Wednesday, April 23, 2014
KeyBank has begun cashing checks in Maine for residents who don't have bank accounts, a move that puts it in competition with payday lenders and other retail financial alternatives.
The bank says it wants to help low-income residents and those unfamiliar with conventional banking to cash their payroll and benefits checks. But its parallel business goal is to grow its customer base, at a time when industry practices have driven some potential bank customers to other lenders.
KeyBank last week launched the first phase of what it calls KeyBank Plus at six branches in Lewiston, Auburn, Bangor and Brewer. It plans to expand non-customer check cashing into Greater Portland early next year.
KeyBank has 61 branches in Maine. State regulators say they don't know of any other banks in Maine cashing checks for non-customers.
"We see a great need," said Therese Myers, a KeyBank spokeswoman. "There are a lot of people without bank accounts."
KeyBank is charging 1 percent of the value of the check for the service. That's much lower than what many payday lenders charge.
"We did a lot of research," Myers said, "and found a lot of people in Maine use check cashing services, which can be very expensive."
Just 2.6 percent of Maine households have no bank or credit union account, according to a national survey last year by the Federal Deposit Insurance Corp., well below the 7.7 percent national average. That said, 14,000 Maine households have no bank or credit union accounts, according to the Maine Bureau of Financial Institutions.
Keybank sees the opportunity to convert some of these non-bankers to customers with checking accounts, or preferably, debit cards. It began courting these customers six years ago in Cleveland and since has expanded the program into 10 other markets.
In Maine, it's working with non-profit groups such as Goodwill Industries, Coastal Enterprises Inc., the Good Shepherd Food Bank and housing authorities in Bangor and Lewiston, to reach their clients. Part of the program aims to help educate customers about services that will work best for them.
KeyBank employees trained in financial education will offer classes to help clients learn to maintain good credit, form a budget and use basic banking services.
Keybank's move comes as a surprise to Brandi Duggan, who manages RepubliCash stores in Portland and South Portland. RepubliCash cashes payroll checks for 1.75 percent of the check value; out-of-state personal checks cost 5.99 percent.
"That sounds very similar to what we do," she said. "Eventually, that may cut into our business."
Many customers are contractors who need a cash advance to buy materials and pay their crews. But others, Duggan said, are former bank customers who say they're fed up with overdraft charges and hidden fees, some of which were limited by last month's federal financial overhaul law. The unrest created new business and growth during the recession, Duggan said.
"People came in and said, 'I've had enough,"' she said.
These perceptions are of interest to Lloyd LaFountain, Maine's superintendent of financial institutions. He serves on a working group, requested by the Legislature, that's looking into the problems faced by people without bank access.
LaFountain agrees that the banking industry has "taken a hit" in public perception. But several Maine-based banks and credit unions, he added, now offer accounts that have very low minimum deposits and fees that are low or non-existent.
"These accounts are out there," he said. "People just need to shop for them."