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Gouging continues despite crackdown on check-cashers

Six months after state and local officials vowed action against unlicensed check-cashers charging excessive -- and illegal -- fees to people in some of Buffalo's poorest neighborhoods, the practice continues, a Buffalo News follow-up investigation has found.

While several corner markets stopped cashing checks after The News published the series "The High Cost of Being Poor," some businesses continue charging fees that would be illegal even if the stores had licenses -- which they don't.

The problems persist despite a new Buffalo Common Council law making check-cashers reveal their fees, Assembly hearings and vows in Albany to enact stronger state laws in the next session, and incoming State Attorney General Andrew M. Cuomo's pledge to stop illegal check-cashers from gouging customers.

Some of the stores now overcharging for check-cashing were pinpointed by residents responding to The News' series published in June. Others are stores spotlighted in the series that are still charging illegal fees.

Now, all of the stores may be in the crosshairs of the Erie County District Attorney's Office.

While no one has filed a complaint that could lead to prosecution, the district attorney's Special Investigations Unit is looking at the stores for something else: possible income tax evasion.

"Our primary concern is tax violations, right now," said John J. DeFranks, first deputy district attorney. "We're looking at the stores in the series."

DeFranks said the district attorney's office is authorized to investigate state tax evasion. If a formal probe is launched, any findings also would be turned over to the Internal Revenue Service for federal action.

The unit has been gathering information, and the review was scheduled to accelerate this week, DeFranks said. Store owners found guilty of felony tax evasion could get up to four years in prison plus fines, he said.

The investigation is focusing on stores identified in The News' series six months ago. If other stores come to the department's attention now, will they be added to the probe?

"Absolutely," DeFranks said.

State law mandates that stores charge no more than 99 cents to cash a check, unless they are licensed by the State Banking Department, in which case they can charge 1.64 percent of the value of the check. There is only one licensed check-casher -- Buffalo Check Cashing on Jefferson Avenue -- operating in Western New York.

Last spring, News reporters going in as typical customers with payroll, bank and federal tax-refund checks were quoted rates of up to 10 percent to cash the tax check, and rates of between 1 and 5 percent to cash the others.

This time -- with tax-refund checks not yet available -- The News used payroll and Social Security checks, which were treated virtually the same by the merchants.

>Some stores make changes

Some of the eight stores visited last spring apparently have stopped cashing checks in the wake of the series. Big Basha on South Park Avenue and Frontier Liquor on Grant Street no longer cash checks, based on reports from residents and the experiences of reporters.

At the Corner Store on Connecticut Street, an electronic sign still advertises check-cashing, but clerks and patrons say the store is not accepting any new check-cashing customers.

Elsewhere, stores continue to prove what residents often say: It depends on who is behind the counter. For instance, at Golden Farm on Kensington Avenue -- which asked for up to 10 percent to cash a tax-refund check last spring -- timing seems to be everything. At various times, store clerks said they no longer cash any checks, only cash "small checks," or only cash checks of less than $200.

When a reporter visited Family Saver on Bailey Avenue and the IGA on William Street with a $318.85 payroll check, IGA offered to cash it for $5, while Family Saver quoted a $4.74 fee. Both fees were about the same as the stores charged six months ago for payroll checks and amount to less than the state's 1.64 percent cap, though neither store has a license.

But it's worse elsewhere. The Food Shoppe & Deli on Elmwood Avenue and the Citgo gas/minimart at 1624 William St. each quoted a fee of $10 to cash the paycheck, or 3.1 percent. The Citgo also offered to cash a $466 Social Security check for $20, or 4.3 percent.

At another Citgo minimart at William Street and Fillmore Avenue -- one of the stores spotlighted in the June series -- reporters at different times were told the store no longer cashes checks, or that it would cost $11 to cash the $318.85 payroll check -- nearly 3.5 percent.

The Sunoco minimart at Suffolk Street and East Delavan Avenue charges the same 3 percent it was charging six months ago.

When confronted later, some of the stores still offering to cash checks denied doing so. When the clerk at Food Shoppe was asked whether the store cashes checks, his first response was, "Let me see the check." When told that his customers were from The News, he then said the store doesn't cash checks.

Later, owner Mark Rizek said that the store cashes checks only for customers who are known "so they can spend money in our store" and that the charge is only 99 cents. He said a reporter might have misinterpreted the requirement to spend money in the store, mistaking it for a check-cashing fee.

Other stores also insisted that they charge only 99 cents or do it free as a service for customers who shop or pay utility bills.

"If we don't cash the customer's check when he comes, we lose the [utility payment] business," said Mike Jabr at the Family Saver on Bailey Avenue, who said he is looking into getting a check-cashing license.

The News' findings jibe with the experiences of residents, who report being charged double or more the state limit for licensed check-cashers by some stores that are not licensed to charge anything above 99 cents.

Yvonne Tinsley, a 54-year-old resident of the Commodore Perry Homes, said she pays $25 to cash her $655 Social Security check at the William Street IGA. That's 3.8 percent.

Residents say the size of the fee often depends on who is behind the counter. Sometimes Tinsley complains, and the manager lowers it to $20. She said the fee used to be $45 when her check was more than $800 -- or as much as 5.6 percent.

"I don't appreciate them taking money like that," she said.

But when asked whether any stores have been prosecuted for breaking the law, authorities say no one has complained to them.

"We don't have a complainant. Nobody has come forward since your [series last June] to say they've been gouged," DeFranks said. "And that's a little upsetting to me."

Nor have state banking regulators referred cases to the district attorney. Last summer, Banking Commissioner Diana L. Taylor promised to meet with local authorities about illegal check-cashers. DeFranks said that to his knowledge, no such meeting was held.

Taylor was reported out of the office and unavailable to comment, and a Banking Department spokeswoman said she could not comment on current investigations.

Does that mean there is an investigation?

"I can't even confirm or deny that," she said.

>Common Council responds

The most vigorous action so far has come from the Common Council, which unanimously passed a measure last month requiring food stores to tell the city how much they charge if they cash checks. The requirement will be added to the license applications that stores must file April 1, said Council Majority Leader Dominic J. Bonifacio Jr., the bill's prime sponsor.

The requirement will give the city leverage to revoke the food license of a store that violates the law, Bonifacio said. The goal is not to hurt stores providing a service to customers without access to a bank, but to make sure that stores are not gouging people, he said.

"We just hope people realize there's no sense in giving up more than [1.64 percent] of your check," Bonifacio said.

Advocates for the poor say cracking down on illegal check-cashers would not necessarily help some consumers unless there is also an effort to make bank services more accessible. Most banks will not cash checks for people who are not customers, and it is very difficult for low-income people to afford the account fees or even open a checking account if they have bounced checks in the past.

KeyBank is one of the few banks locally that will cash checks for noncustomers. But it charges a flat $5 fee, even if the check is drawn on Key.

Of course, overpriced check-cashing is not just a problem here. A November study by the Consumer Federation of America reported that consumers nationally paid an average rate of 2.44 percent to cash Social Security checks and 4.11 percent to cash a typical paycheck, up significantly from 10 years ago.

"Consumers who are shut out of mainstream banking essentially pay a penalty to access their income, pay their bills, or borrow money," the report concluded.

News Staff Reporters John F. Bonfatti, Jay Rey and Deidre Williams contributed to this report. and

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