WASHINGTON — Representatives of the check-cashing business warned lawmakers on Wednesday that passing legislation that creates more regulatory barriers could stall business, eventually hurting consumers who lack bank accounts with depository institutions.
Three representatives of what is referred to as the money services business testified before a subcommittee of the House Financial Services Committee. The hearing was held to examine how the money services business, which also includes currency exchange and bill pay services, are regulated at the state and federal levels.
Executives testifying before the subcommittee included Western Union Company Chief Compliance Officer Joe Cachey, Financial Service Centers Association Deputy General Counsel Scott McClain and Deborah Thoren-Peden of Pillsbury Winthrop Shaw Pittman LLP, which specializes in financial service industry law.
The hearing was based on two main issues: money services businesses that have had their ties with actual banking institutions cut because banks fear implication of wrongdoing may occur and the high number of service entities that are not registered with federal overseers, making it difficult to track compliance.
Lawmakers are tasked with trying to find a way to increase the number of money services businesses, or MSB, who should be federally registered and compliant, in particular, with anti-money laundering standards. Roughly 30,000 to 40,000 money services businesses operate in the U.S., but approximately half of those entities are not registered.
Western Union's Cachey shot down proposed legislation in the House that would establish an office under the Treasury Department to oversee MSB compliance. The bill would increase regulatory costs, he said, and be ineffective because it "does not create uniform standards for safety and soundness, leaving Western Union to continue navigating the current maze of state requirements which can be conflicting."
Cachey said the proposed legislation could be "burdensome."
The industry representatives said U.S. officials need not enact additional regulatory provisions, but should instead hire more federal workers to better implement and streamline existing regulations.
However, while McClain agreed that no new regulations are needed, he said the same legislation Cachey opposes would have no real impact on the smaller money services businesses that his organization represents. The primary issue McClain addressed was the strained ties between banks and money services entities, stemming from pressure on banks to ensure its customers are serving legitimate transactions.
"Check cashers and other MSBs are dependent on access to depository and banking services for their very survival," he said.
McClain pointed to a separate piece of legislation, also in the House, that would allow money servicers to "self-certify" that their business and customers are not involved in money laundering or terrorist financing. He added that self-certification would remove banks from being targeted, and would hopefully curtail the notion that doing business with money services businesses is too risky.
