Forces driving the check-cashers' growth are related to those that gave birth to the industry in the 1930s -- the Depression-era bank closings. Also, as employers switched to check-based payrolls, they fueled the check-cashers' expansion. In fact, the lion's share of the industry's business today is payroll checks -- which explains the heavily armored check-cashing vans that roam from workplace to workplace -- with government assistance checks in second place.
But it wasn't until the 1980s that the industry started to boom. In 1980 Congress abolished interest rate ceilings on bank deposits and increased the fees banks had to pay the government. The whole industry became much more competitive, and banks responded by raising their own fees and closing unprofitable branches, a process that hit low-income neighborhoods hardest.
The number of bank branches in Maryland peaked in 1989 and fell 2.7 percent through June 1992, excluding Baltimore City, according to Sheshunoff Information Services Inc. of Austin, Texas. In the counties surrounding the city, the number of branches fell 6.6 percent during the same period. But Baltimore, which contains most of the region's poor neighborhoods, suffered a 15.6 percent decline in bank branches.
Meanwhile, the earnings of industrial workers fell, as did the standard of living of low-income Americans. The cities got poorer. The number of families below the poverty line rose to 31.9 million in 1989 from 24.5 million in 1978.
As those changes took place, check-cashers thrived -- because fewer people could build up the savings needed for bank accounts and because bank branches were disappearing from their neighborhoods.
"I think the check-cashing organizations have moved in to fill voids that have been left by the absence of the banks," says James Fulcher, vice president for branch administration at Signet Bank/Maryland.
"It's not so much a concern that we're losing business to them," says Vickie Tassan, who heads MNC Financial Inc.'s community reinvestment program. "But we're concerned that the consumer is not being served adequately by the banks."
Banks start to respond
But the banks haven't entirely abandoned the low-income neighborhoods. Whether by design or not, they have allowed the check-cashers to act as their proxies. The check-cashers maintain their storefronts for long hours, bear the risk of
bounced checks and violent crime. Then they pay the banks to process the checks through the Federal Reserve system.
"When I go to work in the morning, I pull on a gun and a bulletproof vest. I have for years," says Brian Satisky, secretary/treasurer of the Maryland Check Cashers Association, and co-owner of three shops in Baltimore.
"Whether [bankers] know it or not, we're their friend, because we take what they don't want," he says. "We service the customer that means nothing to them, the customer with little or nothing in the bank."
Do banks want customers who can't sustain a savings account? "Probably not," admits Douglas Dodge, president of Mercantile-Safe Deposit & Trust Co., which has practically no branches in Baltimore's poor neighborhoods.
But Mercantile and other banks, partly from the prodding of activists and federal community reinvestment laws, and partly on their own, have started to respond.
Many area banks now offer no-minimum-balance and low-fee checking and savings accounts. And a coalition of banks, thrifts and community leaders, called the Maryland Bankers Community Reinvestment Group, has been holding seminars on "Banking Basics" for the public.
The state also has stepped in, with a program that allows most welfare recipients to bypass check-cashers' fees by using an automated teller machine card. Many check-cashers have installed the machines needed to accept the cards. "We started to fight, but we bowed to the old adage, 'If you can't beat 'em, join 'em,' " Mr. Satisky says.
In Washington, too, legislators have been threatening to trim the check-cashers' turf. Sen. Howard Metzenbaum, D-Ohio, has sponsored bills for several years that would require banks to offer "no-frills" checking accounts for the poor, and to cash government checks.
"Every year the banking industry, with our help, gets that thing squashed," says Howard Mandelbaum, executive director of the New Jersey-based National Check Cashers Association. Without banks' commitment to return to poor neighborhoods, any moves to regulate his industry out of existence would only hurt the poor, he maintains.
"The attitude toward the non-depositors and welfare clients was no secret," he recalls. " 'Get these people out of my branches.'
"It may be magnanimous for Maryland National to offer no-minimum-balance checking accounts," he says, "but they know full well those people aren't coming into their branches."