Upham's Corner Online

Upham's Corner Youth Writes Legislation

Posted: April 26 2011     Nancy J Conrad

Alex KnowlesThis is the story of one youth who is making a significant difference in Upham's Corner, in the Commonwealth and the world around her.   

This is the story of a youth who wrote important legislation that has the potential for saving thousands of families hundreds of dollars annually throughout the Commonwealth. 

Alexandra Knowles grew up in a home in Upham's Corner, steeped in the day-to-day talk of what needed to change to improve the lives of people in Roxbury and Upham's Corner, a home where much of the conversation stemmed from Dad's (Glenn Knowles) involvement with the Dudley Street Neighborhood Initiative (DSNI).

"My dad has been involved in DSNI since I was six years old. When we first moved to Dorchester, when I was 10, there are always underlying issues that people talk about but never really do anything.  The issue that kept coming up was check cashers and rent-a-centers - organizations that take money from the people that they really shouldn't be taking."

Following after Dad's footsteps seemed natural.   "I was elected as a youth representative to DSNI's board when I was 15.  I was the first white female youth representative ever on the board.  Now I have one of the at-large seats" (at the age of 18).

Her interest in community based action spilled over into her school life.  Soon after she was elected to the DSNI board, she was accepted as an intern in the leadership and social justice program at her high school, Boston Trinity Academy.  "We did a lot of work with fair trade foods and bringing them into the Boston area.  We did a lot of work on revitalization of urban neighborhoods."

Her passions, her knowledge, her experience and her vision of caring came to fruition in her senior year.  "In my senior year we have an activity called symposium.  We have to write a 15 to 20 page paper about a social justice issue that ties to a biblical principle. I wanted to pick something that was closer to home and something that people really didn't know about that was important."

The disparity in knowledge between wealthier and poorer communities was clearly evident in the classroom: "Many of my teachers had never heard of check cashers but many of the students had because there are from Dorchester and Roxbury and Mattapan.  A lot of their parents use check cashers so they knew exactly what I was talking about.  But the kids from Wellesley and Danvers had never heard of it."

Since she was required to write a juried paper, Alex looked for the experts and discovered exactly one check cashing expert in the United States.  John Caskey, professor of economics at Swarthmore College who had been working on this topic since the '80s, was invaluable in giving her insight into the issue. 

Alex learned that the Commonwealth already regulates the licensing of check cashing establishments.
  • In order to open a check-cashing place, you have to have $25,000 already.
  • You have to post your fees in a place that everybody can see.
  • If anyone asks for a copy of the fee schedule, the check cashing company has to give you a photocopy.
She then examined the legislated fee schedules for check cashing businesses across the country.  Of the 50 states, 27 have legislation limiting the amount that can be charged and 23 states are unlegislated.  In the unlegislated states check cashers can charge whatever the market will bear.  Massachusetts "is way behind" according to Alex.  There is no legislated cap on check cashing fees in Massachusetts. 

So she documented the legislated fee schedules for the 27 states that have caps.  The fee range is wide with some states (Connecticut and Illinois) close to the 1 and 2% range while others operate closer to 10% (Indiana).

View Comparison of Check Cashing Fees by State

So just how high are the fees? 

Alex found that the fee schedule across the check cashers in Massachusetts (that she was able to contact) tends to be similar.  Boston Check Cashers serves the Boston area; Graham Check Cashers are in Springfield while Worcester has a lot of independent check cashiers, "all on the same street."   The average is around 6% and varies by type of check.  Personal checks run 7 or 8% while government checks are between 1 and 3%.

What concerned Alex was the lack of a cap and the high percentage being charged here.  The Commonwealth's Division of Banks issued the "2010 Report on Check Casher and Basic Banking Fees."  Their goal is to promote the "Basic Banking Plan" implemented in 1994 and currently active in 120 banks throughout the state.  One of the statistics generated in this report was the cost of check cashing services for various net income levels. 

For example the annual cost of cashing payroll checks and purchasing 8 money orders a month for a net family income of $39,000 is an estimated $1,100.00 (rounded), the equivalent of a 2.8% fee.  By comparison the equivalent cost at a bank offering the Basic Banking Program is $36.00.

Based on the clear disparity of fees that poorer people are paying for "banking" services, our best approach is to force everyone who uses check cashers to open a Basic Bank checking account.  Right? 

Alex:  "In some states, they tried to shut down check cashers.  It was a disaster because it created an underground economy.  It caused more problems than it did any good."

