Refusing Oral Stop Payment Orders

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Question:

I am in [state name here] and we currently accept oral stop payment orders, BUT there is one exception... we do NOT accept any oral orders for any type of insurance payment. How can I find out if this is out of compliance?

Answer:

If you are refusing oral stop payment orders on any electronic insurance payments from consumer accounts, you are, I believe, in violation of Regulation E section 205.10(c). The Official Staff Commentary to that section requires that you accept oral stops (I believe this trumps any state law that allows banks to refuse oral orders), but you may require that they be confirmed in writing within 14 days. Basically, Reg. E imposes on recurring EFT debits the same stop payment provisions that are in the standard UCC language for paper items. But with Regulation E, there is no ability to alter the requirements of the law by contract.

As to paper insurance checks or drafts, [state name here] law may allow you to refuse oral stops or to alter its UCC provisions about oral stops by contract. I am not conversant with [state] law, and I suggest you contact someone who is. You also might post a specific question in the [state] threads on BankersOnline.

First published on BankersOnline.com 12/1/03