Senate Bill S8056

                                
 
BILL NUMBER: S8056

SPONSOR: HAMILTON
 
TITLE OF BILL:

An act to amend chapter 591 of the laws of 2001 amending the banking law
relating to limiting the check cashing exemption for national banks and
other regulated entities, in relation to the effectiveness of such chap-
ter

 
PURPOSE OR GENERAL IDEA OF BILL:

To provide greater certainty and stability to the check cashing industry
by extending the sunset provisions on Chapter 591 of 2001.

 
SUMMARY OF SPECIFIC PROVISIONS:

This bill extends, until August 1, 2022, the provisions of law enacted
by Chapter 591 of 2001.

 
              

EXISTING LAW:

The provisions of Chapter 591 of 2001 - which provides that any separate
check cashing facilities established by banking institution shall be
subject to the existing distance standard, which applies to the licens-
ing of check casher operations - are currently scheduled to expire on
August 1, 2018.

 
JUSTIFICATION:

This bill seeks to provide greater certainty, stability and predictabil-
ity in the industry by extending the sunset date on the provisions of
Chapter 591 of the Laws of 2001. That law which is currently scheduled
to expire on August 1, 2018 - provides that any separate check cashing
facilities established by banking institutions shall be subject to the
existing distance standard, which applies to the licensing of check
casher operations.

In New York State, the check cashing industry is strictly regulated,
including being subject to limits on the maximum amount that a licensee
may charge for cashing a check. The maximum fee is significantly lower
than the rates charged in other states. Given these fee limits, check
cashers must rely on a large volume of business in order to be finan-
cially viable. In recognition of this situation, State law and policy
have long provided for a three-tenths of a mile distance standard in the
licensing of check cashers.

This system gave rise to an industry, which provides low-cost financial
services in many neighborhoods. However, by the year 2001, the stability
and continued viability of this industry were in question due to
concerns about challenges from unregulated competitors. Some new stand-
alone facilities had been established which were taking advantage of the
traditional exemption of banking institutions from the check casher law.
As a result, these new entities were not subject to any of the regulato-
ry requirements including the distance standard and the fee limitations
- that applied to licensed check cashers.

There were concerns about the potential impact of these exempt entities
on the stability of the check cashing industry and, on the level of fees
charged to consumers. There were also questions about whether these new
developments were consistent with the intent of the traditional
exemption for banking institutions from the check casher law. Although
these new facilities were bank-owned, they were separate from the bank
itself, did not provide other traditional banking services, and were
generally indistinguishable from licensed check cashers. In response to
this situation, Chapter 591 of 2001 provided that a bank which estab-
lishes a separate facility for the purpose of cashing checks must abide
by the existing distance standards. Chapter 591 was amended in early
2002 to set a three-year sunset date, thereby providing an opportunity
to review and evaluate the impact of this new law. The sunset date was
subsequently extended and is currently set to expire on August 1, 2018

 
PRIOR LEGISLATIVE HISTORY:

This is new legislation.

 
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:

None to the State.

 
EFFECTIVE DATE:
Immediately.