CompuPawn Industry Information
	Check Cashing and Check Advance Industry
	Check cashing is a growing and profitable business; the number of check-cashing outlets more than doubled from the mid-1980s to the early 1990s. Many consumers, particularly those who have low incomes and do not have bank accounts, rely on so-called "fringe banks" -- check-cashing outlets, consumer finance companies, and pawnshops -- for their banking needs. Major reasons for the growth in "fringe banking" are: Stagnant incomes and a larger number of households at lower-income levels Bank branch closings, especially in low-income and minority neighborhoods Decline of the savings and loan industry; steep increases in banking fees Discriminatory lending practices; and increased credit card debt and personal bankruptcies. In addition, a lax regulatory environment, which permits high charges and results in extraordinary profits, has made the check-cashing industry a magnet for capital raised in the equity markets. In a makeover worthy of Evita Perón, the nation's once seedy check-cashing outfits have gone upmarket. As more and more bank branches closed in the past decade, and the banks that remained began charging more for checking accounts, check cashers found increasing demand for their services among the middle class. So they scrubbed their outlets clean, started offering conveniences like faxing, bill payment, and income tax preparation, and opened stores in more prosperous urban neighborhoods and suburbs. The growth has been extraordinary. From 1988 to 1997, the number of outlets nationwide more than doubled to 5,270. Today we estimate that there are over 20,000 retail check cashing stores nationwide. While some people use check cashing outlets because they offer convenience and fewer "hassles" than banks, many low-income people cannot afford to maintain a checking account because of minimum balance requirements or high bank fees. According to the Federal Reserve's latest Survey of Consumer Finance, 33 percent of families headed by persons age 50 and older did not have checking accounts in 1995. The incidence of older families without a checking account is higher among those with low incomes and those headed by older women and minorities. On average, check cashers charge 2 to 3 percent of each check, which for some people can be cheaper than maintaining a bank account. The check-cashing business is extremely innovative, for example, the industry has proposed linking check-cashing outlets to the benefit payments system so that Social Security recipients can get their cash at a check-cashing outlet. Check cashers also have been trying to form alliances with banks so that they can become part of ATM networks. Chase Manhattan is doing this with New York City check cashers. The alliance hopes eventually to open the network to people without bank accounts. The day they were paid, they would access a direct-deposit-payroll account with a swipe card at check-cashing locations. The check cashing industry provides a service that other financial institutions often decline to offer, especially in neighborhoods where bank branches have closed. Check-cashing outlets, unlike banks, are often willing to extend credit to customers who need money immediately to pay the rent, repair cars to get to work, or cope with other emergencies. Consumers with language barriers or low literacy skills may also find these outlets easier to use. Check cashers also are getting into the lending business, where states allow it. Check cashers offer simple, weeklong cash advances against someone's salary. This practice has become very popular, particularly in suburban outlets.
	Regulation
States have enacted laws that regulate the check-cashing industry. A review of state statutes indicates that nearly half of all states regulate at least some aspect of check-cashing services. Most of these states regulate check cashing through a system of licensing or registration: a check casher submits an application - along with a fee and, if the company meets the qualifications set out in the law and regulations, it is granted a license. Unless or until that license is granted or registration is accepted, the check-cashing business cannot operate. Most states that regulate check cashing address the biggest consumer concern -- the levying of high check-cashing fees -- by setting fee limits for each type of check (e.g., government, payroll, personal). They also establish a long list of responsibilities that a check casher must satisfy, such as posting fees, providing customers with itemized receipts, and filing reports of their operations with the state regulatory authority. In addition, state check-cashing laws delineate other prohibited acts and provide for penal-ties for violations of the law. Another common service that is regulated by check-cashing laws is "pay-day lending" or "deferred deposit." Deferred deposit is the practice of holding a customer's post-dated check for deposit until a later date. The fees charged for these loans can be significant. Some statutes prohibit deferred deposit, while others allow it under a separate approval process or with specific restrictions. Ace Cash Express, the single largest check cashing operation, operates 310 pay-day loan outlets that completed 460,000 transactions totalling $105.8 million in 1999.
	Market Trends
Check cashing is a growing and profitable business; the number of check-cashing outlets has nearly tripled since the late 1980s. There are many reasons for the growth in "fringe banking" as it is called: Stagnant incomes and a large number of households in poverty; Bank branch closures, especially in low-income and minority neighborhoods; Decline of the savings and loan industry; Steep rises in banking fees; Discriminatory lending practices; Increased credit card debt and personal bankruptcies. Consumers are increasingly turning to check cashers because: Some consumers prefer the convenience. Others use check-cashing outlets for privacy. They are in the neighborhoods, where banks may not be. They are often open longer hours than banks. Poor people, who cannot afford bank accounts because of minimum balance requirements or high fees, turn to these outlets. Check cashers play a major role in providing basic banking services to many low-income people.