Illegal Check Cashing in Need of Some Balance

State law enforcement officials say they are helpless to crack down on the underground check-cashing businesses booming in many communities, some of which are not served by traditional banks.

The problem, they say, is that there are no penalties for violating a 1995 law requiring check cashers to register with the state. To get an operating permit, business owners are subject to a background check and are required to pony up a $50 annual fee. That money goes into a fund to pay for regulation of the industry--for instance, ensuring that check-cashing owners take no more than the hefty 15% cut allowed from each personal check cashed. Liquor and grocery stores may not charge more than a $2 transaction fee to cash a check.

The attorney general’s office has issued permits for only 2,087 check-cashing businesses throughout the state. But it is likely there are hundreds, if not thousands, more operating illegally.

Dick Ackerman (R-Orange), at the request of the office, has introduced AB 711 to put some teeth into the law. Check cashers operating without permits would face fines of $1,500 or two months in jail for a first offense and up to $25,000 or six months in jail for a third violation.