Other Things You Can Do to Reduce Your Potential Liability

Your potential for liability in the stop-payment area lies in the possibility that you will pay a check contrary to a stop-payment order. So, simply reducing the likelihood of that happening is one way to reduce your potential liability. You might accomplish this by reprogramming your computerized check-processing equipment so that it will pull a check based on the check number in addition to the amount of the check. Or, you might program it to search for an amount within a given range of amounts higher and lower than the amount specified in the stop order. For example, you might program it to pull checks that either match the amount specified in the stop order or are within some percentage of that amount, either higher or lower. Or, to catch transposed numbers, you might program your equipment to search for the specified amount of the check and for check amounts that differ from the specified amount by a whole number multiple of nine. (Transposed numbers always differ from the original number by a whole number multiple of nine. For example, $365.92 differs from $365.29 by 63 cents, a whole number multiple of nine.)

Of course, reprogramming may be expensive, and so you will have to weigh the costs of doing so against your potential liability for paying checks contrary to stop-payment orders.

Another way to reduce potential liability is to train institution employees who receive telephone stop-payment orders to emphasize to the customer the importance of supplying exactly correct information. They should: (1) tell the customer that the information must be exactly correct, (2) encourage the customer to double-check the information against their records, and (3) read back to the customer the information taken over the phone to be sure it is recorded correctly. Institutions located in the nonconforming states might want to simply refuse to take telephone stop-payment orders, although this sort of business decision should also take into account customer reaction to such a rule. (Institutions in states with the standard UCC language cannot do this; the standard UCC language gives customers the right to make oral stop-payment orders.)

Finally, you should encourage customers opening new accounts to maintain careful records of all the checks they write. Careful record keeping will, of course, benefit the customer in many ways, but it will also improve the customer’s ability to give you accurate information about checks the customer wants stopped. You might also want to include reminders about the importance of accurate record keeping in periodic mailings to customers.