Mandatory Check Cashing?

Bankers celebrated only briefly the defeat of a Senate bill requiring that financial institutions cash government checks for non-depositors.

This legislation would have required financial institutions to cash U.S. government checks, state checks, and municipal government checks within the state of issue for check recipients with no accounts.

The General Accounting Office reports that approximately 17% of the population have no account relationships with financial institutions. They estimate that most of the people in this group receive monthly checks from government agencies.

LIFELINE SERVICES OUT
When the bill was originally proposed, it included a provision requiring financial institutions to offer low-cost checking accounts to the poor, known as lifeline services.

The lifeline service provision was dropped due to lack of support in the Senate, but the check cashing portion of the bill picked up considerable support and pressure from pro-consumer groups. It was put to a vote and defeated.

COMPROMISE VERSION
But even as we breathed a sigh of relief over this bill's defeat, another check cashing amendment was being formulated that has a better than average chance of passing.

The new version could contain important compromises, such as: permission to charge a fee for check cashing; specified latitude to refuse to cash some checks; the ability to require the use of direct deposit in some cases; exemption for institutions with less than $25 million in assets.

Bankers are particularly concerned over the possibility of fraud, and apprehensive of the long lines and reduced service for customers if this proposal becomes law.

CHECK CASHING IN THE POST OFFICE!
While deliberation over the bill was going on in the Senate, Anthony M. Frank, Postmaster General, made it known that he is studying whether the 40,000 branches of the Postal Service might take on the job of cashing government checks.

He said that fees paid by people cashing checks would provide income to the Postal Service. "This income could be added to the income now generated from stamp collectors and money order purchasers," he commented. "This might help hold off future postal rate increases."

Mr. Frank stated that if Congress passes the mandatory check cashing law, the Postal Service may assist the financial institutions by providing such a service in rural areas and in the inner city.

One Senator was quoted as saying there are more post offices in the country than there are financial institutions, and that the Postal Service could potentially offer the cashing service for about 75 cents a check.

If cashing government checks in the post office really does happen, any teller will tell you-don't try to mail a package on the third of the month!

Copyright © 1990 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 1, No. 6, 7/90