Check cashing

 

Using check cashing services:

 

Using a check cashing service is for all purposes similar to selling a loan to a third party, and follows all the restrictions and laws explained above. The difference between cashing a check by a bank and by a check cashing service is that by a bank, the money is not cleared into your account until the money leaves the check writer’s account. It is hence similar to one who is owed money asking an individual to bring him the money from the person who owes him. However by a check cashing service, the client receives cash on the spot of the transaction, and in exchange for this cash payment he signs over the collection of the check to the check cashing Service Company. Thus, in essence he has sold his check, or his loan document, to the company. Now, as the income for their business, the check cashing service charges a fixed percentage rate towards the check, and hence on every check they make a certain amount of money. For example, on a $1000 check, a service fee of 3% will give the client $970, while the company will eventually collect $1000. This enters one into the above Halachic question regarding Ribis. The following is the ruling based on above. These laws must be followed both by the client and by the service owner, if they are Jewish.

 

Definition of a check in Halacha:[1] Prior to discussing the law of cashing a check by a check cashing service we must first determine the status of a check according to Halacha; is a check considered a loan document, a promissory note, an equivalent to cash payment? The practical ramification regarding Ribis is if the check may be sold for a lesser amount with or without liability. There is a dispute amongst today’s Poskim as to the status of a check according to Halacha. Some Poskim[2] rule it is viewed as a mere promise document which has no Halachic validity. It is similar to note promising to pay someone money, and is not a document of a debt. According to this opinion, a check cannot be sold to another and hence one may never exchange a check for less than its value, even if the seller does not have liability on the check, unless he is only taking Sechar Tircha. Other Poskim[3] rule a check is identical to a loan document for all Halachic purposes, and hence may be sold just like a loan may be sold.[4] Accordingly, it may be sold for a lesser amount if the seller does not retain liability. Other Poskim[5] rule a check is similar to an oral loan that can be purchased through Mamad Shelashton, otherwise, it cannot be sold for a lesser amount. Other Poskim[6] rule that a non-postdated check is considered like actual cash payment, as under law the person must honor the check he signed. Practically, the majority of today’s Poskim conclude that a check has the status of a loan document which can be sold following the same rules as a loan document. Based on this the following is the summary of cashing a check by a check cashing service:

 

 

 

A. Gentile check cashing service:

 

A Jew may use any gentile owned check cashing service, irrelevant of fees, liability and the like.[7]

 

 

 

B. Jewish check cashing service-gentile client:

 

A Jewish owned check cashing service may charge a gentile client whatever rate he desires for exchange of cashing his check, irrelevant of liability and the like.[8] Furthermore, it is even a positive command to take a surcharge for the exchange.[9]

 

 

 

C. Jewish check cashing service-Jewish client:

 

Non-postdated check:[10] Some of today’s Poskim rule that Ribis does not apply to a non-postdated check, as it is viewed as cash payment. Majority of today’s Poskim however rule that it is considered like a loan document and hence follows the same laws as a post-dated check, as explained next. 

 

Postdated check [and non-postdated check according to most Poskim]:[11] A Jewish client may not cash a check by a Jewish owned check cashing service unless the Jew does not accept liability for the check’s payment, or the Jew is charged a fixed fee that covers only the expenses of the service [i.e. Sechar Tircha]. Being that all check cashing services make the check holder retain liability to repay the money in the event that the check is not respected, irrelevant of reason, therefore the only option that remains is the second option, which is for the check cash service to charge a fixed fee for their service. Accordingly, it is forbidden for the client to be charged a greater rate for a postdated check, as this reveals that the extra fee is in exchange for the delay of payment. Thus, in summary, a check cashing service may charge only a fixed rate for all checks that they cash, irrelevant of the due date of the check.

 

Heter Iska:[12] In addition to all the above it is proper for the check cashing service to have a Heter Iska for all of his transactions in order to prevent any issues of Ribis that may come up. [Some check cashing services charge more money for post-dated checks based on a Shetar Heter Iska. One should contact a Rav regarding if such a Shetar should be relied upon.]

 

Exchange fees:[13] So long as the company has a fixed exchange fee for all checks, whether postdated or non-postdated, and it covers only the expenses of the service [Sechar Tircha], it is valid, and is not considered Ribis.

 

 

 

May one write a postdated check for himself and exchange it by a Jewish owned check-cashing service for less money?[14]

 

One may only do so if there is a fixed fee or percentage rate being taken for the check [as Sechar Tircha] and this rate would be the same even if the check was not postdated. If however the check cashing services charges a greater fee or percentage for the postdated check, it is forbidden to exchange it by them due to Ribis.


[1] See Mishpitei Ribis p. 342

 

[2] Ateres Shlomo 1/65 of Rav Shlomo Garelitz; Chut Shani Ribis 16/115 of Rav Gerelitz; Vayaan David 2/219; Rav Z.N. Goldberg in Techumin 12/295; leaves this issue in doubt; Kinyan Torah 3/93

 

[3] Minchas Yitzchak 5/120; Igros Moshe C.M. 2/15; Lehoros Nasan 8/106; Ohala Shel Torah 1/84

 

[4] The reason: Various Halachic considerations can render a check as a valid loan document:

  1. Mamrani: The Poskim rule that a Shetar Mamarani [I owe you document] is a valid document as has the same status as a loan. [See Shut Bach 15; Tzemach Tzedek 10
  2. Dina Demalchusa Dina: Since according to law the check writer must honor his check, therefore it is considered like a loan document, as Halacha accepts the laws of the country regarding monetary matters. [Rama C.M. 369/11; Chasam Sofer 5 C.M. 44; Rashba 22]
  3. Situmta: Since using a check is an accepted way of business, it receives the Halachic status of a “Situmta”, which is considered a Halachicly binding Kinyan. [See Choshen Mishpat 129/5 and Keses Kodshim on 201/1]
  4. Umdana: When one can assess the intents of a transaction to be of a certain form, it has Halachic status of Umdana, which is Halachiclly binding. [See Rav Z.N. Goldberg in Techumin 35/346]

[5] Rav Aaba Shaul, brought in Mishpitei Ribis ibid

 

[6] See Mishpitei Ribis ibid; Pischeiy Choshen Halvaa 10 footnote 21; See Shevet Halevi 7/222

 

[7] The reason: As the laws of interest do not apply to transactions between gentiles and a Jew. [See Admur Ribis 70 and 75]

 

[8] The reason: As the laws of interest do not apply to transactions between gentiles and a Jew. [Admur Ribis 75]

 

[9] Admur ibid

 

The reason: This is similar to the collection of an actual debt from the gentile in which the surcharge collection is interest, and hence fulfills the positive Biblical command to take interest from a gentile. 

 

[10] See Mishpitei Ribis p. 342

 

[11] Bris Pinchas 17/11-16

 

[12] Bris Pinchas 17/16

 

[13] Bris Pinchas 17/16

 

[14] Bris Pinchas 17/11

 

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