Credit Unions in Pennsylvania Find Innovative Way to Cash New Members' Checks More Efficiently

HARRISBURG, Pa. – Pennsylvania credit unions forbidden by law from cashing non-members checks have adopted a program offered by Certegy to at least cash new member’s checks more quickly and easily. Under the auspices of the Pennsylvania Credit Union Association, interested credit unions have been able to contract with Certegy to use its PayCheck Accept service. PayCheck Accept is a check validation and guarantee service that allows participating credit unions to accept and cash a new member’s checks immediately without imposing the usual holds and other procedures which can serve to slow the process and make credit unions less attractive to potential new members who need to have their checks cashed. Currently only one Pennsylvania credit union, the $51 million Choice One FCU, headquartered in Wilkes-Barre, Pennsylvania has taken advantage of the program, according to Michael Wishnow, vice president for communications for the Association, but other credit unions in the state have begun to express an interest. The need in Pennsylvania is pressing, Wishnow explained, since the state set the highest rate that check cashers can charge at 10%, a rate which is a burden to many who need check cashing services and one which credit unions could certainly undercut. Wishnow emphasized that the alternative does not represent an attempt to work around the existing law but instead to make complying with the law easier and safer for credit unions. Someone coming in needing a check cashed might be open to becoming a credit union member as part of what is likely a recurring transaction, Wishnow explained, but they will not be open to waiting for the check to clear to get their money. Jerry Marshall, a vice president with Certegy explained that the financial services firm, more known among credit unions for card processing, had first marketed the PayCheck Accept service to supermarkets and other retail establishments and had only recently come to understand that credit unions would be interested in it as well. Essentially, a credit union taking on a new member who wanted a check cashed immediately would use the service to verify the person’s identification as well as to verify that the check came from a bono-fide business or government source, Marshall explained. “If we ok it and then the check comes up later as fraudulent,” Marshall said, “the credit union knows that they are protected from the loss, that we will guarantee that check,” he said. That assurance, in turn, allows the credit union to cash the new member’s check and fulfill a need that they have at a price substantially less expensive than the surrounding check cashing market. Certegy has been gaining experience with the check verification service for years, Marshall explained, including years in the beginning when it was particularly rough and the service was seeing losses on checks running sometimes as high as 10%. “That was pretty scary,” Marshall said, “but we have gotten it down to where most of the time our losses run about 1%.” Marshall was reluctant to give hard examples of the program in action, but he described a recent situation where, in Northeastern Florida, the service had faced a ring of fraudulent check passers targeting some of the firm’s retailing clients. Although the service has no credit union clients in the area, if they had one the credit union would have been able to benefit from Certegy’s experience in that region. “That’s what we call a good footprint,” Marshall said. So far Certegy has fewer than 10 credit unions that are using the PayCheck Accept service, Marshall explained, but added that the processing firm had begun discussions with credit union leagues around the country who seek a similar arrangement to that of Pennsylvania’s. The other part of the PayCheck Accept service that interests credit unions, Marshall said, is a consultative service wherein Certegy will advise a credit union about the state, federal and local regulations and licensing requirements that govern check cashing. “Many people don’t realize how much regulation there is around cashing checks,” Marshall said, “particularly in our time of awareness of cash and the need to know where money is going for security purposes.” -