HARRISBURG, Pa. – With check cashers mushrooming across Pennsylvania in increasing numbers, the state's top financial regulator is appealing to credit unions to jump into the check cashing business through CUSOs or community charters. "This is a service that if done safely and the risks managed, it would be a natural for credit unions to develop new business and new members," declared A. William Schenck III, the state's secretary of banking. In comments made at the Fall Leadership Conference of the Pennsylvania Credit Union Association in Champion Sept. 7 and in an interview last week with Credit Union Times, Schenck said his office looks favorably on moves by CUs to launch check cashing for non-members as an alternative to the high rates charged by check cashers and payday lenders. The PCUA, meanwhile, said for months it has been working with Filene Research Institute of Madison, Wis. on just such a project involving half a dozen CUs, many of them in large metropolitan areas which lack banking services. "We hope to have our first live check cashing facilities in operation within a month," forecast Richard Myxter, vice president of planning and development for PCUA. He declined to name the six CUs taking part in the "pilot" project since each is in different stages of development. Nonetheless, the PCUA leadership was pleased at Schenck's endorsement of the concept since it also fits into a stepped up League program of promoting financial literacy among the underserved, said Myxter. In encouraging CUs to start check cashing operations, Myxter said the goal is to also provide classes on budgeting, savings, checking and credit to the underserved to improve personal finance and to help individuals manage their personal finance. "But we don't want to look like every other check casher on the corner," said Myxter emphasizing that CUs entering the field, will pursue financial education while also trying to build membership. On that point, Schenck said CUSOs and community charters are both acceptable vehicles CUs can use to break into the field adding his office also sees community charters as a convenient means of expanding field of membership. "The basic charter of a credit union is to serve the community and that includes the underserved, so it seems to me the need is out there for these kinds of financial services," said Schenck. The PCUA has estimated there are 500 check cashers in the state, predominantly in metropolitan Philadelphia and Pittsburgh, but also in Erie and Wilkes-Barre. "I think a stand-alone facility can be a good business generator and can make some money for the credit union," said Schenck pointing to work already done by Filene Research, which has joint check cashing ventures underway with several state Leagues. At the PCUA's Champion meeting at which he was a panelist, Schenck said he came away impressed with work done on check cashing by Filene. He said he had seen an earlier report on the topic issued last February by the Madison research firm. Schenck said he was familiar with some check cashing operations run by banks "and Union Bank in California has one that works well" in helping the disadvantaged. A spokesman for the secretary noted that check cashiers in Pennsylvania "have pretty much free rein in charging what they want" and that Pennsylvania statutes are considered "weak." Whether Schenck, a former executive vice president of PNC Bank in Pittsburgh, might take on check cashing in the next session was unclear. Schenck was appointed the state's chief regulator of banks, credit unions, and financial service firms last January by Democratic Gov. Ed Rendell. Myxter of PCUA said the trade group also became interested in linking up with Filene after earlier meetings with research firm reps. One proposal being discussed is for community CUs to set up "a special type of membership" in which the initial check fee could be converted into a share account and ultimately CU membership. "That idea may not work everywhere since some credit unions have membership policies with higher fees at say a $50 savings account," said Myxter. In addition, non-community CUs would be required to form a CUSO, he concluded. -
Complete your profile to continue reading and get FREE access to CUTimes.com, part of your ALM digital membership.
Your access to unlimited CUTimes.com content isn’t changing.
Once you are an ALM digital member, you’ll receive:
- Breaking credit union news and analysis, on-site and via our newsletters and custom alerts
- Weekly Shared Accounts podcast featuring exclusive interviews with industry leaders
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the commercial real estate and financial advisory markets on our other ALM sites, GlobeSt.com and ThinkAdvisor.com
Already have an account? Sign In Now
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.