ALBANY - New York's top court Monday will hear arguments about whether the Town of Hempstead can force 25 check-cashing outlets to move to industrial areas from business districts, or to close.
Hempstead says it enacted a zoning law in 2006 to relocate the check-cashing operations because it wants to encourage young and low-income individuals to open savings and checking accounts, instead of relying on "predatory and exploitative" firms, which "tend to keep a neighborhood down," according to court documents.
Check cashers often open in minority neighborhoods, the town argued, and thus can be exploitative.
Sunrise Check Cashing and Payroll Services and seven other companies filed suit against the town. The companies said the zoning ordinance would force 25 check-cashing operations to move or shut down.
They contend state banking laws allowing them to operate as "lawful" businesses supersede local zoning ordinances, according to court documents.
A midlevel court agreed with the companies, determining that Hempstead had overstepped its authority.
More than a decade ago, New York's top court ruled that New York City could use its zoning law to protect children and churchgoers from being confronted with so-called adult entertainment by restricting such establishments to manufacturing and commercial districts.
Individuals who use check-cashing services instead of bank accounts can find it harder to qualify for loans for new businesses or home mortgages because they have not built up the documented credit record that lenders typically require, experts say.
Hempstead Town Supervisor Kate Murray said the check-cashing firms were "by and large predatory" because most of their customers are low-income people who can least afford the fees the companies charge.
According to the lower court's opinion, the companies claimed that Hempstead's comparison of check-cashing establishments to "seedy" operations, "akin to pawnshops and strip clubs," was irresponsible.
The companies claimed that the town acted in an arbitrary and capricious manner "because it perceived check-cashing establishments as undesirable -- clearly demonstrating an ignorant bias toward [the] establishments and the communities they serve," the court's opinion said.
The state Department of Financial Services has filed a brief siding with the Town of Hempstead.
"Typically, the superintendent of state agencies is given great deference in the interpretation of their own statutes," Sullivan said.