HACKENSACK, N.J. – The Financial Services Centers of America, the largest trade association for check cashers in the nation, has begun negotiating with a national bank to begin offering their customers federally-insured depository accounts. The move, should it succeed, could sharply boost efforts to move the nation's more than 10 million unbanked adults into relationships with a financial institution. But credit unions and others say many questions remain and that only time will tell if the accounts will really offer a workable option for people who lack bank accounts. According to FiSCA officials, the project will involve a national bank which will offer the federally-insured depository accounts. The accounts would be unique to the individual who would, in effect, become a customer of the bank through the offices of the check casher. "The analogy I would use is that of a manufacturer and an outlet store," explained Joe Coleman, a FiSCA Board Member and president of RiteCheck check cashing headquartered in New York. "When someone shops at the outlet store, they are the customer of both the store and the manufacturer. The bank is the manufacturer that will hold the account and the check casher is the outlet store which offers the retail transaction," Coleman added. But Coleman agreed with the old saying that the devil often comes in the details and acknowledged that many of the details, such as the interest rates the accounts might carry as well as their fees and regulatory details remain to be explored. Those details have the attention of community development credit unions, many of whom serve the same populations as check cashers and who take a cautious stance toward the idea, at least for now. "We are very concerned about how many fees which might be attached to these cards and accounts," said Clifford Rosenthal, executive director of the National Federation of Community Development Credit Unions. "There are additional concerns about who will be responsible for providing statements for the accounts, along with fixing accounting errors along with the different security concerns that go along with banking now." What Is Known About The Idea Neither FiSCA General Counsel Gerry Goldman nor Chairman Gary Dachis would reveal many details of the plan, citing the ongoing negotiations. They declined to answer questions about fee structure, regulation or who the banking partner might be. However, they did acknowledge that they saw the plan as both a means to address an ongoing public relations problem as well as the growing popularity of debit cards among their customers. "Whatever we have done we have always faced the allegation that we exploit the poor," Dachis complained, "when the reality is that we are there in these neighborhoods, we have stayed there when everyone left, and we provide needed financial services at a reasonable price." The reality is that FiSCA members care about their unbanked customers and would like to see them start at least a tentative relationship with the financial services system, Dachis maintained. He pointed to some of the initial impetus for the new product which, he said, arose after check cashers noticed that many of their customers had begun using their rechargeable debit cards as ersatz portable savings accounts, adding to the cards regularly even though they still had significant funds on them. Those cards are prepaid debit cards that carry the MasterCard logo and which are offered through NetSpend, Dachis said. NetSpend, an Austin, Texas company offers prepaid debit cards though a relationship with the $800 million Inter National Bank, headquartered in McAllen, Texas. No one was available from either NetSpend or Inter National to comment on whether either company contemplated partnering with FiSCA in its plan, but if they did, they would be offering a significantly different product than they do now. Currently the NetSpend cards rely on one large account which is deposited with Inter National and which does not require the bank to keep records of individual account holders. By contrast the FiSCA product, Coleman stressed, would match up individual account holders with the bank, making them effectively bank customers. "The check cashers are not seeking to become bankers," Coleman said. "We specialize in transactions and will continue to offer transactions and cards. The difference now is that the accounts attached to the cards will be able to have a savings component." The question of who is the bank's customer, the check casher or the cardholder, might prove crucial for how the Comptroller of the Currency views the idea, according to Kevin Mukri, a spokesman for the national bank regulator. Mukri did not want to say a great deal about an idea the agency has not seen, but he stressed that the OCC would not automatically rule such a proposal illegal. "We talk to anybody, both people who are thinking about a new product and people who might think the product was a bad idea," Mukri said. He pointed to the relationship some national banks had with payday lending companies until the OCC discouraged them through regulation as an example of a new product which had seemed like a good idea but about which the agency had changed its mind. Having the cardholders as bank customers would mean the bank would be responsible for things like statements and calculating interest and verifying the cardholders' identity and would have to work out how that would work with the check cashers, Mukri speculated. David John, a banking analyst with the predominantly conservative Heritage Foundation said that if those hurdles could be overcome, there could be a lot of support in the agency and among legislators for a new approach toward getting people without relationships with financial institutions on the road to financial security. Credit Union Roots? Coleman, whose check cashing firm has a relationship with three credit unions in New York, said that he had the idea for over a decade and that it was a natural evolution from his firm's partnership with credit unions. Under the New York partnership, members of the $8 million Bethex Federal Credit Union, headquartered in the Bronx, and the $84 million Actor's Federal Credit Union, headquartered in Manhattan can make deposits into their credit union accounts through a network of check cashers. Members of the $1.8 billion Bethpage FCU, headquartered in Bethpage, New York, will be able to do so as well as soon as technical hurdles are overcome. Coleman explained that, in his view, the challenge was to view the financial services industry as a ladder. The lowest rung is where check cashers have traditionally served most of their customers, many people without relationships with banks or credit unions, Coleman said, and the savings accounts attached to the debit cards would be one more way to induce people to climb the ladder. "I don't think people have ever really understood why check cashers are so popular in these neighborhoods, Coleman said. "It's not just because we are there, it's also because we let our customers keep their money," he said. "People are saving on these prepaid cards because they can take them with them and have access to their money whenever they want. What we want to offer them is a way to save money in a way that offers some interest, is more secure, and which still lets them get their money whenever they want." -

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