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Check cashing rate compromise passes General Assembly

collins 042418SPRINGFIELD – A proposal setting new rates on check cashing services, including lowering the rate on government assistance checks, passed the General Assembly without opposition last week and awaits the governor’s signature to become law.

State Senator Jacqueline Collins (D-Chicago) worked alongside consumer advocates to reach the compromise in the wake of a proposal from the Illinois Department of Financial and Professional Regulation (IDFPR) which would have raised rates on check cashing services like those at a Currency Exchange. The measure now awaiting the governor’s signature includes lower rate increases on smaller checks and also caps the rates on all public assistance checks at a lower rate for many recipients.

“I’m pleased to see this compromise meet with success in the General Assembly without opposition,” Collins said. “This is a service used almost exclusively by the unbanked – those who don’t have access to a bank account for a variety of reasons, and whose income has been virtually stagnant since the recession. We must ensure that this process – which determines what rate to charge the people who can least afford such services offered to bank accountholders for free – is closely regulated and its import carefully considered.”

For people living paycheck to paycheck, an initial deposit for a bank account might not be possible, or even physically reaching a banking institution might not be plausible. For them, the only option is often a check cashing service, which draws a fee.

Senate Bill 2433 also calls for IDFPR to consider the impact on consumers and whether an increase in the rate schedule will disproportionately impact anyone on the basis of any protected categories defined in the Illinois Human Rights Act.

Below is a complete listing of the current fees, including the initial IDFPR rate hike proposals and those defined by SB 2433.

Type of Check (@$100)

Current Rate

Proposed Rate Hike

Agreed

 Public assistance

1.40% + $1

2.50% + $1

1.50%

Government check (e.g. *EITC)

1.40% + $1

2.50% + $1

2.40% + $1

Printed paycheck

1.40% + $1

2.50% + $1

2.40% + $1

Personal check

1.40% + $1

2.50% + $1

2.45% + $1

All other (e.g., insurance)

1.40% + $1

2.50% + $1

2.40% + $1

According to an industry report, the average check amount is $463.83.

Type of Check (@$500)

Current Rate

Proposed Rate Hike

Agreed

Public assistance

2.25%

2.50%

1.50%

Government check (e.g. *EITC)

2.25%

2.50%

2.33%

Printed paycheck

2.25%

2.50%

2.33%

Personal check

2.25%

2.50%

3.00%

All other (e.g., insurance)

2.25%

2.50%

2.40%

According to industry data, only 7 percent of checks are greater than $1,250.

Type of Check (@$1250.01)

Current Rate

IDFPR Rate

Agreed

Public assistance

2.25%

3.00%

1.50%

Government check (e.g. *EITC)

2.25%

3.00%

3.00%

Printed paycheck

2.25%

3.00%

3.50%

Personal check

2.25%

3.00%

3.50%

All other (e.g., insurance)

2.25%

3.00%

3.50%

*EITC = Earned Income Tax Credit

Sen. Jacqueline Y. Collins

Deputy Majority Caucus Chair
16th Senate District

Years served:
2003 - Present

Committee assignments: Financial Institutions (Chairperson); Insurance; Transportation; Subcommittee on Capital (TR).

Biography: Born in McComb, Miss.; grew up in the Englewood neighborhood of Chicago. Studied journalism at Northwestern University and graduated from Harvard University's John F. Kennedy School of Government and Harvard Divinity Schoool. Emmy Award-nominated news editor at CBS-TV in Chicago and 2001 Legislative Fellow with U.S. Sen. Hillary Rodham Clinton. Recipient in 2011 of a Lifetime Achievement Award for Financial Literacy Leadership from the Illinois state treasurer.

Associated Representatives:
Mary E. Flowers
André Thapedi