In response to a lawsuit filed by an industry group, the Hochula administration’s recent regulations that limit the income of check cashing centers are “killing business.”
Financial firms are complaining that the revised rules limit the fees they will charge customers, which may very well be a death blow as they struggle to remain afloat during record-high inflation.
State Department of Financial Services Superintendent Adrienne Harris imposed recent regulations in January that lowered the prevailing check success rate from 2.27% to a maximum of 1.5% for some government profit checks and a couple of.2% for all other checks, in keeping with of the lawsuit is “arbitrary”. and capricious.”
Plaintiffs in a lawsuit filed in the Manhattan Supreme Court include Financial Services of New York, Baychester Payment Center, Challenger Check Cashing Corp and David’s Check Cashing Inc.
Andrew Siegel, who owns and operates Check Changers NY, said he already closed two of his six check success centers last yr and is prone to close a 3rd in Brooklyn’s Gravesend neighborhood, arguing that he can now not turn a profit on the lower rates.
Check cashing corporations operate in many low-income areas that would not have access to banks.
“It’ll be hard for me to shut this location, but much more so for every of its employees who could have to be laid off and the many shoppers who rely upon them,” Siegel said of his Brooklyn store. “The shop, situated in a financial desert, has been operating for over 50 years.
“Customers who could have no local financial services options after this location closes have relied on our store services, including dozens of shoppers who use the shop every month to money their Social Security checks and additional insurance income and pay their rent and other bills. “
The lawsuit includes statements from Siegel customers.
“I have been using the identical check cashing shop since 1981. I even have at all times viewed this store as a crucial a part of the community. Even throughout the pandemic, Check Changers has gone to great lengths to work with the community to stay open and accessible,” said Margie Simmons, a longtime customer of Check Changers Gravesend.
“I even have limited mobility and there are no other check tellers in the world,” she said. “When this place closes, it’ll be devastating for me and others in the community. The federal government might imagine they’re doing what’s best for me, but they’re unsuitable.”
A 2022 assessment for the check cashing industry by accounting firm Ernst & Young found that a decline in fees cap revenue would make check cashiers “unprofitable” and force a closure.
One in all the attorneys representing the cashiers in the lawsuit against the Hochula administration is Mylan Denerstein, who was the chief legal counsel to former Governor Andrew Cuomo.
Hochul and the Department of Financial Services declined to comment on the lawsuit.
But DFS Chief Superintendent Harris defended the brand new fee structure when it implemented it in January, saying the old rules, which gave cashiers an automatic increase in the price of living, were outdated and burdened lower-income customers.
“Check cashiering is usually the one way many underserved New Yorkers – especially members of the immigrant community and other people of color – can access their money,” Harris said on the time.
“After I became superintendent, it was clear that the prevailing charging methodology was not only outdated, but additionally inappropriate and punishable for consumers. Check handlers shouldn’t be entitled to automatic annual fee increases simply because their services are essential to many New Yorkers.”
She said laws passed in 2005 made New York the one state in the country to grant annual, automatic increases to ascertain cashing fees, tying the increases to a measure of inflation through the Consumer Price Index, which essentially tracks changes in the price of living for consumers.
Before Harris took over the department when Hochul became governor, cashiers received three raises – in December 2019, March 2020 and February 2021.