Paying for your cash is a tough proposition

December 01, 1992|By New York Times News Service

WASHINGTON -- Victoria Keyes, a nurse at Children's Hospital National Medical Center here, pays a check-cashing store roughly $13 every two weeks to cash her paycheck of about $500.

A bank would charge far less, but there is not one within walking distance of her house in the poor Washington neighborhood of Anacostia. Miss Keyes, who makes $24,000 a year, closed her last checking account because her bank started requiring minimum monthly balances in lieu of service fees -- neither of which she could afford, she said.

Miss Keyes knows from experience what consumer groups have come to conclude: the deregulation of financial services in the 1980s has made banking services unavailable or beyond the financial reach of many low-income people. Many have turned instead to cash-checking outlets that consumer-rights groups and state regulators accuse of widespread price gouging.

Many banks have closed inner city branches or raised fees beyond the means of many people.

Check-cashing outlets have multiplied to fill the void.

There are an estimated 5,000 check cashers nationwide today, up from 3,000 in 1988, according to the National Check Cashers Association, a trade organization.

A study by Mr. Caskey for the Federal Reserve Bank of Kansas City, Mo., estimated that the industry in 1990 cashed 150 million checks worth $45 billion, mainly for people making between $18,000 and $25,000 a year. The check cashers took in $790 million in fees on those services.

The fees are the point of contention. A 1990 study by the Consumer Federation of America showed that most charged from 1 to 3 percent of the value of a check to cash it. But some services, the study found, charged as much as 20 percent -- or $20 for a $100 check.

"Consumer groups don't view these outlets as good options for low-income consumers because of the gouging that occurs," said Michele Meier of Consumers Union.

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