Superintendent of Financial Services Adrienne A. Harris announced today that the New York State Department of Financial Services (DFS) has adopted an updated check cashing regulation following the proposed regulation announced in June. The regulation implements a new, data-driven methodology for calculating fees which accounts for needs of licensees, and most importantly, consumers who use check cashing services.
The new ruling also caps regulatory fees at 1.5% for check printed by a state or federal agency, and 2.2% for other checks.
“Check cashers are frequently the only way that many underserved New Yorkers – particularly members of immigrant communities and people of color – can access their money,” said Harris. “When I became Superintendent, it was clear that the existing fee methodology wasn’t just outdated, but inappropriate and punitive to consumers. Check cashers should not be entitled to automatic, annual fee increases just because their services are essential to many New Yorkers.”
Regulations issued in 2005 made New York the only state in the nation to grant annual, automatic increases to the maximum percentage check cashing fee, pegging increases to a measure of inflation, the Consumer Price Index (CPI), which broadly tracks changes in cost of living for consumers. Before Harris was nominated to lead the DFS, in and around the pandemic alone, check cashers received three increases – December 2019, March 2020 and February 2021.
Annual, automatic CPI-based fee increases failed to account for the disproportionate impact inflation has on struggling New Yorkers who rely on these services to access their cash. If wages were stagnant, automatic increases in check-cashing fees tied to CPI meant that consumers were hit with price increases and an increase in the cost of cashing checks. If wages increased, check cashers received a double fee increase: one based on the increased check amount, and another based on the CPI adjustment mechanism.
In February 2022, Harris issued an emergency regulation to maintain the 2021 maximum fee while the DFS commenced a data-driven process to reexamine the methodology to determine check cashing fees.
The final regulation eliminates annual, automatic increases based on CPI. Similar to the approach of many other states, the regulation creates two tiers of fees for check cashers. The maximum fee that any check casher can charge for a public assistance check issued by a federal or state agency is 1.5%. This includes checks for social security, unemployment, emergency relief, veteran’s benefits and the like. For all other checks, the maximum fee that any check casher can charge is 2.2% or $1, whichever is greater.
The regulation does not apply to commercial checks, which are not subject to statutory fee limits, or fees generated from other services that check cashers often provide including wire transfers, bill payments and lottery tickets.
But concerns, primarily for areas like the Bronx, stem over fears that these regulations could shutter put check-cashing businesses, considered a lifeline for many unbanked Bronxites.
In 2021 the NYC Department of Consumer and Worker Protection (DCWP) announced a research brief, which revealed the updated number of unbanked households in NYC, detailing demographic information and highlighting systemic barriers to banking access. It shows that an estimated 301,700 NYC households — or around 3.6% of them — have no bank account, which is slightly lower than previous years, but still considerably higher than the national average of 5.4%. The findings included that 17.7% of Bronx households are unbanked, which is nearly two times higher than the rest of the city.
In the Bronx, seven banks closed 17 branches from 2018 to 2021 — more than half were in 2020 — reducing the total number of full-service branches to just 131, down from 144 in June 2018, according to The Association for Neighborhood & Housing Development. And more than 100 branches closed in 2020 in New York City, an increase from 74 closures in 2019 and 53 in 2018.
Without a full-service institution, bank-needy Bronxites rely on check cashers, pawn shops or branches of the largest national banks that typically charge high monthly maintenance fees for customers without direct deposit or certain minimum balances, multiple credit unions and Bronx residents told the Bronx Times.
— Jason Cohen contributed to this report.
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