Magazine article American Banker

M&A Picks Up in Check Cashing; Impact on Fees?

Magazine article American Banker

M&A Picks Up in Check Cashing; Impact on Fees?

Article excerpt

The continuing consolidation of the check-cashing industry could lead to changes to pricing, observers said, though they disagreed about which way fees would go.

Some experts said that the economies of scale and access to capital afforded by merging check cashers could lead to price cuts. But others said that as the industry becomes concentrated in bigger companies, which can spend more on lobbying, it has a better chance of softening or eliminating regulations that check cashers say keep fees artificially low in some states.

On Wednesday the private-equity firm Founders Equity Inc. said it had purchased C.L.B. Check Cashing Inc. and Pay-O-Matic Corp. and would merge them to create the largest check casher in New York, with 130 locations. Founders Equity did not say what it paid for either outfit.

In an interview, Warren H. Haber, a partner at Founders Equity, said "there is an opportunity to continue to consolidate what is traditionally a family business, particularly in light of today's issues related to compliance and customer service, which smaller players are finding much more difficult to accomplish."

He said the merger would not affect pricing, because rates are capped in New York State.

The combined company would offer additional products like EasyPass, an electronic toll payment system in Northeast states, and it would add more point of sale terminals.

Last year Kinecta Federal Credit Union bought Navicert Financial Inc., which does business as Nix Check Cashing, to create a check-cashing service with 78 locations in Southern California.

John Caskey, a professor at Swarthmore College who studies the underbanked, said check cashers "used to be mom-and-pop operations," but many have merged to form professional ventures with the necessary scale to lower prices as well as the money to commit to lobbying, marketing, and public relations. …

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