Banking Interpretations

NYSBL 374(3); 191; 193
Supv. Proc. G-4

Memorandum 

TO:             Superintendent McCaul, First Deputy Superintendent Muccia, 
                   Director Kent, Deputy Conlon, Deputy Fazio and Director Billet

FROM:       G.C. Brooks

DATE:       December 18, 2002

SUBJECT: [ ] Facility

I have been asked to opine as to whether the facility operated by [ ] adjacent to its [ ]branch is legal under the provisions of Section 374(3) of the New York Banking Law (the "Banking Law"). At this facility, [ ] operates a check cashing business through its [ ] Division (the "Division Facility"). It is next door to the bank's branch office. This new facility cashes checks (drawn on other institutions), transmits money through Western Union, accepts and processes bill payments, and sells money orders, phone cards, transit tokens, and transportation passes [ ] notified the New York State Banking Department (the "Department") of its plans to establish the facility on January 11, 2002. The Department acknowledged the plan on January 18, 2002. (Copies of this correspondence are attached. Please see below.) The facility opened in March of 2002.

Subsequently, the Check Cashers Association (the "Association") protested the facility and argued that it violated the newly enacted Section 374(3) of the New York Banking Law (the "Banking Law"). Specifically, the Association argues that the facility constitutes a separate location of a bank engaged primarily in check cashing activities within the meaning of section 374(3). Moreover, Section 374(3) requires any such facility to be at least three-tenths of a mile from any check cashing facility licensed under Article IX-A of the Banking Law. Because the facility in question is less than three-tenths of a mile from such a facility, the Association argues that it is operating illegally and must be shut down.

[ ] has provided two responses to this protest. The first, dated November 5, 2002, argues in effect that the new facility is really a part of [ ] existing, [ ] branch. Subsequently, [ ] provided a second letter, dated December 17, 2002, wherein it argues that the facility is permitted under the Banking Law, notwithstanding Section 373(4), because it constitutes a public accommodation office (a "PAO"). (Copies of these letters along with their enclosures are attached.)

Conclusion

Based on my analysis of the Banking Law and the facts of this situation, I am of the opinion that the Division Facility qualifies as, and can be operated as, a PAO, notwithstanding the provisions of Section 374(3).

Analysis

Article 4-A of the Banking Law governs the establishment of PAO. This Article allows banking institutions, a term defined for purposes of this Article to include a bank such as [ ] to establish one PAO for each branch office operated by the bank (Section 191 of the Banking Law). No business other than those activities set out in Section 193 of the Banking Law may be conducted at the PAO. Section 193 goes on, however, to provide that the permitted activities of a PAO include, among others, "(c) the cashing of checks, drafts and other similar items" and "(e) the issuance of cashier's checks, treasurer's checks, money orders and other similar items." These are the activities engaged in by the Division Facility. Moreover, the new facility satisfies the distance limitations of the Article since it is adjacent to an existing branch. Accordingly, the Division facility meets the definitional requirements of a PAO under the Banking Law.

Section 194 of the Banking law provides in relevant part that each PAO "shall be deemed to be an integral part of the banking institution or branch office of which it is an adjunct, and all business transacted at such public accommodation office shall be deemed to be transacted at the office of which it is adjunct." Simply put, this provision makes clear that a PAO, such as the Division Facility, is part of the adjacent branch office.

There are two (2) Supervisory Policies dealing with this Article of the Banking Law. First, Supervisory Policy G-4 provides guidelines for certain PAO's fitting within its parameters. Specifically, Supervisory Policy G-4 states that no notice to, or approval of, the Department is necessary if the proposed PAO is adjacent to an existing office of a bank. (Please see Section 4.2 of G-4.) G-4, therefore, further emphasizes the legal status of a PAO, such as the Division Facility, as little more than part of the branch office to which it is adjacent. (The second Supervisory Policy applicable to PAO's, G- 104, is not relevant to this analysis.)

The above provisions strongly support [ ] claim. Specifically, it is clear from Article 4-A of the Banking Law and Supervisory policy G-4 that a PAO of a bank, such as the Division Facility on [ ] is not as a matter of law deemed to be separate location. It follows, therefore, that a legally operating PAO can not be considered to be in violation of the provisions of Section 374(3) of the Banking Law prohibiting the establishment of a separate location of a bank engaged primarily in check cashing activities.

Attachments

Noted:________ 
           SAK