Agreement To Delay Presentment Of Customer's Personal Check - Q4 1999

By the Division of Banks

A check casher proposes an arrangement with its customers whereby, in exchange for a fee, the check casher will accept a personal check of its customer, disburse funds to the customer immediately and agree to delay presentment of the check for a predetermined time period.

It is the position of the Division that the proposed activity would be an impermissible activity for a check casher to perform under General Laws chapter 169A and its implementing regulation 209 CMR 45.00 et seq. It is the opinion of the Division that in a transaction in which one party gives a check to another party for which the first party receives funds immediately and agrees with the second party that the check is not to be negotiated for a predetermined time period is properly characterized as a loan. In essence what has occurred is that the first party has received an advance of money upon the promise to repay the advance by having sufficient funds available in a checking account at a predetermined time in the future. Accordingly, the check casher may not engage in the proposed activity unless it obtains a license to engage in small loans pursuant to General Laws chapter 140, section 96 as required by 209 CMR 45.14(8). You should note that pursuant to General Laws chapter 140, section 100 and its implementing regulation at 209 CMR 26.00 et seq. that the maximum interest rate on a "small loan" is 23%. The calculation of the annual percentage rate on a small loan must be in compliance with General Laws chapter 140D and its implementing regulation 209 CMR 32.00 et seq.