Renew Stop Payments or Implement Positive Pay

Many companies and municipalities have been burned by stale-dated stop payment orders. Dishonest recipients will receive a check, then tell the issuer the check was never received. A stop payment is placed on the check and a new check is issued. The second check is immediately cashed, and the original check is saved for later use.

Sophisticated con artists know that stop payments at most banks are only good for 180 days, after which time they expire. They must then be renewed for another 180 days, though few companies do so. The clever con artist will patiently wait up to one year before negotiating the second check, which will pay almost every time.

To block this scam, some banks put extended stop payment periods, such as 999 days, on checks issued by selected industries, particularly insurance companies. The bank's number-of-days field length for stop payments is three digits, and 999 fits as easily as 180. Stop payments at most banks cost $12, or the equivalent of $2 per month. Rather than charging $12 every 180 days, some banks charge $1 per month. Many companies have dozens or even hundreds of stop payment orders in effect at any one time. The cost for those stop payments can become prohibitive, but the exposure for loss is even greater, considering that a loss is not the bank's liability.

An excellent alternative to stop payment renewals is Positive Pay. The original check that was stopped is more likely to be deposited, not cashed over the counter because a sharp teller might notice the old date. With Positive Pay it will not pay!