Expand Economic Opportunity and Reduce Child Poverty

Limit Check Cashing Fees

A large number of low-wage and minority neighborhoods are underserved by banks and therefore residents are more likely to use check cashing services. While these services provide convenience for customers, it comes at a high price – check cashing fees between 2 and 4 percent of the face value of the check – which is much more expensive than conventional banking fees. [i]

What Can Policymakers Do?

• Cap Fees on Check Cashing. Check cashers are part of the money services business category, typically regulated at the state level by banking or financial services departments. Twenty states now regulate fees and other practices in the industry. [ii] States that do regulate check cashing either set the cap at a percentage of the check or a total dollar amount per check. Resources for Policymakers:

• 50-state analysis of state check-cashing laws . This resource was developed by the Consumer Federation of America.

• Model legislation has been developed by the American Association of Retired Persons (AARP) and endorsed by the Consumer Federation of America.

• Incentivize banks to locate in underserved areas. An emerging policy approach is for states to offer incentives to banks to open branches in low-wage neighborhoods. In New York, for example, the state found a creative way to make it easier for banks to locate in underserved areas. The state offered incentives like tax relief, and they deposited a portion of the state treasury in order to capitalize these banks. Through this initiative they opened over 30 new bank branches in low-income neighborhoods in only four years. [iii]
  

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