Makes permanent the provisions of chapter 591 of the laws of 2001 relating to limiting the check cashing exemption for national banks and other regulated entities

1 Co-sponsor

• Hugh T. Farley

Title of bill

An act to amend chapter 591 of the laws of 2001 amending the banking law relating to limiting the check cashing exemption for national banks and other regulated entities, in relation to the effectiveness of such chapter

Purpose

To provide greater certainty and stability to the check cashing industry by removing the sunset provisions on Chapter 591 of 2001.

Summary of provisions

This bill eliminates the arbitrary sunset date on the provisions of law enacted by Chapter 591 of 2001.

Existing law

The provisions of Chapter 591 of 2001 - which provide that any separate check cashing facilities established by banking institutions shall be subject to the existing distance standard which applies to the licensing of check casher operations - are currently scheduled to expire August 1, 2010.

Justification

This bill seeks to provide greater certainty, stability and predictability in the industry by eliminating the sunset date on the provisions of Chapter 591 of the Laws of 2001. That law bad provided that any separate check cashing facilities established by banking institutions shall be subject 10 the existing distance standard which applies to the licensing of check casher operations.

In New York State, the check cashing industry is strictly regulated, including being subject to limits on the maximum amount that a licensee may charge for cashing a check. The maximum fee of 1.82% is significantly lower than the rates charged in other states· Given these fee limits, check cashers must rely on a large volume of business in order to be financially viable. In recognition of this situation, State law and policy have, long provided for a three-tenths of a mile distance standard in the licensing of check cashers.

This system has resulted in a stable industry which provides low-cost financial services in many neighborhoods. However, the stability and continued viability of this industry had been facing a challenge from the entry of unregulated competitors. Some new stand-alone facilities had been established which were taking advantage of the traditional exemption of banking institutions from the check casher law. As a result, these new entities were not subject to any of the regulatory requirements - including the distance standard and the fee limitations' -- that applied to licensed check cashers.

There were concerns about the potential impact of these exempt entities on the stability of the check cashing industry and, on the level of fees charged to consumers. There were also questions about whether these new developments were consistent with the intent of the traditional exemption for banking institutions from the check casher law. Although these new facilities were bank-owned, they were separate from the bank itself, did not provide other traditional banking services, and were generally indistinguishable from licensed check cashers. In response to this situation, Chapter 591 of 2001 provided that a bank which establishes a separate facility for the purpose of cashing checks must abide by the existing distance standards. Chapter 591 was amended in early 2002 to set a three-year sunset date, thereby providing an opportunity to review and evaluate the impact of this new law. The sunset date was subsequently extended.

About eight years have now passed since the original enactment of this legislation. The law has been a fair and workable approach, which helps provide certainty and stability to the industry, and therefore this bill would remove the arbitrary sunset provisions.

Legislative history

New Bill.

Fiscal implications

None.

Local fiscal implications

None.

Effective date

Immediately.