Op-Ed: The Real Tale Of Two Cities

BY ANDREW SIEGEL

State Attorney General Eric Schneiderman recently announced new steps to assist unbanked New Yorkers gain access to bank accounts; namely, by limiting the use of predatory financial background checks of prospective customers. New York’s licensed check cashers applaud these efforts. But we proudly note that we have been providing low-cost financial services to unbanked and underbanked New Yorkers – from check cashing to money transfers to bill payments – in an affordable, transparent way for the last 70 years.

But let’s be clear – bank accounts alone are no silver bullet. The reality is that just months after Mayor de Blasio swept into City Hall on his “Tale of Two Cities” campaign slogan, New Yorkers throughout the second City remain without the basic financial wherewithal to move away from the financial edge. The real problem is that thousands and thousands of New York City families live paycheck to paycheck – perched perilously close to the personal financial cliff.

The fundamental misconception about unbanked and under-banked New Yorkers is that bank accounts alone would help them avoid unsound financial decisions and consequences. Nothing could be farther from the truth.

On any given day, these hard-working New Yorkers, who have bank accounts with well-respected financial institutions, still cannot pay all of their bills. They typically have jobs and regular paychecks, but still can’t pay monthly expenses.

The result is that New Yorkers living in the second City face a terrible choice: either pay a late fee waiting for their paycheck to clear or pay an overdraft fee imposed by their bank.

For New Yorkers on the financial edge, there is another option: a licensed check casher. Licensed check cashers across New York cash annually an estimated $12 billion in checks. The average check size is under $500.

There is a fee to cash the check just like any other service. But the difference is that licensed New York check cashers cannot charge more than a maximum fee of 1.98 percent – the lowest rate in the country. If you could choose between a $50 late fee with your utility company – and the long-term negative credit mark – and a $10 check cashing fee, which one would you choose? When every dollar counts, a $40 savings is enormous.

As illustrated by recent studies conducted by the New York City Dept. of Consumer Affairs, many New Yorkers – unbanked and underbanked both – choose to use licensed check cashers to conduct their financial business because they offer competitive pricing and convenience.

Simply put, New Yorkers living in the second City make sound financial decisions in conducting their financial lives because they have no room for error. This is the true reason why many New Yorkers choose to open or close bank accounts. For these New Yorkers, check cashers are simply the smarter financial decision.

Protecting New Yorkers from financial predators is the right thing to do. But the underlying issue is that we need to identify the services New Yorkers actually need and use – and then work with the small businesses that are already providing those services. That’s a strategy we can all bank on.

Andrew Siegel is the president of the Financial Service Centers of New York.