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Bank Plays Games with Stop Payments
I recently issued three checks to my vendors. Three days later, I received a hold notice for seven days in the mail on deposits I made a couple days prior.
I contacted the folks to whom I wrote the checks and told them to not cash them and that I would issue new ones once the holds had expired. To be safe, I called my bank and told them to place a stop payment on those three checks.
That was fine by them, they required the check numbers, exact amount, the payee names and date the check was written. I provided all the information correctly. They charged me $20 per check to place a stop on it. Then they told me that in the event they still paid the check, they would not be held liable for any damages and I must agree to their terms to place the hold and be charged $20 per check.
Sure enough, they paid one of the checks it was returned NSF, I got charged $35 for the NSF, my vendor got charged $25 for the return. Hence I'm out $120 for trying to be a good account custodian.
Of course, when I contacted the bank and asked why this check was paid, the excuse was "some information you provided did not match the check presented". Of course when I asked what that was, the reply was "our computer system figures that out not us, but you did agree to our terms that we would not be held liable for paying a check whether you provided the correct information or not".
What can I do? The deposit hold expired just fine after seven days. The reason for the hold was "We have confidential information that the check may not be paid".
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 Unless you or the bank recorded that conversation when you placed the stop payments, there's no evidence of the information you gave the bank. That makes it a 'your word against theirs' situation.
As for the bank's attempt to simply escape all liability by including the broad disclaimer you've described, it would hardly stand up in court. If the dollar amount is big enough, talk to an attorney. Banks can disclaim a lot of things, but under the Uniform Commercial Code they can't disclaim their duty of good faith, diligence, reasonableness and care.
The bank's use of a hold based on "confidential information that the check may not be paid" is hard to understand. Because it invoked "confidential information," the bank is unlikely to tell you what that information was. That sort of hold has been used when a bank is concerned that its customer might be kiting checks, or that the issuer of the check is insolvent or filing for bankruptcy. There have also been instances in which a bank's use of the extended hold based on a belief that a check won't be paid is unwarranted. However, the hold on your deposit account, which set the wheels in motion for this series of events, is actually a side issue.
Whether or not you have any recourse against the bank for paying your stopped check will depend on whether you incurred any damages or losses resulting from the payment of the check, and whether the bank can successfully disclaim any responsibility for missing the stop order. You need to consider whether to discuss your options with a lawyer.
Published on BankingQuestions.com 10/01/09
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