Low wage earners said they are worried about being able to make ends meet now that currency exchanges have won state approval to increase their check-cashing fees, including for government checks.
“I cash my paycheck every two weeks at a currency exchange because I do not have a bank account,” said Jonathan Carrington, 47, who lives in Austin. “But if the fee to cash a check goes up, I’m not sure how I will make it considering I’m struggling already.”
Carrington, who works as a customer service representative for a telemarketing company, said he pays $6 to cash his weekly paycheck at a currency exchange.
“Those who have less usually end up paying more. The poor is already getting hit with higher taxes and fees while the rich gets avoids paying anything,” added Carrington. “I guess you can say it’s very expensive to be poor in Chicago.”
The Illinois Department of Financial and Professional Regulation, which oversees currency exchanges and banks, approved an increase for check cashing fees in June at the request of the Currency Exchange Association of Illinois and the Community Currency Exchange Licensees. For their part, state officials said they are following procedures when considering requests made by financial institutions.
“The Illinois Department of Financial and Professional Regulation is following proper statutory procedures related to rulemaking regarding currency exchange rate caps in Illinois,” said Terry Hortsman, a spokesman for the Illinois Department of Financial and Professional Regulation.
Now a 12-member state committee will meet in November to decide whether to approve a rate hike, which could begin by the end of the year for 400 currency exchanges in Illinois.
Currently, it costs $2.40 to cash a $100 check at a currency exchange. After the increase, it will cost $3.50. And the cost to cash a $400 check will climb from $11.25 to $12.50.
The new rates, if approved by a state committee, would be 2.5 percent, plus $1 for checks up to $100; 2.5 percent for checks $100.01 to $1,250.00; and 3 percent for checks over $1,250.01.
The current rates are 1.4 percent plus $1 for checks up to $100 and 2.25 percent for checks above $100.
One reason so many people use currency exchanges is because it’s conveniently located in their neighborhood and some services are less expensive than what banks charge, said Marquita Austin, a 33-year-old North Lawndale resident.
“I think the proposed increases are ridiculous,” said Austin. “Typically, most people who utilize currency exchanges are from low-income communities. If this fee increase goes through, I probably won’t be utilizing currency exchanges at all.”
However, supporters for a fee increase said check-cashing fees for currency exchanges have not increased in a decade, and as a result many currency exchanges have closed.
“We’ve lost 187 stores in the last nine years. Currency exchange locations are literally being forced to close because they cannot earn a profit or commensurate rate of return,” said Martin Liberman, president of the Currency Exchange Association of Illinois, at a Sept. 13 public hearing. “[And that’s because] a lot fewer checks are being cashed.”
According to Lieberman, from 2008 to 2015, check-cashing revenues decreased by 43 percent; check-cashing revenues per currency exchange have also decreased by over $50,000; expenses per store have increased; net revenues for the industry decreased by 60 percent; and net revenues per store are down by 45 percent.
One currency exchange executive agreed with Lieberman that revenue from check cashing has dropped dramatically.
“Checks used to be 80 percent of our volume in terms of revenue stream. It’s probably like 55 percent today,” said Gary Gagerman, president of Check Changers, 2848 W. Madison St. “The amount of state checks we cash are minimal. And government checks are among the biggest risks currency exchanges take when cashing them because of fraud.”
Increasing fees on government checks is one reason why state Rep. La Shawn Ford (D-8th) said he does not support the proposal. Ford, whose district includes Austin, is also chairman of the House Financial Institutions Committee.
“These are checks with guaranteed funds so there should be a set fee for these checks opposed to charging the same fee for every other check,” Ford told Austin Weekly News. “The [fee] increase, in my opinion, is an assault on people who cannot do better for themselves.”
He added that the black community continues to be one of the most ‘under banked’ communities in Illinois and throughout the country, and that currency exchanges should be used as a convenience and not a main source to handle financial business.
He suggested residents consider joining a credit union to avoid paying high fees at currency exchanges and to establish a financial track record that could be used later to secure major purchases, such as a home or automobile.
“Struggling communities tend to use these alternative banking institutions like currency exchanges more often than affluent communities,” explained Ford. “Banks must do everything it can to be more friendly to underserved communities. And I plan to meet with banking executives to discuss this with them.”