Extend Check Cashing Limits

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 chap- ter

Purpose or general idea of bill

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

Summary of specific provisions

This bill extends, until August 1, 2022, the provisions of law enacted by Chapter 591 of 2001.

Existing law

The provisions of Chapter 591 of 2001 - which provides that any separate check cashing facilities established by banking institution shall be subject to the existing distance standard, which applies to the licens- ing of check casher operations - are currently scheduled to expire on August 1, 2018.

Justification

This bill seeks to provide greater certainty, stability and predictabil- ity in the industry by extending the sunset date on the provisions of Chapter 591 of the Laws of 2001. That law which is currently scheduled to expire on August 1, 2018 - provides 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.

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 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 finan- cially 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 gave rise to an industry, which provides low-cost financial services in many neighborhoods. However, by the year 2001, the stability and continued viability of this industry were in question due to concerns about challenges from 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 regulato- ry 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 estab- lishes 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 and is currently set to expire on August 1, 2018

Prior legislative history

This is new legislation.

Fiscal implications for state and local governments

None to the State.

Effective date

Immediately.