Unfortunately, most of us know this feeling. It’s Monday morning. You open your bank account to check the balance and see that it is significantly lower than you were expecting. You immediately check your recent transactions and see something unfamiliar; an ACH withdrawal from a company you do not recognize. You search the business name on the internet and find hundreds of complaints from people like you, reporting this company for fraudulent billing. You immediately contact your financial institution to request a stop payment. In this scenario, a stop payment is fully valid and should be applied to its fullest extent. After all, this is why stop payments exist.
What is a “stop payment”? A stop payment order is a request to cancel a payment before it has been processed. Most financial institutions require this request to be made in writing at least three (3) business days before the transaction is set to occur. There is usually a fee associated with this request. Some reasons you might request a stop payment are a dispute over a service or purchase, an incorrect amount, or insufficient funds. According to Forbes: “Stop payment orders are legal and offered by most banks and other financial institutions. There are certain situations where it’s imperative to stop a payment from going through. Stop payment orders also protect consumers.
However, stopping a payment doesn’t leave you off the hook if you’ve entered into a contractual agreement that requires payment. While you may have stopped a specific payment, that doesn’t release you from any payment obligations. You could be subject to late fees and other negative consequences, including legal action.” A stop payment should only be used in situations where it is legally necessary.
What are the ramifications of placing a stop payment? When you are under a contractual obligation to pay a company such as Family Business Funding, you have agreed to contact the vendor before placing a stop payment. See Exhibit A – Applicable Fees – Section 6D of Family Business Funding’s contract: “In the event the Seller places a Stop-Payment on the Purchaser’s ACH or closes their bank account, a blocked account fee of $5,000 or Twenty-Five Percent (25%) of the outstanding balance shall be added.”
In addition, as soon as our Finance department receives the notification of a stop payment, your account is flagged to be sent to collections. The act of placing the stop payment itself will not affect your credit score, but if you stop paying a bill on which you owe and are sent to collections, it will be reported to the credit agencies and likely impact your credit score.
Broker Misinformation and Misrepresentations: Beware of dishonest brokers. If a broker advises that “you only need to make 4 or 5 payments”, this is because that is when their commission claw back period is over, meaning the commission they earned on your deal is no longer in danger of being reversed. In the case of decreased revenue for your business resulting in trouble making your agreed-upon payment, changes to your payment plan regarding amount and frequency need to be negotiated directly with FBF. You can easily contact William in our finance department (firstname.lastname@example.org) to discuss updating your payment schedule.
At Family Business Funding, we are here to help you and your business grow, but we need you to be mindful of certain actions that would be detrimental to the current and future prospects of your business.