BRONX, N.Y.- How is this for a financial services coming attraction? Coming soon to a check casher near you: a credit union! Joy Cousminer usually reserves her biggest, baddest Bronx cheer (roughly translated as a raspberry, for residents of the remaining 49 states) for payday lenders, check cashers and pawn shop operators. Today's politically-correct definition of check cashers has placed most of them in the predatory lending category, a placement some feel they do not deserve. (See related story on predatory lending protests page 24.) Using that definition, Cousminer, president of Bethex Federal Credit Union here, might be about to do a deal with the devil, but she doesn't think so. What she has done, together with Joe Coleman, president/owner of Rite Check Cashing, who owns eight store branch locations in New York City-four in the Bronx and four in Harlem- is form a symbiotic relationship that promises to benefit the credit union, the check cashers and consumers. "Joe's not made in the usual image of the check casher," said Cousminer, who is a credit union loyalist to the teeth, a winner of the National Federation of Community Development Credit Unions' Annie Vamper Award, and a NFCDCU board member as well. So how does she explain this deal with the devil? She allows that it makes for strange bedfellows, but so what? The point is to `serve the underserved' isn't it? To educate them in the world of mainstream financial services? To treat them with dignity, right? To bring credit union services to their doorstep? The pilot program would do just that, said Cousminer and Coleman, and it began with the realization that both CUs and check cashers serve many of the same customers: low income earners who feel disenfranchised or alienated by banks, many credit unions, and other financial service providers. Besides the power of the two individuals behind this concept, what makes it possible is that the law on check cashing operations is very different in New York State, according to Cousminer. In fact, the law covering such operations was passed during the term of Governor Thomas E. Dewey in 1948 and provides for strict limits on fees, Coleman told Credit Union Times. Coleman said his stores get $1.40 for cashing a $100 check. "That's 1.4%, not exactly a rip off. And we take all utilities payments for free (electric and phone), sell postage stamps for free, charge 89 cents for a money order, sell subway and bus fare tickets at no charge and accept cable TV payments for 95 cents." Those are all `lifeline' services that residents of low income neighborhoods need. No one else offers that kind of menu, really, at least not in so many convenient locations, he said. "Look, the ultimate reason that check cashers are held in low esteem is because we make money doing business in poor neighborhoods, so people have come to believe that makes us morally reprehensible." It doesn't, Coleman said. That's just the pot calling the kettle black, especially since many of those calling names have done little or nothing to provide a solution. The idea was born because both Coleman and Cousminer are active in the South Bronx Development Organization, a community development group which has regular breakfast meetings where businesses, non-profits and other organizations meet to discuss ways to improve life in the Bronx. "It just made so much sense-it was so obvious- that we wondered why we hadn't thought of it before," he said. "Credit unions, and particularly Bethex, are hamstrung by a lack of branches. So I said: `I'll be your branch,' and Joy agreed. For Bethex, it's far cheaper to use my locations than to open standalone branches-that would be prohibitive- and we will offer credit union membership and products and services through our branches," Coleman said. "I'm in the transactions business," explained Coleman, when asked where the benefit was for his company. "I'll make money on the transactions, and realize this too, it's a myth that we want to keep these people away from mainstream banks and credit unions. In fact, our highest transaction locations are those nearest to bank branches. What does that tell you?" Banks actually pay for as much as 40% of the transactions made by check cashers, Coleman informed. (How? A bank that issues payroll checks for an employer arranges for check cashers to accept those payroll checks regularly, for example, because they have no branch nearby.) "So banks, companies and individuals hire us to do transactions." (Check cashers also patronize banks, Coleman said, needing cash services and short term loans.) Coleman admits that payday lenders have earned a bad reputation by rolling over loans so many times that the interest owed makes the debt impossible to repay. He is a former president of the Check Cashing Association of New York, the trade association for the industry in the Empire State. "I'd like to see rollovers limited to one," he said. Coleman related that he believes that to foster economic development, you have to meet people on their own terms. "The basic assumption is that check cashers are bad. Look, it's pretty simple for middle class people who have a banking relationship to look down their noses at people who don't, and then feel sorry for people who have to use check cashers. For them, being in the financial mainstream means having a checking account, a credit card, a debit card, etc. But here in the real world, people need access to transactions, and banks and others want a relationship; they don't want to just do transactions. So we make these assumptions that if we only had a way to down scale all these products and services and shove them down to low-income people it will suddenly be all right. It's an arrogant attitude, really. "Check cashers do transactions for a fee, period. No one else seems to want to do this, or knows how to do it. It's a straightforward business where people pay up front for a service," said Coleman. The secret of the success of check cashing operations is simply that they provide three things: accessibility, liquidity and service. Multi-locations make them accessible; liquidity means that users get cash for checks immediately, and service means that live people are doing these transactions. "I see a great synergy between check cashers and credit unions," said Coleman. "For us, I see the chance to offer more products and services to my customers; to give them more choices. For the credit union, it's an opportunity to have branch locations; to educate and serve people that they could never afford to otherwise." PILOT PLAN The plan between Bethex and Rite Check Cashing is made possible because both are members of the NYCE ATM network (via a sponsorship from Chase Manhattan Bank). At check cashing locations, POB terminals or "Point of Banking" technology (which Coleman describes simply as an ATM with a `live' teller or clerk who accepts and dispenses cash) provides the platform for control and reconciliation of transactions. Those two requirements are the key to the pilot's success; if it works, it can be expanded to include more. The service menu for the pilot includes new account facilitation, withdrawals and deposits and discounted check cashing services through Pay Net, the payroll network of the Check Cashers Association of NY (CCANY), which includes 600 outlets in the five boroughs of New York, Long Island, Westchester County and New Jersey. Check cashers will provide forms and information to open up CU accounts, even offering assistance in filling them out. They will act only as facilitators, leaving all follow-up to the CU. The CU pays a fee for each successfully opened account or loan. For deposits, a customer swipes his/her ATM debit card in the check cashers POB terminal, inputs the info, then gives the money to a clerk. The POB terminal transmits the info over the NYCE network, and upon receiving the approval code, prints a receipt and the account is credited. That night, the network credits the check cashers transaction account for all withdrawals made and debits for all deposits. Check cashers' fees consist of interchange income charged to the depositor's institution and paid to check cashers through the NYCE network. The current fee is 75 cents (NYCE does not permit surcharging.) A detailed marketing plan is in the works, and would include the creation of signage and marketing materials to support the relationship. Basically, a customer would see promotional materials for Bethex when they enter an outlet. A company called Grafico would perform a strategic marketing analysis of the eight check cashing stores/CU alliance that would include philosophy, mission and goals of the CU in the partnership, the scope of services available through competitors, the strengths of each partner and expansion/growth opportunities. The credit union brand (and the Bethex name, in particular) would be front and center of so many more people if the marketing plan takes off. A major media "roll out" and in-store "kick-off" events would be launched to back up direct mail and advertising efforts. "We are asking to make an extremely modest beginning," said Coleman. "We want to test the waters at eight locations to have a chance to prove the enormous benefit this alliance will provide to low-income consumers," said Coleman. Both he and Cousminer believe the last regulatory hurdle is about to fall. If it does, many of New York's presently `unbanked' millions may become credit union members. -
caburger@cutimes.com
