Legal Definitions - stop-payment order

A stop-payment order is an instruction given by an account holder to their financial institution (such as a bank or credit union) to prevent a specific payment from being processed and paid out of their account. This instruction is typically issued when the account holder wishes to cancel a payment they have initiated, often due to an error, a dispute, or concerns about fraud.

Here are some examples illustrating the application of a stop-payment order:

• Example 1: Disputed Service
  Imagine Sarah hires a contractor to repair her roof and writes them a check for a deposit. Before the check is cashed, Sarah discovers that the contractor has a history of not completing jobs and decides to cancel the agreement. To prevent the contractor from cashing the check, Sarah immediately contacts her bank and issues a stop-payment order on that specific check. This action instructs the bank not to honor the check if it is presented for payment.

• Example 2: Lost or Stolen Check
  John mails a check to pay his utility bill, but a few days later, he realizes the envelope might have fallen out of his bag or been stolen before reaching the post office. Concerned that someone unauthorized might try to cash it, John calls his bank. He provides the check number, amount, and payee details, requesting a stop-payment order. This ensures that if the lost or stolen check is presented, the bank will refuse to pay it, protecting John from potential fraud.

• Example 3: Canceling an Automated Payment
  Maria signs up for a free trial of an online subscription service, which requires her to provide her bank account details for automatic monthly debits after the trial ends. Before the trial period concludes, Maria decides the service isn't for her and cancels her subscription directly with the company. However, to be absolutely sure no further payments are taken from her account, she also contacts her bank and places a stop-payment order on any future automated debits from that specific company. This provides an extra layer of protection against unintended charges.