U.S. Treasury Department’s FinCEN Subcommittee Holds Hearing on Discriminatory Trend of Banks Closing Check Casher Accounts

FiSCA Calls for Moratorium to Stop Discriminatory Closures That Threaten Consumer Access to Financial Services for Millions of Americans

Washington, D.C. – At a hearing today before a joint committee of the U.S. Treasury Department Financial Crimes Enforcement Network (FinCEN) representatives of the Financial Service Centers of America (FiSCA), joined by members of state associations from New York, Florida, Illinois and Maryland, reported that an escalating number of banks are unfairly conducting blanket closures of financial service center accounts; actions that threaten consumer access to financial services for millions of Americans. FiSCA also reiterated its call for the Treasury Department to ask banks to observe a moratorium on these unwarranted discriminatory closures while FinCEN studies the issue.

“We are pleased the U.S. Treasury Department called this hearing.  FiSCA has been trying to convince legislators and regulators about the serious nature of the bank discontinuance issue for the last four years,” said Gerald Goldman, FiSCA General Counsel.  “Meanwhile, hundreds of financial service centers employing thousands of Americans have had their business banking accounts and access to credit unfairly terminated without cause.

“The pace of bank discontinuation has escalated and is now approaching crisis levels in many areas. The government has to step in and protect consumers who need access to the services and products we provide,” Goldman continued.  

In recent years, bank mergers have decreased the number of potential commercial banking service providers for check cashers, payday advance companies and other money service businesses. Left unchecked, this reduction in available commercial banking services threatens the delivery of basic financial services in underserved communities around the country.

“We believe that an immediate moratorium on the closure of financial service center business accounts should be declared,” Goldman said. “A commercial bank relationship is the lifeblood of any business. In states like New York, Rhode Island, Florida, Mississippi and elsewhere the availability of banking services is drying up. We need to halt the bleeding that is taking place before more damage is done to the industry and to the consumers we serve.”

Additionally, some banks cited “business decisions” as the reason for terminating financial service center accounts. New federal anti-money laundering laws and the U.S. PATRIOT Act caused some regulators to classify a number of industries as “high risk” for money laundering. This has prompted additional banks to unfairly close the accounts of financial service centers.

“Check cashers are good bank customers – banks that understand our industry will tell you that we are stable, profitable and law abiding businesses,” said Jerome Gagerman of Illinois, a former FiSCA Chairman. “This trend is discriminatory and represents a form of economic redlining that the Community Reinvestment Act is meant to prohibit. It should be stopped.” 

FiSCA members have been at the forefront of compliance with the PATRIOT Act and other anti-money laundering regulations. In 38 states the same agencies that regulate banks also regulate check cashers. The industry’s track record of compliance has been applauded by FinCEN and state regulators.

“FiSCA members do a remarkable job of customer service. Studies by the industry, the government and independent organizations have all found high levels of consumer satisfaction with the quality service we provide, the convenience we offer and the value of our products and services,” said Joe Coleman, a director of the Financial Service Centers of New York. “Bank discontinuance harms a legal industry that plays a key role in the U.S. economy.”

U.S. Treasury Secretary John Snow was quoted in the February 10, 2005, issue of American Banker as saying, “These businesses are key components of a healthy financial sector, and it is very important that they have access to banking services.”

In a letter dated Jan. 4^th to FiSCA from FinCEN Associate Director for Regulatory Policy and Programs William Langford Jr. said, “We are aware of this problem and agree with you that it threatens to undermine the accomplishments we have made over the past several years in enhancing the security and transparency of the Money Services Business industry. We take very seriously the important role that check cashers and other Money Services Businesses play in providing financial services to segments of our society that may not have access to the more traditional banking system. To that end, we remain committed to working with organizations such as the Financial Service Centers of America and your members to ensure continued access to bank accounts.”

The Financial Service Centers of America is a professional association serving more than 5,000 individual financial service centers across the United States.  FiSCA members provide local communities with check cashing, money orders, money wire transfers, automatic teller machine access, the ability to make bank withdrawals and balance inquiries, cash advances, Social Security benefit payments, public assistance benefits, electronic bill payment, deferred deposit service, electronic tax preparation and filing, public transportation fare sales, and motor vehicle license plate and title distribution. 

FiSCA, founded in 1986, serves the majority of companies in the industry and is the leading voice on legislative, regulatory and business issues that affect its members and the rights of consumers to access basic financial services.  The industry cashes an estimated 180 million checks annually, with an aggregate face value of $55 billion.  More information about the organization is available at www.fisca.org.

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