Kokua Line
Kokua Line
Question: In the September AARP Bulletin, there is a story about rip-offs of elderly people. It said that this year, consumer groups in Hawaii experienced a setback when the Legislature made it easy for check-cashing firms to offer high-interest payday loans. What's that all about and why did something like that pass? State law clarified on
check cashingAnswer: Actually, a local leader for the American Association of Retired Persons said there is now more protection for the consumer than there was in the past -- at least in Hawaii.
It's just that the law is not as tough as proponents had hoped.
The article you cite was about fast-growing businesses nationwide "that cash checks and issue short-term loans at sometimes exorbitant rates." It said these businesses are especially popular among older low-income Americans and noted that about one-third of U.S. households are headed by persons age 50 and older who do not have bank accounts.
The article also said that many check cashers offer pay-day loans, in which you get a cash advance on a government benefit check or paycheck. The interest on such loans can be particularly costly -- sometimes several hundred percent, said Ruth Dias, a state legislative committee member and task force coordinator for the AARP.
But the Hawaii Legislature this year passed a bill that put caps on fees that can be charged by companies in the business of cashing checks and requires consumers be given notice of these fees, plus other restrictions.
For example, no check casher can charge fees in excess of: 5 percent of the amount of the check or $5, whichever is greater; 3 percent of the amount of the check or $5, whichever is greater, if the check is a payment of any kind of state public assistance or federal social security benefit; 10 percent of the amount of a personal check or money order, or $5, whichever is greater; or no more than $10 to set up an initial account and issue an optional membership or identification card, and no more than $5 for a replacement optional identification card.
Although the final bill was not as tough as AARP wanted it to be, it still has "a lot of good things," Dias said. "There is a lot of consumer protection in there where there had been none."
Former Office of Consumer Protection Executive Director Jo Ann Uchida testified for stricter regulation.
Heretofore, check-cashing businesses were "totally unregulated in Hawaii," said Uchida, now the state's complaints and enforcement officer for the Regulated Industries Complaints Office.
There has been some talk about regulating them on the federal level, but so far, it's state by state.
The new Hawaii law differs from most other states in that it doesn't require the check casher to register with the state. There was a lot of "back and forth" on the issue, resulting in a compromise, Uchida said.
"The original (House) draft of the bill limited the amount a check casher could charge to the existing usury rate. That would have been a rate significantly lower than what check cashers were charging in Hawaii and in the majority of states," she said.
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