Check$mart Puts Credit on its Prepaid Card

Ohio check cashing firm Check$mart is offering high-cost credit on its prepaid cards.

The Insight Card calls the product the ”convenience transfer”  but it is simply a way to borrow money. The fee is based on the size of the withdrawal. Consumers pay $3.50 for every $25 increment. This is actually higher than the rate that MetaBank was charging its customers prior to the OTS directive against the product.

By the way, if you are MetaBank you are becoming increasingly disturbed by what it must seem as a two-tiered platform for regulatory supervision. MetaBank cannot offer credit on its cards, but Urban Trust can issue cards with credit. Moreover, the big banks are doing much the same thing on their checking account advance products. Indeed, the OCC is working aggressively to create a regulator moat around those products.

Just to be clear, Check$mart is merely the marketer of this card. The card is Urban Trust Bank.

The term of the Urban Trust loan depends upon when the customer next puts a load on to the card. The debt is collected as soon as enough money resides on the card to make things square.

The Insight Card has a separate overdraft function. Again, it is based on a share of the size of the overage. Consumers will pay 3 percent of the overage. This is actually a lot less than the typical fixed fee that most checking accounts levy on their cards.

Urban Trust can put overdraft on cards that it issues because it gets an exemption for the Durbin Amendment. The Federal Reserve said how it was going to apply Durbin over the summer. Their statement was that any bank that was covered by Durbin – large banks with assets above $10 billion – could not offer either overdraft.

Check$mart’s parent, Community Choice Financial Holdings, issued plans to offer an initial public offering of its stock.  The stock will be sold under the ticker symbol “CCFI.” The S-1 says that the company wants to build its revenues from direct deposit. It describe direct deposit not as a place to produce revenues from fees, but instead by building a ‘hub’ that encourages card holders to expand the number of services that they use.