Six state-licensed check cashers have been ordered by the state Division of Banks to terminate partnerships with out-of-state banks that were charging Social Security recipients exorbitant fees to cash and access their benefit checks.
Although banks and credit unions in the Bay State are required by law to cash Social Security and pension checks at no cost to the consumer, check cashers have been creating limited-purpose accounts with out-of-state banks and charging fees to deposit customers’ Social Security or other government benefit checks.
Under these arrangements, about 2,700 residents had established these accounts, according to the state Office of Consumer Affairs.
The out-of-state banks routinely charged between $4 and $4.95 each time a Social Security benefit check was electronically deposited into one of these accounts. These so-called limited-purpose accounts did not provide an access device for customers, making consumers dependent upon the participating check cashers to access their funds once deposited in the out-of-state banks.
Check cashers were provided with the ability to write checks on the accounts by the out-of-state banks and typically charged consumers an additional fee ranging from 2 percent to 2.8 percent of the face value of any check created to access funds.
"These partnerships between check cashers and out-of-state banks and the resulting fees are outrageous," said Barbara Anthony, the undersecretary of the Office of Consumer Affairs and Business Regulation. "The consumer thinks they are getting access to their Social Security benefits through a direct deposit at a bank. Instead, they are forced to pay high fees to access their own money. Consumers will be far better served to open a full-service account at a local bank or credit union."
Check cashers disciplined by the division include Boston Check Cashers and its 20 Boston area locations; Cassie H. Farmer d/b/a Family Financial Center, in Framingham; JMT Check Cashing Inc., d/b/a United Check Cashing, in West Springfield; Northeast Check Cashing Inc., d/b/a The Money Stop, in Worcester; Parras Inc., d/b/a Ace Cash Express, in Worcester; and Speedy Check Inc., in Lowell.
The out-of-state banks partnering with these licensees were Republic Bank and Trust Co. of Louisville, Ky., and Bank of Agriculture and Commerce of Stockton, Calif. Following the division’s orders, the bank involved in all six Massachusetts check cashers, Republic Bank and Trust Co., announced it will exit the business. Bank of Agriculture and Commerce had previously announced it would end partnerships with check cashers nationwide.
Commissioner of Banks Steven L. Antonakes said the partnerships between the out-of-state banks and check cashers were discovered during routine examinations of the check cashers.
Dan Forte, president of the Massachusetts Bankers Association, urged consumers to establish a secure and insured account at a local bank.
"Consumers can avoid high check casher fees by opening a low-cost bank account or a free full-service account at most local banks," he said. "Massachusetts banks have been serving customers on fixed incomes for years."
Dan Egan, president of the Massachusetts Credit Union League, also advised Social Security recipients to save money by establishing a direct deposit account locally.
"Massachusetts credit unions were founded to serve people of limited means," Egan said. "By doing business with a credit union in Massachusetts, consumers can access their accounts without having to pay a fee."