Alex wanted to find out why some people prefer check cashers over banks despite the cost.  So for another class requiring original research, she piggybacked on her interest and did a paper on immigrants and check cashers.  The research results were surprising.  "A huge percentage of the population of Massachusetts and the Boston area uses check cashiers only." 

Alex worked with Agency Alpha which provides immigration services out of Congregation Lion of Judah. "I wrote up a survey (translated into Spanish) which they gave it to the people coming in for immigration services. Their responses provided insight into their lives and why they use check cashers."
  • Fear of banks - Because of the recession, people have heard things on the news giving the impression that banks are bad.  Instead of the people checking out their information, they make blanket decisions that they can't use banks.

  • Banking hours - Banking hours are not good for some people.  For example they close at 4 pm before people get home from work.  They are only open until 12 on Saturday.  Check cashers are open seven days a week until midnight. 

  • Too expensive - Some banks are more expensive to use the lower your income is.  Some have a minimum balance required, for example, $250.  This is completely unrealistic if you are living paycheck to paycheck.  You will get hit with overdraft fees that you can't afford. 

  • Language - Tellers don't speak their language.

  • Long lines - Even if they want to use the bank, they find that the lines are so long. It's not convenient enough for people who are trying to work. At a check casher, you can walk in and simply cash your check.  It's quick and it's easy.
The Dilemma and the Solution: 

Until we can educate people to using a bank that offers Basic Banking and until we can provide banks that are convenient and accessible to the poorer classes in our inner city neighborhoods, check cashing establishments are needed.  The high fees are not. 

Alex was convinced that a family of four (for example) with a net income of around $40,000 could use the $1,100 they spend on checking cashing in a better way.  Still if you set the rates too low, you will run the check cashing businesses out of town. 

Alex graduated from high school in 2010 and entered Boston University as a freshman majoring in political science.  She continued to talk about her check casher fee findings with many people including the newly elected Rep. Carlos Henriquez. She came to the conclusion that Massachusetts needed to join the ranks of the 27 states with check cashing fee caps.

Writing legislation, Alex says, takes a long time and is tedious work but mostly because of having to research conditions, disparities and needs.  She had all of that work done and was familiar with the wording of comparable laws in the other 27 states.  If she was willing to put in the work, Rep. Henriquez said he would be willing to sponsor the bill.  One more task remained - learning the rules on wording laws.  For that the Commonwealth provides an online reference.

Two weeks later Alex had completed the legal composition and had it reviewed (perfect).  Job done, right?  Not quite.

Rep. Carlos Henriquez filed the bill on January 20, 2011 and it was assigned to the Consumer Protection and Professional Licensure Committee. 

Docket# Bill # 
Primary Sponsor
HD02041 H01880 An Act creating a maximum allowable check-cashing rate Carlos Henriquez Consumer Protection and Professional Licensure

Read the bill at the Commonwealth of MA website  http://www.malegislature.gov/Bills/187/House/H01880

The proposed legislation has entered the review and public hearing stage.  This is when you try to rally support from other state representatives and senators who will ultimately determine the bill's fate.

To assist in this matter, Alex has created the Fair Fees For Families website to help focus attention on the problem and the proposed legislation.  She is pleased to report that the bill is gaining popularity.  Currently, 10 other representatives and senators, both Democrat and Republican, that have signed on as co-sponsors. 

To see current status of who has joined the Fair Fees for Families Coalition, visit:  http://www.fairfeesforfamilies.com/join-the-coalition.html

Bill H01880 calls for a two-tiered fee structure - 1.5% for $100 or less (size of negotiable instrument) plus a $1.00 service fee and 2.25% for all other dollar amounts.  It also calls for a penalty of $1,000 per day per violation.

Let's stand back a bit and look out at the financial services industry.  How do check cashers fit it?  They are in a group of businesses labeled "Fringe Banking" because it is an alternative financial sector.  Yes, check cashers are expensive but banks can also be very expensive. 

The real solution to the problem of providing affordable financial services to the poor in Massachusetts ,where both the business and the community share in benefits, is one of education - teaching the citizens of our poorer communities how to tap into the Basic Banking services available through state-chartered banks.  Until then we need to focus on making a difference where we can.

How much will house Bill H01880 help our Massachusetts families?  That varies, depending on income level, number of money orders purchased, number of personal checks cashed and so on. 

The example we cited earlier translated to a 2.8% fee (on average).  If the 2.8% fee were reduced to 2.25%, that would generate a savings of $200, not a small sum.  On the other hand, it could be a lot more because we have no way of knowing how much check cashing businesses are really charging.

One day Alex realized how few people understood how check cashing is affecting so many people. 

Her response?  "I just decided that something needed to be done about this."

Thanks, Alex.

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