Woodstock Offers Counterproposal on Check-Cashing Rate Increase

Government-Imposed Rate Increase is Tantamount to the Kind of Tax Increase Governor Rauner Opposes

For Immediate Release
Friday, July 7, 2017

Contacts: Brent Adams, Woodstock
(o) 312-368-0310
(c) 773-844-5544

Angelica Rosales, consumer (bilingual)
(contact Brent above to arrange interview)

Tracy Occomy, COFI/POWER-PAC
(o) 312-226-5141

Chicago, IL – Woodstock Institute, a not-for-profit organization that advocates for a more fair and inclusive financial system, asked the Illinois Department of Financial and Professional Regulation (IDFPR) to reconsider its June 19 decision increasing the maximum allowable rate for check cashing that may be charged at Illinois currency exchanges. If IDFPR’s decision becomes law, currency exchange customers, who are largely the unbanked and underbanked, would be forced to bear a double-digit rate increase compared to the current rates.

The new rates, which were exactly what the industry asked for, would be as follows:

Old Rate

New Rate

Check Amount

Percent Increase

1.4%+$1.00

2.5% + $1.00

$100 or less

46%

2.25%

2.5%

$100.01-$1250.00

11%

2.25%

3.0%

$1250.01 or more

33%

Woodstock’s counterproposal is as follows:

  1. Exempt government issued checks, including public assistance checks and government payroll checks (regardless of the amount of the check) from the rate increase.  Thus, the current rate schedule would continue to apply to those checks.
  2. Cap the rate on all printed payroll checks (except government payroll checks, which would be subject to the current rate schedule per the above) at 2.25%, the top rate under the current schedule.  With this rate, the industry would still receive an increase as compared to the current rate schedule, but the rate would take into account (a) the low risk associated with printed payroll checks, and (b) the financial insecurity of workers who rely on currency exchanges for check cashing.

In the document tendered to IDFPR today, Woodstock states that IDFPR failed to explain why a tiered rate schedule, which is used by the vast majority of states that regulate rates, is not appropriate for Illinois. A tiered rate schedule could be devised that would be revenue neutral (as compared to the newly proposed rate schedule) but would take into account the varying levels of risk associated with different types of checks as well as the financial insecurity of the recipients of certain types of checks.

A consumer who relies on currency exchanges for check cashing, Angelica Rosales, Community Organizer& Food Ambassador for Community Organizing and Family Issues (COFI), said, “As a mother of three already living paycheck to paycheck, we cannot afford to pay more for basic services like check cashing.  We have nothing left.”

Woodstock Senior Vice President of Policy (and former Secretary of IDFPR), alluding to the Governor’s recent veto of the budget passed by the Illinois General Assembly, said, “If Governor Rauner cares so much about taxes, he should use his authority to lessen the harmful impact of this government-imposed rate increase.”

Rosazlia Grillier, Co-Chair of POWER-PAC and its Stepping Out of Poverty Committee, stated, “With our debt campaign we have seen that fees and fines, such as these, threaten low-income families and push them further and further into debt.”

According to Woodstock, the rates charged for services that are not regulated under Illinois law could provide the additional revenue to offset lost check-cashing revenue.  The industry’s expert report shows that the revenue attributable to “Other Income” has grown by 33% from 2008 to 2015.

Woodstock has requested a response by July 17.

Woodstock Institute is a leading nonprofit research and policy organization in the areas of equitable lending and investments, wealth creation and preservation, and safe and affordable financial products and services. Woodstock Institute works locally and nationally to create a financial system in which lower-wealth persons and communities of color can safely borrow, save, and build wealth so that they can achieve economic security and community prosperity.

POWER-PAC is a project of COFI, whose mission is to strengthen the power and voice of low-income and working families at all levels of civic life—from local institutions and communities to local, state, and federal policy arenas.