Proposed legislation is under consideration in Albany that would allow check cashing companies the ability to issue loans. Consumer advocates, including the Western New York Law Center, are urging lawmakers to reject the idea.
The proposed "Community Financial Services Access and Modernization Act" has, according to Thomas Keily of the Western New York Law Center, been approved by the State Assembly's Banking Committee and was still being debated by the Senate's similar committee as of Wednesday. Keily explained that in late May, his organization forwarded a memo to state lawmakers urging them to vote the proposal down.
"The startling piece, from our perspective, is that there are no standards for sound underwriting or any standardization of practices, which we view as a very dangerous phenomenon," Keily said.
Also raising concern is the lack of experience and adequate staffing to properly vet loan candidates. Keily and other advocates say low-income and small business borrowers would be better served approaching already-existing and more experienced financial institutions.
"The focus should be less on giving check cashers the ability to issue loans and focus more on Community Development Financial Institutions, consumer oriented financial institutions and credit unions to be able to have the capital and resources to issue these loans," Keily said. "That would be a more secure way to put capital in our communities and help businesses grow."
Keily says one only needs to recall the recent "Great Recession," when loosened lending rules and an increase in people unable to pay back loans triggered the sharp economic downturn.
