General Industry Letters
Mortgage Banking Letters
Tax Preparation Firms Conducting Check Cashing Activity
January 25, 2008
To: Tax Preparation Firms
It has come to the attention of the New York State Banking Department that certain tax preparation firms, or their franchisees, may be conducting a check cashing business in New York State without being licensed under Article IX-A of the New York Banking Law and in violation of certain provisions of the Banking Law.
Section 367 of the Banking law prohibits any person from engaging in the business of cashing checks, drafts or money orders (hereinafter, “checks”) for consideration without first obtaining a license from the Superintendent of Banks. Under Section 374(1), Article IX-A does not apply when a person who is not licensed cashes checks without consideration or charge, or when such person cashes checks as an incident to the conduct of another lawful business and does not charge more than $1.00. However a license is required when consideration is taken to cash a check and such consideration is more than one dollar, even if the check cashing activity is incidental to another lawful business, e.g. tax preparation. Moreover, the Banking Department has determined that, in order to qualify for the exception from registration for persons cashing checks as an “incident” to the conduct of another lawful business where the firm charges no more than $1.00 to cash a check, the firm may not advertise the check cashing service using outside signs designed to attract customers.
Certain tax preparation locations may be permitting another firm to locate a check cashing machine within the tax preparation office. Please be advised of Banking Law Section 374 (3):
“….no national bank or any person, partnership, association, corporation or other organization doing business under or pursuant to the provisions of [the Banking Law] . . . shall conduct the business of cashing checks at a separate location which is used primarily by any such entity for the purposes of cashing checks, or at a separate location by means of an electronic check cashing machine, unless such separate location is not closer than one thousand five hundred eighty-four feet (three-tenths of a mile) from an existing licensee [except for certain locations or entities that used electronic check cashing machines prior to February 8, 2002].”
Therefore, a check cashing machine operated by or for a national bank or a New-York chartered banking organization (including any bank, trust company, savings bank, savings and loan association or credit union) may not be located within 3/10ths of a mile of a licensed check cashing location.
Under Section 373(4) of the Banking law, any person who violates the licensing and other requirements of Article IX-A (and the corporate officers, directors, agents and employees who violate them) are guilty of a misdemeanor and are punishable by imprisonment for not more than one year or by a fine or by both a fine and imprisonment. Violations of unlicensed check cashing are subject to prosecution by law enforcement.
Regina A. Stone
Deputy Superintendent of Banks
Licensed Financial Services Division