Does a business that only cashes corporate or commercial checks (not consumer paychecks) need a New York check-cashing license?

Plain-English summary

For roughly twenty years, the New York Banking Department had told inquirers that Banking Law Article 9-A's check-cashing license requirement applied only to entities cashing checks for individuals. Businesses that cashed only commercial checks (checks payable to corporations and other non-natural persons) were treated as outside the scheme. By 2004, the Department wanted to revisit that reading and asked the Attorney General whether the statute really did exempt commercial check cashers.

Attorney General Eliot Spitzer's office concluded the statute did not. Banking Law § 367(1) prohibits "any person, partnership, association or corporation" from engaging "in the business of cashing checks, drafts or money orders for a consideration" without a license. The statute carves out a few specific exemptions (checks cashed for a nominal fee incident to another business; banks and other entities regulated under different Banking Law articles), but it does not carve out commercial-only check cashers. Compare the broad § 367(1) language with § 340 (small loan licensing) and § 491(7) (sales finance companies), where the Legislature drew the natural-person/commercial line explicitly. The Legislature knew how to make that distinction; its silence in Article 9-A was meaningful.

The legislative history did not justify departing from the plain text. The original 1944 statute responded to immigrant defense workers and other vulnerable individuals who could not access banks, but it also benefited small businesses that needed ready cash to meet payroll. The 1947 cap fight included opposition from contractors, art dealers, garment-industry merchants, and printers, all commercial check-cashing customers. The statute's two purposes (protecting unbanked customers and preventing usurious lending dressed up as check cashing) apply to commercial customers just as much as natural-person customers.

On agency deference, the AG declined to defer to the Department's pre-2004 staff opinions. The interpretation involved pure statutory analysis rather than specialized banking expertise, so under Matter of Liao (1989) and Kurcsics (1980), no special deference was owed. Matter of Charles A. Field Delivery Serv. (1985) confirmed that an agency may correct a prior erroneous statutory interpretation.

On the Department's authority to relax the licensing requirements for commercial check cashers, the AG drew a line. The three-tenths-of-a-mile location restriction (§ 369(1)), the $6,000 cap (§ 373(1)), and the other "shall not" provisions are mandatory; the Department cannot waive them. The maximum-fee rule (§ 372) is different. The Legislature delegated the fee-setting authority to the Superintendent, so there is room for the Superintendent to consider the corporate nature of customers in setting fees that may differ between consumer and commercial transactions.

Currency note

This opinion was issued in 2004. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Banking Law Article 9-A has been amended multiple times in subsequent years, including the addition of new provisions governing payday lending, mobile check cashing, and electronic transactions. Anyone considering a check-cashing business in New York should review the current statutory text and Department of Financial Services regulations.

Common questions

Q: What is Article 9-A of the Banking Law?
A: It is New York's check-cashing licensing scheme, enacted in 1944. It requires anyone in the business of cashing checks for consideration to obtain a license from the Superintendent of Banks (now the Superintendent of Financial Services), regulates business practices (maximum fees, location restrictions, prohibited side businesses), and imposes minimum financial responsibility requirements.

Q: What does the three-tenths-of-a-mile rule do?
A: Banking Law § 369(1) prohibits the issuance of a new check-cashing license at a location closer than 1,584 feet (three-tenths of a mile) "on a straight line along the street" from an existing licensee.

Q: What is the $6,000 cap?
A: Section 373(1) limits the amount of a single check a licensee may cash to $6,000, with categorical exceptions for certain checks (government checks, certified bank checks, claims settlements, etc.).

Q: Why doesn't the prior agency interpretation get deference?
A: Under Kurcsics v. Merchants Mut. Ins. Co., agency deference applies to interpretations resting on specialized agency expertise. Where the question is one of "pure statutory reading and analysis, dependent only on accurate apprehension of legislative intent," there is little reason to rely on agency expertise. The AG categorized this question as the latter.

Q: Can a commercial check casher rely on the old Department position?
A: The opinion warned that estoppel against a governmental agency is rare. An agency can correct a prior erroneous interpretation. Matter of Charles A. Field Delivery Serv. (1985). The AG flagged the possibility that an individual case might present an unusual factual situation warranting relief, but said such cases are exceptional.

Q: Can the Superintendent set different fees for commercial check cashing?
A: Probably yes. The Legislature delegated the fee-setting authority to the Superintendent. The AG indicated that there is "at least arguable" authority for the Superintendent to set different maximum fees where there is a rational basis for the distinction, including based on the corporate nature of customers.

