To stop payment on checks is to ask an institution to put them on "hold" before processing them. After the request is initiated by the person who holds the account the check was written from, the bank flags it and when someone tries to deposit or cash it, the bank will reject it. A stop payment request will likely have a small bank fee attached to it and is good for about six months. After that time, it can be renewed.
Once a check has been cashed or deposited, a stop payment request is no longer possible.
How to Stop Payment on Checks
According to Value Penguin, when an account holder requests a stop payment from their bank, they provide that bank with information about the check. This can include their check number, who the check went to, the date of the check and the amount it was written for. The account owner can request the stop payment verbally over the phone but should follow up in writing within 14 days to confirm it. If they don't, the bank may not honor that request. The bank then flags the check before it can be processed; it cannot stop payment on a check that has already been cashed.
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A bank will likely charge a fee to flag the check and prevent its processing. Typically, this fee is about $30, but it can vary from bank to bank. Some banks will waive it for customers, depending on the type of account they have. It may also cost less for a customer to put a stop payment on more than one check at a time instead of doing it individually. Once the stop payment has been processed, the bank will be on alert regarding the check for about six months, but this will also depend on the institution.
What Happens When Stop Payment Fails
A stop payment on checks can sometimes fail for a variety of reasons, according to HelpWithMyBank.gov. If the account holder stops payment correctly and the check gets cashed regardless of that request, the bank may be liable for that money. However, there are exceptions. The institution is not liable if the person making the request failed to give enough identifying information to the bank. The bank is also not responsible if the requestor failed to provide adequate notice for the stop payment order.
It's important to remember that a stop payment order may expire after a period of just a few months. However, it can be renewed for a small fee. If the account holder makes a stop payment order but fails to confirm it in writing, the request may lapse after 14 days. Again, every financial institution does things a little differently, so it is best to check with the issuing bank regarding their policy for stop payment orders.
Canceling Payment on Cashier's Checks
If it is stolen or fraud occurred, a cashier's check can be canceled. The person requesting the cancellation must first alert the bank so it can flag the check in the event of unusual activity and must also file a declaration of loss with the institution that issued it. Those who received it as payment should already have a copy of it; if they don't, they need to find out what bank it was drawn from. Next, the person requesting the cancellation must provide a written statement made under penalty of perjury that they don't have the check in their possession and it is truly lost.
The person who files a declaration of loss can claim the funds but won't receive them until 90 days after doing so or until 90 days after the check was issued, whichever is later. During that time, the bank may pay the money to whoever attempts to cash it. If it was stolen, that person might try to endorse it, at which point the bank may notice that it has been flagged. Cashier's checks cannot be canceled after they have been processed.