The New York Department of Financial Services has announced changes to the rules governing check cashing fees in the state.
The new regulations aim to address the costs for consumers when using check cashing services. The previous rules, which were adopted almost 20 years ago, were the only ones in the country that set annual and gradual increases in the maximum percentage for a check cashing fee and linked those increases to the rate of inflation.
The new rules use a “data-driven methodology” to determine the new fee formula for check cashing, which takes into account the needs of both licensees and consumers who use check cashing services. Check cashing is often used by communities that are underserved, especially for basic consumer banking needs. Linking fees to the rate of inflation did not consider the effect on the often lower-income people who use check cashing services, particularly when combined with stagnant wages and rising inflation.
Under the new rules, automatic increases based on the consumer price index will no longer be in effect. Instead, public assistance checks issued by a federal or state agency will include a 1.5% fee. For all other checks, the maximum fee that can be charged is 2.2% or $1, whichever is greater.
“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 Financial Services Superintendent Adrienne 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 “When I became Superintendent, it was clear that the existing fee methodology wasn’t just outdated, but inappropriate and punitive to consumers.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.”
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