Background and statutory framework

Article 9-A of the Banking Law was enacted in 1944. Its two original purposes, articulated in a contemporaneous 1944 AG opinion, were: (1) protecting unbanked customers, and (2) preventing usurious lending hidden behind check-cashing fees. Both purposes accommodate commercial customers as well as natural-person customers; small businesses, like immigrant defense workers, can find themselves unable to access traditional banking services and exposed to financial exploitation.

The statutory text in Banking Law § 367(1) is broad: "No person, partnership, association or corporation shall engage in the business of cashing checks, drafts or money orders for a consideration without first obtaining a license from the superintendent." Section 374(1) carves out two narrow categories: nominal-fee check cashing incidental to another business, and entities regulated under other articles of the Banking Law.

The contrast with the Banking Law's loan licensing scheme is instructive. Section 340 expressly distinguishes consumer/investment loans of $25,000 or less from commercial/business loans of $50,000 or less. The Legislature could have drawn the same line in Article 9-A; the silence is purposeful.

On agency deference, the AG applied the New York doctrinal split. Matter of Liao v. New York State Banking Dep't (1989), itself a check-cashing case, held that pure statutory construction questions are courts' responsibility. The Banking Department's prior staff letters dated back to at least 1984, but that consistent administrative interpretation was insufficient to override the plain statutory text where the issue was one of pure statutory reading. The Department was free to correct course.

On the limits of administrative modification, the mandatory-versus-discretionary distinction draws the line. Section 369(1)'s minimum-distance rule, § 373(1)'s $6,000 cap, and other "no licensee shall" prohibitions are mandatory; the Department cannot waive them. Section 372's fee-setting authority is discretionary; the Department can structure fees including distinctions among customer types.

Citations and references

Statutes:

• Banking Law §§ 340, 367, 369(1), 370, 371, 372, 373, 374(1), 491(7), art. 9-A
• General Obligations Law § 5-521(3)
• 3 NYCRR § 400.12
• State Administrative Procedure Act § 204(1)

Cases:

• Matter of Liao v. New York State Banking Dep't, 74 N.Y.2d 505 (1989)
• Matter of Gruber v. New York City Dep't of Personnel, 89 N.Y.2d 225 (1996)
• Kurcsics v. Merchants Mut. Ins. Co., 49 N.Y.2d 451 (1980)
• Matter of Charles A. Field Delivery Serv., 66 N.Y.2d 516 (1985)
• Matter of Raritan Dev. Corp. v. Silva, 91 N.Y.2d 98 (1997)
• Council of New York City v. Giuliani, 93 N.Y.2d 60 (1999)
• Matter of Dworman v. New York State Div. of Hous. and Cmty. Renewal, 94 N.Y.2d 359 (1999)
• Matter of New York State Medical Transporters Ass'n v. Perales, 77 N.Y.2d 126 (1990)

Source

• Landing page: https://ag.ny.gov/libraries-documents/opinions/opinions-year
• Original PDF: https://ag.ny.gov/sites/default/files/opinions/2004-F5_pw.pdf

Original opinion text

BANKING LAW §§ 340, 367, 369(1), 370, 371, 372, 373, 374(1), 491(7), ART. 9-A; GENERAL OBLIGATIONS LAW § 5-521(3); 3 N.Y.C.R.R. § 400.12; STATE ADMINISTRATIVE PROCEDURE ACT § 204(1); STATUTES § 93; L. 1997, CH. 144; L. 1983, CH. 263; L. 1978, CH. 235; L. 1974, CH. 461; L. 1958, CH. 350; L. 1954, CH. 466; L. 1947, CH. 485; L. 1944, CH. 593.

The licensing scheme contained in Article 9-A of the Banking Law applies to all persons and entities that engage in the business of cashing checks, regardless of whether the checks are payable to natural persons or commercial entities.

July 14, 2004

Sara A. Kelsey
Deputy Superintendent and Counsel
New York State Banking Department
One State Street
New York, New York 10004-1417

Formal Opinion No. 2004-F5

Dear Ms. Kelsey:

You have asked whether the prohibition on unlicensed check-cashing in Banking Law § 367(1) applies to persons or entities engaged in the business of cashing only commercial checks, i.e., checks that are payable to an entity other than a natural person. We conclude that this prohibition applies to all persons or entities that engage in the business of cashing checks, regardless of whether the checks are payable to natural persons or commercial entities. Accordingly, any person or entity that would engage in the business of cashing checks and is not otherwise exempt from the licensing requirements must first obtain a license from the Department under Article 9-A of the Banking Law.

