ARLINGTON, Va – Even if Congress and the Administration were to allow federally chartered credit unions to cash the checks of some non-members, as the pending Regulatory Relief bill would do, it is unlikely a large percentage of credit unions would rush to offer the service, according to various credit unions and check cashers. Currently, federally chartered credit unions, and credit unions in states whose state credit union laws mirror the federal act, cannot cash non-members checks. But the pending regulatory relief bill would change the law to allow federally chartered credit unions to cash the checks of anyone who, while they may not be credit union members, are nonetheless in the credit union's field of membership. While various credit union and NCUA officials have heralded this proposed change as opening a powerful door for credit unions to reach out to the underserved, credit unions who are already involved in check cashing, as well as check cashers sympathetic to credit unions, have doubted whether credit unions will rush to fill this financial services niche. "There is no doubt that location is a key aspect of running a check cashing outreach and it's not clear that every credit union is going to have the locations it needs to really make a go of this," said Mark Hohenstein, vice president of shared branching with the Missouri Credit Union League. Working with the Filene Research Institute, the League started a "pilot" check cashing effort in two locations and has found growth in the service has been slow. The effort now cashes 60 or 70 checks per month, and many of those for customers who acknowledge the service is primarily a "convenience." The effort has also seen five check cashing customers become credit union members during the period when it cashed about 400 checks, Hohenstein reported. Location of check cashing services is key, according to the Financial Services Centers of America, the trade association claiming to represent over 5000 of the nation's check cashing firms, and a couple of check cashers who described themselves as "sympathetic" to credit unions. "People think that you can just put a service outlet anywhere there aren't other financial institutions," said one, whose firm runs five mostly urban check cashing stores in the Midwest. "But this is a traffic based service. People need to be able to get to you with their checks and then get going to do their other errands. Accessibility of your location is key," he said, "the best locations are ones right where major bus lines or subway lines intersect." Hohenstein agreed that the credit unions' locations might be an obstacle. While the branches that offer check cashing are in or near lower income areas, he noted that neither one is really on a bus line nor other transportation avenue that many check cashing customers might use. A bus line that passes one location, he noted, tended to be an express from which passengers generally do not disembark nearby. Even if credit unions were given permission to cash more of the public's checks, and this would most likely apply to community chartered institutions which would have the fields of membership broad enough to make the effort worthwhile, they would still have to give a thought to where they put the check cashing service. "They can't just count on putting it in a branch," he noted. Jim Blaine, CEO of the $9.1 billion State Employees Credit Union in Raleigh, North Carolina, also cited the experience of some credit unions who had offered check cashing in their branches and found that members objected to having to share time in line and other teller services with non-members who were merely looking to have a check cashed. If a check cashing operation really gets going and becomes successful, that could be a real issue, Blaine noted. Credit unions will also have to recognize that an increasing number of check cashing customers do not use the facility to cash checks but also to buy other products and services that a credit union may not be interested in offering, the check casher said. And another one agreed. "Cashing the check is merely the main service, the draw service," said Joseph Coleman, president of RiteCheck, the New York firm that has partnered with Bethex FCU and Actors FCU in Manhattan to allow credit union members to make deposits through their facilities. "We cash their checks but then we sell them products like wire services, pre-paid phone and other cards, and other things they need," he said. A large percentage of this business is strictly retail in that the customers using the check cashing centers are not looking to start a deposit account with that institution, even if they could, he explained. "Credit unions need to recognize that not every check cashing customer is going to be interested in a relationship with the credit union," he noted. Still, even with these obstacles, Hohenstein and other credit union officials expressed confidence that, if allowed, greater numbers of credit unions will grow into offering this service, just as many grew into shared branching, even though that began to take off only slowly. Bob Hoyle, executive director of the Filene Institute, shared this confidence, pointing out that credit unions still did not understand how large an untapped market the pool of check cashing Americans represented. "Twenty-five to 30 million Americans are check cashing customers," Hoel noted, "and they are not the sorts that you might think. They are younger than you would expect. They are employed. They have a need for this service." More credit unions might discern a path to offering a check cashing service if the Denver Community Credit Union succeeds in developing what CEO Carla Hedrick called a "solid business model" for how credit unions might go about starting a check cashing service. Hedrick said the $162 million credit union is working with two Colorado based foundations in the effort and confirmed that the institution had already tried to make sure the proposed location is close to both a low income area and a significant transportation route. She also said that although the credit union would be actively marketing credit union membership to the check cashing customers, it would also be offering the other products and services, the wire transfers, pre-paid cards for example, check cashing customers need to buy. -


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