Western Union Causes Stir With Check-Cashing Plan

Western Union's joint venture with a California check-cashing franchise has prompted complaints from the industry and may pose some competition for banks.

The venture, unveiled last week, brings together the New Jersey-based telecommunications company and Thomas Nix Distributor Inc., which operates Nix Check Cashing outlets throughout Southern California. The new company initially plans to open as many as 20 check-cashing stores in the San Francisco/Oakland area.

Western Union Financial Services Inc. expects many of its check-cashing customers to be people who have bank accounts but find its service more convenient.

A |Household Word'

"Western Union is a household word," said Howard Mandelbaum, executive director for the National Check Casher Association in Paramus, N.J. "This could win customers from banks."

"We think some bank customers will come over to us as a matter of convenience," said Warren Bechtel, a spokesman for Western Union, which is based in Upper Saddle River and is a unit of New Valley Corp. Check-cashing outlets generally maintain long hours and tout fast service to attract customers, who pay relatively high fees.

Western Union is the first company with a nationwide franchise to delve into the business. Because it markets its wire-transfer services through many check-cashing outlets, many of these businesses are crying foul. They have considered themselves partners with Western Union but now face the prospect of being fierce competitors.

The Poor Pay High Fees

The check-cashing business has a reputation for charging high fees to serve poor customers without bank accounts.

"Check cashing has grown and flourished in recent years, because responsible firms like Nix offer a much better level of basic services," Mr. Bechtel said.

Few data on check cashing services can be found, but a recent study by John P. Caskey, associate professor of economics at Swarthmore College, cited 4,289 listings in the Yellow Pages for check-cashing outlets in the United States.

Mr. Caskey estimated the industry cashed 144 million checks last year with a combined face value of $43 billion. From this activity, he said, the industry earned about $750 million.

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