Wednesday, August 05, 2009

Check cashing stores, the "neighborhood", and local legislative action in a Maryland County

Prince George's County in Maryland (which is an Eastern state in the US) is apparently considering "draconian" legislation that would severely restrict the operations of check cashing stores.

Briefly, there are a number of unbanked people in the US (not to mention in Latin America). A paper by the World Bank examines the demographics of the unbanked and why they might be unbanked. The authors conducted survey research. I haven't read the whole paper, but the unbanked are mainly poor and largely Hispanic (although there are a number of African-American unbanked). Major reasons cited for being unbanked are lack of trust in banks, or that bank fees are too high; for example, many banks in the US assess monthly fees for balances below a certain level. As an aside, no-fee and zero minimum balance accounts are often available if you look hard enough; credit unions, which are non-profits, often have these features.

A Washington Post article corroborates some of the findings. Fees are capped in PG County, but competition has driven the fees lower. Nonetheless, interviewees are paying something in the region of 1% per check. That money adds up, especially for low-income people.

My fiance and I live in Hyattsville, which is frankly not in the nicest part of the county. What can I say, it was cheap. In any case, I asked potential rental offices to describe the neighborhood. I had meant what grocery stores and restaurants were in walking distance, but in fact the word "neighborhood" is code in the US. If asked by someone White, it can basically be interpreted as how many people of color are living there.

In any case, check cashing stores are not commonly found in "nice" neighborhoods.

But a cluster of check-cashing stores leads other people to think: This is a bad part of town.

The County Council is considering restrictions that would make it more difficult to open check-cashing stores as part of a long-standing effort to improve Prince George's image by clamping down on certain types of businesses, including strip clubs, liquor stores, pawnshops and adult video stores.

The latest proposal highlights a persistent tension among residents of the economically stratified suburb, which includes both struggling, often blighted, urban areas and upscale, manicured subdivisions.

"People want to have quote-unquote 'nice things' in their neighborhoods, and a check-cashing place may very well be a nice entity," said council member William A. Campos (D-Hyattsville), who proposed the bill. "Unfortunately, though, the image that it carries is not so great. And that's something people think about when they're looking to move into a neighborhood. . . . You don't see check-cashing places in Bethesda."


Critics said check cashers prey on the less fortunate and attract crime because of the amount of cash going out the door.

The Prince George's bill would require new check cashers to acquire a special zoning exception from the county, involving a lengthy approval process with a public hearing. It would also limit the stores' hours, impose such security requirements as having a guard and bullet-resistant glass, and prohibit the stores from having ATMs or from sharing floor space with other businesses.

The last clause could be particularly onerous, business owners said, because many also offer money-wiring services or share space with liquor or grocery stores.

As an aside, Bethesda is a much richer and more expensive town. No way we could afford to live there.

If the restrictions put check cashing stores out of business, they will deprive county residents of a vital service. If you want to put these folks out of business - and this would frankly not be a bad thing - you need to ensure that more viable alternatives are in place first. I think this probably means access to credit unions (or banks) that offer no-fee accounts, and loans at a reasonable price. However, I'm not certain that the credit unions will be able to maintain a viable business model in a poorer area. I'm not sure if Campos realizes that.

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