Stop Payment Law and Legal Definition
Stop payment is an order issued to a bank by an account owner not to pay a check written on their account. Stop payment orders are primarily governed by state laws and bank regulations, which vary by state and bank. Banks typically charge a fee to stop payment on a check already issued to a payee. Stopping payment on a check in order to avoid payment of a legitmate debt may be a criminal act of fraud, governed by state fraud laws, which vary bystate. Typically, state fraud laws require a showing that there was no good faith dispute over the amount of the debt at the time the stop payment order was issued.
The following is an example of a state law governing stop payment orders issued with intent to defraud:
"(a) A person commits the offense of deposit account fraud when such person makes, draws, utters, executes, or delivers an instrument for the payment of money on any bank or other depository in exchange for a present consideration or wages, knowing that it will not be honored by the drawee or issues a stop-payment order directing the bank or other depository on which the instrument is drawn not to honor said instrument knowing that the instrument would not otherwise be honored by the drawee. For the purposes of this Code section, it is prima-facie evidence that the accused knew that the instrument would not be honored if:
(1) The accused had no account with the drawee at the time the instrument was made, drawn, uttered, or delivered;
(2) Payment upon presentation within 30 days after delivery was refused by the drawee for lack of funds upon presentation within 30 days after delivery or due to a stop-payment order issued on an account that does not bear sufficient funds to process the instrument and the accused or someone for him or her shall not have tendered the holder thereof the amount due thereon, together with a service charge, within ten days after receiving written notice that payment was refused upon such instrument.
