Under New Jersey law, anyone authorized to write a check can issue a stop payment order. A stop payment order tells the bank that it should not honor a check already written and given to someone, but not yet cashed.
In New Jersey, a stop payment order is effective for six months. However, if the stop payment order was verbally conveyed to the bank, it will lapse after fourteen days unless the customer confirms the order in writing within the fourteen day period. Then the customer may extend it for another six months by submitting a written request within the first six months.
However, New Jersey law does not require check cashing companies to investigate every check for possible stop payment orders. For instance, the Superior Court of New Jersey ruled that any claim that a check cashing company failed to conduct due diligence is unlikely to succeed because it is commercially unreasonable for companies to inquire about possible stop payment orders on every single check. It is enough for the company to see that the amount is small, the person has cashed similar checks from the same source, the person shows identification, and there are sufficient funds in the account.
If there is something suspicious about the check, the law may require the check cashing company to call the bank or check-writer to ensure it is legitimate. However, without some clear sign of fraud or other suspicious circumstances (for instance if a person attempted to cash a check for a large sum of money or the names or amounts had been erased or altered) the company has no obligation to confirm the check’s validity and may proceed to cash the check.
If there is not clear fraud, a check may be cashed even after a stop payment order is properly issued. After the check cashing company cashed the check, however, the bank would refuse to pay it because of the stop payment order. However, this does not leave the check cashing company without recourse. The company may actually sue the writer of the check for payment – regardless of the stop payment order.