A Chicago community group claims check-cashing businesses in the city are gouging low-income and minority customers-and that banks are partly to blame.

One reason for the problem, the group says, is that banks don't offer enough services where such people live.

The Chicago-based Woodstock Institute said low-income Chicagoans pay 250% more on average for basic financial services at check-cashing businesses than they would at banks.

Moreover, check-cashing operations, also known as currency exchanges, outnumber banks 2 to 1 in low-income neighborhoods; citywide, though, the numbers are about equal: 404 currency exchanges, 401 bank branches.

Woodstock has proposed that state and federal regulators push banks to serve low-income and minority areas better, and that the state reduce the charges it lets currency exchanges impose.

For checks of up to $500 they can now charge 90 cents plus 1.4% of the check amount; the maximum charge for larger checks is a flat 1.85%. Thus it costs $5.10 to cash a $300 check-slightly less if it's a welfare check-at a Chicago check casher.

In states where there's no legal limit, check cashers charge as much as 20% of the check amount. The banks surveyed didn't charge their customers for check cashing.

"People living in low-income neighborhoods are forced to pay a surcharge on everything from groceries to insurance. There is no reason they should pay these exorbitant surcharges on basic financial services," said Malcom Bush, the community group's president.

Woodstock officials said Community Reinvestment Act regulations, revised in 1995, now require banks to provide service in addition to loans to low- income people in their markets.

"I think banks are responding" with plans to serve such customers, "either through brick-and-mortar or through other means," said Julie Chavez, vice president and director of community relations for Bank of America Illinois.

Ms. Chavez said BankAmerica plans to enter low-income neighborhoods as it rolls out its supermarket branches. The San Francisco-based bank will open eight of them in low- to moderate- income Chicago neighborhoods by yearend.

"The focus going forward for banks is going to be the number of loans actually made and the way these loans and services are performed," said Mary Decker, senior vice president of community affairs for First Chicago NBD Corp.

In Chicago, Ms. Decker said her company's First National Bank of Chicago serves low- to moderate-income neighborhoods through nine branches. The company had tried its hand at operating a couple of check-cashing offices but closed them last year because they weren't profitable.

Dan Immergluck, vice president of Woodstock, said First Chicago, BankAmerica, and other large banks, including Northern Trust Corp., and Harris Bank, have made some progress entering low-income neighborhoods. But, he said, there's a lot of room for improvement.

Mr. Immergluck said banks have alienated low-income customers by focusing on the rich and on electronic banking. Also, banks tend to require large balances to maintain a checking account, he noted.

Abby Hans, president of the Community Currency Exchange Association of Illinois, rejected the notion that banks and check cashers are competitors. "We appreciate banks coming into our neighborhood and doing what thy're supposed to do: provide credit to creditworthy people," he said.

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