Legal Q&A: Managing Online Stop Payment Orders
Ensuring satisfactory written instruction for electronic payments
By Scott Birrenkott
Q: Can a Stop Payment Order for a Check Be Made Electronically?
A: Yes. An electronic stop payment order can be given for a check electronically and would be effective for six months.
Wisconsin Statute section 404.403 provides that a stop payment may be given by an order to the bank describing the item with reasonable certainty received at a time and in a manner that affords the bank a reasonable opportunity to act on the stop payment request. This order may be made orally or in writing. The statute provides that if the order is oral and not confirmed in writing, it is valid for 14 days. A written order is valid for six months, and the oral order must be confirmed in writing (before the end of the 14-day period) for it to be extended to six months.
The rule does not discuss online stop payment orders, nor have the courts yet interpreted whether an electronic stop payment is oral or in writing. For example, a stop payment made online, through bank’s website platform, or mobile application. However, it is WBA’s understanding that such an electronic stop payment would be considered “in writing” and thus, effective for six months.
As stated, the statute provides that a stop payment may be given by an “order.” The Uniform Commercial Code (UCC) defines an order as “a written instruction to pay money signed by the person giving the instruction,” establishing that an order must be written and must be signed. The UCC further provides that a writing “includes printing, typewriting, or any other intentional reduction to tangible form.” Although the UCC’s definition does not include “electronic,” or other such means, WBA believes that a valid argument exists that an electronic file can be reduced to a tangible form by printing the document. For example, electronic writings have been held to satisfy the writing requirement of the statute of frauds. Furthermore, The UCC defines “signed” as “any symbol executed or adopted with present intention to adopt or accept a writing.”
For the above reasons, it is WBA’s understanding that an electronic stop payment order would satisfy the writing requirement of the UCC. Banks offering the ability to issue an electronic stop payment should confirm the methods for doing so in accordance with the discussion above, to determine whether it aligns with this rationale.
For any questions regarding stop payments, or other topics, please contact WBA legal. Additional compliance resources can be found on the WBA website: wisbank.com/resources/compliance.