| |
| CLMman | |
| Airline Industry | |
| Appliance Industry | |
| Audio Industry | |
| Aviation Industry | |
| Beer Industry | |
| Bicycle Industry | |
| Check Cashing Industry | |
| Consumer Electronics Industry | |
| Convenience Store Industry | |
| Cosmetics Industry | |
| Food & Beverage Industry | |
| Golfing Industry | |
| Grocery Industry | |
| Import Export Industry | |
| Jewelry Industry | |
| Loan Industry | |
| Maritime & Shipbuilding Industry | |
| Motorcycle Industry | |
| Oil and Energy Industry | |
| Personal Watercraft Industry | |
| Pharmaceuticals Industry | |
| Racing Industry | |
| Real Estate Industry | |
| Soda Industry | |
| Tobacco Industry | |
| Transportation Industry | |
| Video Industry |
 |
|
Search |
Some would say that the free market system would be the best checks and balances for this industry. With large numbers of neighborhood financial services stores opening up daily throughout the country, can competition pin down self regulation of fees? Others would say that check cashing fees need to be regulated federally as to create consistency between states. And still others would have you believe that state regulation is by far the best due to local control and monitoring. While all of these ideas for regulation have their merit each also has drawbacks. In a free market system where local competition dictates fee, rural and remote locations that do not have competition would be able to charge fees that were much higher than a store located in a highly populated urban area. In a federally regulated environment, fees dictated would be high for some markets and too low for others. Monitoring and enforcement would be difficult and costly. Within the current state model the weaknesses are very apparent. Some states have very limited regulations while others are very much over regulated. So what is the answer? I would suggest a hybrid of all three! Now that you are totally confused let me explain. In this hybrid situation the maximum fee would be regulated by the federal funds rate. Then add in a touch of free market by allowing the check casher the ability to go up to 1% over that federal rate. Then add in a touch of state regulation by allowing the state the ability to monitor and enforce the industry based upon the limits listed above. By doing this a highly competitive area such as a densely populated urban environment would have the ability to be competitive with their fees with the flex of up to 1%. And in a non-competitive environment such as a rural store, it would be capped at a maximum of the federal funds rate plus 1%. In both cases, monitoring and enforcement would be done by the state. Here is where your jaw may drop. I suggest that this apply to all businesses that cash checks and that any business that cashes checks should have the same licenses and be regulated in the same manner. Banks, Credit Unions, Check Cashing Stores, Grocery Stores, Liquor Stores and all others. How would this effect the current environment? Simple, it would level the playing field for all businesses that cash checks. Thus taking away any unfair business advantage and forcing the level of competition to a new level. By doing this the competition would not be limited to just check cashing stores but would expand that competition to include other financial and non-financial institutions that would be in an unfair advantage if only check cashing stores were held to these limits. Of course there would be one caveat, a person cashing a check at the bank or credit union that it is drawn on should not charge any fee for that specific check to be cashed. The reason for this is also very simple. A check is a promise to pay from that banks customer to the person that the check is made out payable to. If the bank charged the payee of this check a fee that reduces the amount of funds presented then the promise to pay the face amount is not met. There have been many “model statutes” proposed by many consumer protection organizations. These were very confusing, choked out the check cashing industry and most of all created a greater level of unfair advantage for financial services other than check cashing stores. In these proposed statutes check cashing stores were targeted leaving grocery stores, liquor stores, banks and credit unions free from their controls. The thing that is obviously forgotten by these other proposed statutes is that check cashing is a service that is available at a multitude of businesses and all of these businesses need to be able to make a living, cover expenses and pay employees from cashing checks as either a primary service or a secondary service offered. As well, a majority of these model statutes offer an either/or formula. For example, either 1% or $5.00, whichever is less. The risk factors associated with the increase of face value of the check cashed at a Grocery Store, Liquor Store or Check Cashing Store were not taken into account with this kind of formulation. By limiting the check cashing fee to a maximum of $5.00, a store that cashes a $1,000.00 check and spends 5 minutes of labor, the expense of having the cash available in the facility, the overhead of the building, insurances, armored transport, etc., $5.00 would not begin to cover the costs associated with the cashing of that check. Current California rates would allow a fee of $30.00 to be collected. Using the current federal funds rate (in a competitive environment) the fee would be $12.50 and in a non-competitive environment the fee would be $22.50. By using a simple base plus formula costs associated with monitoring and enforcement could be reduced, the economy would be driving the rates via the Federal Reserve Board and fair market competition would keep fees “consumer friendly” with businesses that wish to maintain or increase market share. Personally I feel much more comfortable knowing that the base fee is controlled in a similar manner to that of which mortgage rates and the money loaned between banks on the overnight market are controlled rather than the current method. Don’t you? copyrighted materials - Do Not Duplicate without expressed written permission from B2
Visit the Check Cashing Industry Forum
The articles themselves are owned and are the copyright of the writer of the article. The writer of the article has provided Industry Pages Inc. expressed written permission to have the articles available on the Industry Pages Network, CLMman and the CLMman Column Webfeed. Any use of the articles outside the CLMman system requires written permission from the writer of the article itself. If you have any comments about this column please feel free to express your opinion in the Forums. Article © Copyright Apr 24, 2003 B2 |
|
Check Cashing Industry Latest Columns |