January 18, 2023
DFS SUPERINTENDENT ADRIENNE A. HARRIS ADOPTS UPDATED CHECK CASHING REGULATION CREATING A FAIRER, DATA-DRIVEN FEE METHODOLOGY FOR NEW YORKERS
Regulation Creates a Data-Driven Approach to Fees that Accounts for Consumer Needs
New Methodology Creates Two-Tier Fee Structure Creating a Lower Fee for Cashing Public Assistance Checks Consistent with Numerous Other States
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.
“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 Superintendent 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 “When I became Superintendent, it was clear that the existing fee methodology wasn’t just outdated, but inappropriate and punitive to consumers.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 Superintendent Harris was nominated to lead the Department, 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, Superintendent Harris issued an emergency regulation to maintain the 2021 maximum fee while the Department commenced a data-driven process to reexamine the methodology to determine check cashing fees.
The Department conducted a landscape assessment of other state regulations, reviewed check casher industry data (including current rates charged, industry costs, distributions by geography, check casher business size, and trends over time), interviewed economic experts, and met with stakeholder groups including advocates and the check cashing industry.
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.
DFS issued the final regulation after taking into consideration comments on the proposed regulation submitted during the public comment period. Please find a copy of the final regulation on the DFS website.
As the check cashing industry evolves, DFS will closely monitor the stability of the industry to understand the impact of the updated regulation and if necessary, responsibly modernize requirements to reduce certain operating costs. Today, DFS also has issued a proposed regulation for reducing the square footage requirement for check cashing locations. Pursuant to the New York State Administrative Procedure Act, the proposed regulation is currently subject to a 10-day pre-proposal outreach period. The Department encourages everyone interested in the proposed regulation to utilize the public comment period to submit a written comment on the proposed regulation which is available on the DFS website.