City officials hope to drive commercial check-cashing outlets out of San Francisco by promoting banks that offer accounts to clients who have bad credit or other financial struggles
"We want to take the check cashers out of business," Mayor Gavin Newsom said Thursday. "The only wayto do that is to provide alternatives."
Commercial check-cashing outlets provide many of the services that banks provide — such as paycheck cashing, money orders, loans and electronic money transfers — but for a price that critics say takes advantage of low-income clients.
Most of the check-cashing shops charge between 2 percent and 3 percent of the face value of a check to cash it, according to a report by The Brookings Institution. A family with $18,000 in take-home pay that regularly uses a check-cashing shop can spend $400 or more of its limited income just to obtain basic payment services, according to the public policy group’s research.
Last year, the Board of Supervisors approved a citywide moratorium on new check-cashing outlets. The City has one of the highest concentrations of check-cashing businesses in low-income neighborhoods in the country, according to Brookings data.
Newsom said crime problems such as drug dealing and muggings near the check-cashing outlets are another reason to seek ways to reduce their numbers in The City.
In an effort to connect a portion of the estimated 50,000 households in San Francisco without a checking or savings account to a banking institution, San Francisco has launched an initiative called "Bank on San Francisco." Spearheaded by city Treasurer Jose Cisneros, the program promotes banks and credit unions in San Francisco that have agreed to offer accounts to clients that might not have opened an account due to financial struggles, because they were undocumented immigrants or for other reasons.
Financial institutions that have agreed to participate so far include Bank of America, Bank of the West, Citibank, Mission Area Federal Credit Union, Mission National Bank, Northeast Community Federal Credit Union, Patelco Credit Union, Spectrum Federal Credit Union, Sterling Bank and Trust, US Bank, Washington Mutual and Wells Fargo.
"It’sunprecedented to see this type of cooperation between what normally would be competitors," said Jack Richards, an official with the San Francisco branch of the Federal Reserve Bank. "We’re hopeful as we see more and more success that this is something we can replicate in other cities."
Some of the account offerings under the program will include an education component if a client has a history of poor financial management.
Michael Kyle, the Castro branch manager for US Bank, said his organization began offering its "Second Chance Checking" program about 10 years ago, with strong success. The accounts are monitored more closely for overspending than other accounts, he email@example.com