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.
Joe Coleman, the president of RiteCheck Cashing Inc., which operates 12 branches around New York City, and the chairman of Financial Service Centers of America, a trade group for check cashers, agreed that consolidation should lead to more scale and influence.
Though check-cashing laws vary from state to state, Mr. Coleman said, having more sway could help the industry shape regulations, which in turn “could help normalize pricing in the long run.” However, he said, it remains to be seen whether that means fees would end up higher or lower than today.
Mr. Coleman said he believes check cashers’ future lies in partnering with banks to offer products and services, instead of competing with them.
“We can become the retailers of financial services, and the banks can become the wholesalers,” he said. (However, since the Sept. 11 attacks, concerns about money laundering have made it hard for some money-services businesses simply to get basic services from banks, much less form marketing alliances with them.)
Mr. Haber said bigger companies are likelier to stay in business long enough for their stores to establish roots in a neighborhood.
As an example, he mentioned an incident that gained nationwide attention last week in which a Pay-O-Matic agent prevented two men from cashing the Social Security check of a dead man whose body they wheeled into a branch. Mr. Haber said the agent recognized the dead man as a regular customer and called the police.
That agent would not have gotten to know his customers so well “if you had stores opening up and closing every day,” Mr. Haber said.
