MADISON, Wis. - With the proliferation of check cashing outlets and payday lenders spurring credit unions to offer similar types of services to non-members at more affordable and less usurious rates, is it any wonder CUSOs are also beginning to get involved with providing check cashing and other services to...
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MADISON, Wis. – With the proliferation of check cashing outlets and payday lenders spurring credit unions to offer similar types of services to non-members at more affordable and less usurious rates, is it any wonder CUSOs are also beginning to get involved with providing check cashing and other services to non-members as an alternative to neighborhood check cashing businesses? Badger Shared Service Centers Cooperative is so far the only CUSO in Wisconsin – and only one of a handful of CUSOs around the country- that is providing check cashing services to non-members. The multiple-owned CUSO has been offering the services for about a year, and from March 2002-Feb. 2003, it cashed 2,630 non-member checks worth about $882,000 for 752 non-members, and earned approximately $26,000 in fee income, reported the CUSO’s Chairman John Lowrey, vice president of lending, Dane County CU. Badger Shared Service Centers Cooperative was formed in the early 1990s as a Credit Union Express Branch (CUEB) by 11 credit unions, 10 of which are located in Madison – City Employees CU, Dane County CU, Heritage CU, Members First CU, Post Office CU, State Capitol CU, Heartland CU, University of Wisconsin CU, UW Employees CU, and Wisconsin Education Association CU, Madison. The eleventh owner, Commonwealth CU, is in Sun Prairie. CUSO President Patt Steiner recalled there was talk several years ago about offering check cashing services to non-members, but at the time there was concern voiced by some of the credit unions that the facility wouldn’t be able to handle the added transaction volume. The idea was shelved. It was taken up for consideration again in 2002 after the CUSO lost two credit unions – Commonwealth CU merged with State Capital and was renamed Summit CU. Then University of Wisconsin CU built a branch on the east side of the city near the CUSO’s location, and pulled out of the service organization. “When the two credit unions left, they took about half the volume in transactions, as well as our income stream,” said Steiner. Around the same time, she recalled, several non-members came in to the CUSO’s facility to inquire if it cashed non-members checks. All things came together for Badger Shared Service Centers Cooperative to reconsider the idea of offering check cashing services to non-members. It applied to the state Department of Financial Institutions and got its letter of approval in about two weeks. “We’ve been very conservative in our approach,” said Lowrey. The CUSO only cashes non-members’ government or payroll checks – it doesn’t accept personal or two-party checks – and charges a fee of 3% of the check amount or $5, whichever is higher. The maximum check it cashes for a non-member is $2,500, but Steiner said “we rarely see a check for that amount.” In fact glancing over a printout of transaction records, Steiner said most non-member checks cashed by the CUSO each month were for around $340. Steiner said when the CUSO began offering non-member check cashing services, it agreed it wanted to make sure the non-members “received the same excellent type of service our member get.” There is no designated line non-members have to wait on, “so there’s no way anyone waiting on line can tell the difference.” The difference, though, is discernable by the CUSO’s teller. To protect the safety and soundness of the CUSO, tellers can only cash non-members’ payroll or government checks. When cashing non-members’ payroll checks, non-members are asked the first time they come to Badger Shared Service Centers Cooperative to cash a check to complete a short application and asks for their name, address, social security number, employer’s address and phone number, and personal references. Steiner said the application takes about two minutes to complete. So far, Steiner said the service has been running “pretty smoothly.” The CUSO only ran in to one unforeseeable problem in February when an unusually large number of non-members came to the CUSO to cash their income tax checks. “We had to watch our cash flow, and we wound up having to temporarily lower our cash back amount for awhile because there were so many people coming to the CUSO to cash their checks,” she said. Steiner had the opportunity to talk with other CUSOs and credit unions about setting up check cashing services for non-members when she spoke in November at a seminar, “The ABCs of Check Cashing: A New Business Opportunity for Credit Unions” sponsored by the Filene Research Institute on the topic. Participants were also taken on a tour of Badger Shared Service Centers Cooperative and had the opportunity to see the branch in operations. A similar seminar was held in March with the goal of setting up 10 pilot check-cashing stores in states by the end of 2003 (CU Times, March 5). Jodi Spahiu, operations manager for the Wisconsin Shared Service Center in Greenville had the opportunity to attend the Filene seminar. The CUSO has been considering offering check cashing services to non-members for a couple of years, and plans to begin doing so in July in its Northside facility. Spahiu explained that the CUSO is in the final states of purchasing software from a vendor who she said specializes in check cashing. The CUSO will start out handling check cashing and selling money orders, travelers checks and postage stamps to non-members. Eventually, Spahiu said the CUSO wants to expand its non-member offerings to include the sale of bus passes and the ability to accept payments for utility bills. Like Badger Shared Service Centers Cooperative, the Wisconsin Shared Service Center will charge non-members a fee of 2% per dollar of the check amount and only handles their government and payroll check, however it doesn’t designate a maximum amount of a check it will cash for a non-member. “There’s great need to help people get better financial services who otherwise don’t have access to them,” said Spahiu. The Financial Service Centers of America, a national organization representing check cashers throughout the U.S., estimates there are approximately 11,000 check cashing outlets in the U.S. that cash about 180 million checks annually with an aggregate face value of more than $55 billion. -
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