Office of Consumer Affairs Ends
Check Casher Partnerships Targeting Social Security Recipients
Division of Banks Actions Lead to
Bank Ending Relationships Nationwide;
Local Banks and Credit Unions to Fill Void for Consumers
BOSTON – December 14, 2009 – The Patrick Administration’s Office of
Consumer Affairs and Business Regulation announced today that the
Division of Banks has ordered six state-licensed check cashers to
terminate partnerships with out-of-state banks to charge Social
Security recipients exorbitant fees to cash and access their benefit
checks.
Under these arrangements, check cashers would market the
establishment of direct deposit services at their locations and
create a limited-purpose account with an out-of-state bank to allow
for the direct deposit of customers’ Social Security or other
government benefit checks. Approximately 2,700 Massachusetts
residents had established these accounts, even though Massachusetts
banks and credit unions are required by law to cash Social Security
and pension checks at no cost to the consumer.
The out-of-state banks routinely charged between $4 and $4.95 each
time a Social Security benefit check was electronically deposited
into one of these accounts. These so-called limited-purpose accounts
did not provide an access device for customers. Accordingly,
consumers were dependent upon the participating check cashers to
access their funds once deposited in the out-of-state banks. Check
cashers were provided with the ability to write checks on the
accounts by the out-of-state banks and typically charged consumers
an additional fee ranging from 2 percent to 2.8 percent of the face
value of any check created to access funds.
“These partnerships between check cashers and out-of-state banks and
the resulting fees are outrageous. The consumer thinks they are
getting access to their Social Security benefits though a direct
deposit at a bank. Instead, they are forced to pay high fees to
access their own money,” said Barbara Anthony, the Undersecretary of
the Office of Consumer Affairs and Business Regulation. “Consumers
will be far better served to open a full-service account at a local
bank or credit union.”
Commissioner of Banks Steven L. Antonakes said that the partnerships
between the out-of-state banks and check cashers were discovered
during routine examinations of the check cashers. Check cashers
entering into formal consent orders with the Division include Boston
Check Cashers and its 20 Boston area locations; Cassie H. Farmer
d/b/a Family Financial Center, in Framingham; JMT Check Cashing,
Inc., d/b/a United Check Cashing, in West Springfield; Northeast
Check Cashing, Inc., d/b/a The Money Stop, in Worcester; Parras,
Inc., d/b/a Ace Cash Express, in Worcester; and Speedy Check, Inc.,
in Lowell. The out-of-state banks partnering with these licensees
were Republic Bank and Trust Company of Louisville, Kentucky, and
Bank of Agriculture and Commerce of Stockton, California.
The action by the Division will have nationwide ramifications.
Subsequent to the release of the Division’s orders, the bank
involved in all six Massachusetts check cashers – Republic Bank and
Trust Company – announced to check cashers around the country that
it was exiting the business. The California bank had previously
announced that it was ending all partnerships with check cashers
nationally.
“What makes these practices even more frustrating is that under
existing Massachusetts law, any bank or credit union doing business
in the Commonwealth must cash Social Security checks at no cost for
all Massachusetts residents,” Commissioner Antonakes said.
Massachusetts law requires all banks and credit unions to cash
Social Security and other pension benefit checks at no charge, even
if the consumer does not have an account. Dan Forte, President of
the Massachusetts Bankers Association, urged consumers to establish
a secure and insured account at a local bank.
“Consumers can avoid high check casher fees by opening a low-cost
bank account or a free full-service account at most local banks,”
said Forte. “Massachusetts banks have been serving customers on
fixed incomes for years.”
Dan Egan, President of the Massachusetts Credit Union League also
advised Social Security recipients to save money by establishing a
direct deposit account locally.
“Massachusetts credit unions were founded to serve people of limited
means,” Egan said. “By doing business with a credit union in
Massachusetts, consumers can access their accounts without having to
pay a fee.”
Under the terms of the consent orders, all six check cashers will be
required to terminate their relationships with the out-of-state
banks and end all advertising that implies that they offer banking
accounts. In addition, they must provide a letter to each customer
that has established a limited-purpose bank account notifying the
customer that the check casher will no longer be able to provide
direct deposit services. The check cashers must also notify
customers that they can either open up a direct deposit relationship
at another bank or credit union, set up a DirectExpress® debit card
through the Social Security Administration, or revert to receiving
paper checks. They will also advise customers that banks and credit
unions in Massachusetts must cash Social Security and other pension
checks for free.
Consumers with direct deposit relationships with one of these check
cashers who have questions, or other consumers receiving Social
Security or other pension checks who would like information on
alternatives to check cashers, should call the Division’s Consumer
Hotline at (800) 495-BANK (2265).