You also have asked whether the Department has the authority to modify, eliminate, or waive any of the Article 9-A statutory requirements for the cashing of checks payable to corporations and other commercial entities. We conclude that while there is generally no authority for categorical exemptions, there may be grounds for the Superintendent to consider the corporate nature of the customer in exercising her delegated authority to set the maximum fees that may be charged by licensees.

I. BACKGROUND

Article 9-A of the Banking Law, enacted in 1944, governs the licensing and regulation of the business of cashing checks. Under this scheme, it is illegal to engage in the business of cashing checks for consideration without obtaining a license from the Superintendent of Banks. See Banking Law § 367(1). This Article does not apply to the cashing of checks for a nominal fee of one dollar or less incidental to the conduct of another business, or to banks and other entities that operate pursuant to other provisions of the Banking Law. Id. § 374(1). In determining whether to issue a check cashing license, the Superintendent must consider the financial responsibility, experience, and character of the applicant, and must find that granting the license will promote the convenience and advantage of the public where the business will be conducted. Id. § 369(1). A license is granted to operate a check cashing business at a specific location, id. § 370, and the Superintendent may not issue a license for a location that is within three-tenths of a mile from an existing licensee. Id. § 369(1).

The provisions of Article 9-A also regulate the business practices of licensees. Licensed check cashers may not charge fees in excess of the maximum fee set by State regulation. Id. § 371; 3 N.Y.C.R.R. 400.12. Licensees are also prohibited from engaging in the business of making loans and in the discounting of notes, bills and checks, and such businesses may not be conducted on the same premises as a check cashing business. Banking Law § 373(1). Except for certain categorical exemptions, licensees are also prohibited from cashing checks that exceed $6,000. Id. A licensee must maintain liquid assets of $10,000, id. § 367(4), and keep records and accounts as specified by the Superintendent, id. § 372(5).

II. ANALYSIS

As you recognize, the plain language of Article 9-A covers commercial check cashers. See Banking Law § 367(1). Your letter suggests two possible reasons for departing from the statute's plain language: (1) the statute's origin in concerns about the protection of immigrant defense workers and other vulnerable individuals; and (2) past agency interpretation of the statute. We conclude that neither of these provides a persuasive reason for departing from the statute's plain language.

A. The Statutory Language

The scope of Article 9-A is defined by Banking Law § 367(1), which provides: "No person, partnership, association or corporation shall engage in the business of cashing checks, drafts or money orders for a consideration without first obtaining a license from the superintendent."

In our view, businesses that cash checks only for corporations and other commercial entities fall within the plain language of this provision. They differ from other check-cashing businesses only in that the checks they cash are not payable to natural persons. Further, they do not fall within any of the explicit statutory exceptions to the regulatory scheme.

Nothing in the language of section 367, or any other provision of Article 9-A, limits application of the Article to businesses that cash checks for individual consumers. The absence of such language from Article 9-A is notable because the same criterion (whether the customer is a natural person or corporate entity) is used in other provisions of the Banking Law to define the scope of the Department's regulatory authority. See Banking Law § 340 (prohibition on business of making loans without a license applies to consumer and individual investment loans of $25,000 or less and to commercial or business loans of $50,000 or less); id. § 491(7) (defining licensed sales finance companies as businesses involved in purchasing retail installment contracts). The inclusion of this criterion in other provisions suggests that the Legislature considered its relevance generally, and decided it was not appropriately applied to the licensing of check cashers.

Nor do we find any evidence in Article 9-A's legislative history that the Legislature intended to exclude from regulation businesses that cash checks only for corporations and other commercial entities. Indeed, there is evidence that, at least in the early years of the licensing scheme, a significant portion of the customers of licensed check cashers included businesses. For example, when the statutory cap on the amount of a check that could be cashed was first enacted in 1947, the Check Cashers Association opposed the bill in large part because of the effect the cap would have on the many small businesses that regularly relied on check cashing services for their banking needs, including contractors in the garment industry, art dealers, merchants, jobbers and printers.

