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Explanatory All Institutions Letter

February 28, 2008


RE: Adoption of Amendments to Section 400.5 of the Superintendent’s Regulations (Licensed Cashers of Checks -- Depositing of Checks, etc.)

The Superintendent has adopted the attached amendments to Section 400.5 of the Superintendent’s Regulations as a final rule. The amendments became effective upon publication in the State Register, which occurred today. An emergency regulation in substantially similar form first became effective September 22, 2005.

Section 400.5(a) requires that a check casher licensee maintain a deposit account with a banking institution. Licensees are required to deposit any checks, drafts and money orders received into the deposit account not later than the next business day.

Prior to the current amendments, Section 400.5 required that the licensee’s deposit account be maintained with a banking institution in New York. This requirement facilitated timely clearing of deposited instruments and, if the licensee experienced financial or other difficulties, made it easier for the Superintendent to examine the account or obtain control of the licensee’s assets through the judicial process, if necessary.

However, due to the decision of various in-state banking institutions not to provide further deposit account services to check cashing businesses, it is necessary promptly to expand the pool of potential banking institutions that may be willing to provide such services. Therefore, the amendments permit check cashers to maintain deposit accounts with banks or branches located out of state. While doing business with banks or branches located out of state may present certain logistical problems for check cashers in meeting the one-business day deposit requirement, there are mechanisms available within the banking system which should make such arrangements workable.

The amendments ensure that the Superintendent’s supervisory oversight of and jurisdiction over the casher’s banking relationship remains effective, regardless of whether the account is in a banking institution within or outside of New York and whether the federal or a state government has chartered the institution, by requiring that (i) the licensee’s account agreement provide for the personal and in rem jurisdiction by state and federal courts located in New York over the parties and the account and that the agreement be governed by the laws of New York State; and (ii) prior to making any deposit in such account, the licensee will cause the bank to give the Superintendent written authorization to examine any records and related documents and materials pertaining to the deposits and the account.

The new requirements do not apply to any account maintained in New York or in a New York State chartered bank prior to November 1, 2005, unless or until the account agreement is modified subsequent to that date. The Superintendent also has the discretion to waive these new requirements in appropriate cases.

Very truly yours,

Sam L. Abram
Secretary of the Banking Board


Department of Financial Services


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