GROTON, Conn. -
Like a number of other credit unions before it, Charter Oak Federal Credit Union saw the potential to help steer people away from the expensive check-cashing outlets by offering a credit union alternative that can also help boost revenue for the $539-milllion credit union.
Charter Oak SVP and COO Richard Stout said consumers of all types use check cashers for their simplicity and speed.
Contrary to popular belief, people who use check cashers are not always low-income people who lack financial savvy, he noted, adding that many are affluent, some just hate banks and the entire group can't be stereotyped.
"They are all sizes and shapes. Some are nice, some are nasty, but they all need a check cashed," Stout said. "They are not low-income, unsophisticated people."
The program at Charter Oak is called the KISS Check-Cashing Program that charges 1% to cash a known payroll check, IRS or recurring U.S. government check.
In five years, Charter Oak has cashed $54 million in checks that produced $541,500 from the 1% fee.
The Concept Of Check Cashing
When examining the concept of check cashing five years ago, Stout said he discovered that many members had very low balances, little product and service usage and basically just cashed their paychecks each Friday.
"We were running a check-cashing operation and we didn't know it," he said.
As anyone cashing a check needs to prove their identity with a valid ID, Stout said for a $5 start fee, Charter Oak makes them a new member and simultaneously satisfies Patriot Act compliance standards.
COFCU placed check-cashing posters in the CU lobby and in the lunchrooms of established SEGs, plus in-house visits.
But Stout advised against spending time or money on "normal" advertising in the local newspaper as the target audience usually doesn't read the papers.
Instead, Charter Oak took the time and effort to visit local softball leagues, churches, convenience stores, VFW and American Legion Posts, sports bars, even liquor stores and tax preparers. The key, he said, is reaching out to the target market where they work, relax and play.
Beyond the initial, soft marketing set up several years ago, Charter Oak does have at least one annual touchpoint for the product.
"Every January we do a mailing to tax preparers to remind them we do this," Stout related.
Jumpstarting a check-cashing operation requires little planning, cash or training, he suggested, but convincing the board, staff and tellers of the value takes effort.
Credit unions looking to get into the check-cashing business will need to emphasize how the cashing fees will benefit the organization and membership by competing with local cashers charging exorbitant fees.
"The hardest thing is getting the message across to your people," he said.
Stout is adamant about the simplicity of a successful check-cashing program saying credit unions shouldn't create obstacles but eliminate them.
Members who use the check-cashing function the most don't want to be sold or worked over: they only want to cash their check and move on.
Stout also counsels on what not to do:
* Don't try to be all things to all people.
* Never take third-party checks.
* Never accept checks that might be from someone a member met on the Internet.
* Unless it's a government tax check, be wary of a member with an unusually large check.
Use Common Sense
Stout said credit unions starting a check cashing service need to use common sense and first determine if it's right for the organization. Stout said users of check-cashing services are honest, hard-working people who can pay their own way and might become members over time, as long as they aren't pushed too aggressively.
In 2006, Stout said Charter Oak began approaching long-time users of check-cashing services for more services and converted 300 into checking account holders.
"Don't sell or judge the customer. We haven't had a loss in this program since 2004," he said.
For those credit unions who have suggested that credit unions should not be associating the high ideals of the credit union movement with the unsavory business of check cashing, Stout observed that not only can offering such services at more consumer-friendly fees benefit members, but many credit unions, like Charter Oak, may find they are already in the business without even knowing it.
more
Read about how CUs have tried to beat predatory lenders at their own game at www.cujournal.com and typing the following bolded terms into the search function:
Martin Eakes for stories about how the Self Help CU CEO has helped fight predatory lending in North Carolina.
Joy Cousminer for stories about how Bethex FCU has teamed up with check cashers.
Predatory Lending or Check Cashers for stories on both these subjects.