B. The Statute's Purpose

The statute's purpose does not appear to allow disregard of its plain language. As described in an opinion of the Attorney General that was contemporaneous with Article 9-A's enactment, its purposes were two-fold: "the protection of those who are unable to utilize regular banking services and must use the facilities of persons deriving income from the business of cashing checks, and [the prevention of] abuses in the lending of money through illegal and exorbitant interest in the guise of charges for check cashing." 1944 Op. Att'y Gen. 199.

These purposes are not inconsistent with a literal interpretation of the broad language of Banking Law § 367(1). Commercial entities could well be among "those who are unable to utilize regular banking services." With respect to the Act's second purpose (the prevention of lending abuses) commercial entities are not invulnerable to lending abuses, nor are they undeserving of protection from these abuses. Cf. General Obligations Law § 5-521(3).

C. Prior Agency Interpretation

Nor would deference to the Department's prior interpretation of Banking Law § 367(1) support a departure from the statute's plain language. As indicated by the letters you supplied with your opinion request, staff of the Department occasionally have advised persons that "the intent [of Article 9-A] is to protect only natural persons who utilize check cashers." The first of these letters is dated January 10, 1984.

In our view, this interpretation is not entitled to any special deference. An agency's interpretation of a statute it is charged with implementing "is entitled to varying degrees of judicial deference depending upon the extent to which the interpretation relies upon the special competence the agency is presumed to have developed in its administration of the statute." Matter of Gruber, 89 N.Y.2d at 231. Where "the question is one of pure statutory reading and analysis, dependent only on accurate apprehension of legislative intent, there is little basis to rely on any special competence or expertise of the administrative agency." Kurcsics v. Merchants Mut. Ins. Co., 49 N.Y.2d 451, 459 (1980).

This view is consistent with Matter of Liao v. New York State Banking Department, 74 N.Y.2d 505 (1989), in which the Court of Appeals declined to accord deference to the Department's interpretation of another statute governing check-cashing businesses. Moreover, even in situations involving agency expertise where deference would ordinarily be appropriate, an agency's interpretation that is at odds with the plain language of a statute is accorded little weight.

Thus, the fact that the Department has previously interpreted the statute as inapplicable to commercial check cashers in no way precludes the Department from adopting a new interpretation. "Stare decisis is no more an inexorable command for administrative agencies than it is for courts. They are, therefore, free, like courts, to correct a prior erroneous interpretation of the law." Matter of Charles A. Field Delivery Serv., 66 N.Y.2d 516, 518-19 (1985).

Consequently, we conclude that there is no basis for departing from the plain language of Article 9-A by exempting businesses that cash checks only for corporations and other commercial entities.

D. The Department's Authority to Relax the Requirements of Article 9-A

You have further asked whether, assuming that businesses which cash checks only for corporations and other commercial entities are subject to the requirements of Article 9-A, the Department has the authority to modify, eliminate, or waive any of the requirements for these businesses.

We first note that these provisions are mandatory in nature. For example, the minimum-distance requirement says simply: "No license shall be issued to an applicant for a license, at a location to be licensed which is closer than one thousand five hundred eighty-four feet (three-tenths of a mile) from an existing licensee." Banking Law § 369(1). Given the mandatory nature of the requirements you identify, we believe the Department lacks the power to modify these requirements on a categorical basis.

We note, however, that the Department's authority to modify the maximum fees charged by licensees is arguably somewhat broader because the statute delegates to the Superintendent the authority to set these fees. See Banking Law § 372. The question in this context would be whether, in exercising that delegated authority, the Superintendent could set a maximum fee for the cashing of checks payable to corporations that differs from the maximum fee for other checks. In view of the Legislature's decision to grant the Superintendent the authority to set fees, it is at least arguable that this includes the authority to set different fees where there is a rational basis for making such distinctions.

While there may be limited grounds for the Superintendent to consider the corporate nature of the check casher's customers in implementing the maximum fees rule, we do not believe the statutory scheme provides any basis for modification of the three-tenths of a mile restriction on the granting of licenses, the $6,000 cap on the amount of a check that may be cashed by a licensee, or the other prohibited acts.

III. CONCLUSION

We conclude that the licensing and regulatory requirements of Article 9-A apply to all businesses (not otherwise exempt) that cash checks for consideration, including those that cash checks only for corporations and other non-natural persons. While there is no general authority for waiving or modifying the statutory requirements for this group of check cashers, the Department may explore whether it would be appropriate to consider the corporate nature of the customer in exercising its delegated authority to set the maximum fees permitted to be charged by licensees.

Very truly yours,

ELIOT SPITZER
Attorney General