Stop Payment or Unauthorized Transfer: Understanding the Differences

Determining whether a transaction falls under the stop payment or unauthorized use rules is a key step in the process as different rules and time periods apply. This article explores these differences under both Regulation E and the NACHA Operating Rules.

Written by Jennifer Aguilar, Senior Regulatory Compliance Counsel

Credit union members have a number of rights and powers when it comes to money being withdrawn from their accounts. These rights and powers can come from a number of places, including federal and state laws, clearinghouse rules and contractual obligations. One considerable right members have relates to withdrawals that the member did not authorize.

Compliance officers are well aware that federal laws allow members to stop certain payments from being processed and significantly limit the member's liability for unauthorized use. The requirements surrounding these issues are highly technical and the myriad time frames that can apply make these rules even more challenging. Understanding the differences between when a payment needs to be stopped versus when an unauthorized transfer has posted to an account can make a big difference in the time and cost associated with compliance.