Financial
Service Centers of New York Urges
CashPoint Creditors to Properly Credit Consumer Payment
Bankruptcy Court Ruling Protects at Least $2.3 million in Consumer
Payments
NEW YORK NY, May 18, 2004
-- A decision by United States
Bankruptcy Court Judge Robert Gerber means that millions of dollars in
consumer payments made to utilities and other companies through CashPoint
Network Services can now be released by check cashers and other CashPoint
agents directly to creditors.
Legal counsel representing the
Financial Service Centers of New York (FSCNY), New Jersey Check Cashers
Association (NJCCA) and 25 individual neighborhood financial services
providers filed papers on May 11th asking Judge Gerber to protect
consumers who paid bills using CashPoint, which was forced into bankruptcy
by creditors after millions of dollars in consumer payments did not reach
the intended companies.
The funds involved, which include at
least $2.3 million held by 25 FSCNY members, were part of payments made by
consumers during CashPoint’s final days of operation. CashPoint ceased
operations on April 21st, when the New York State Banking Department
suspended the firm’s money transmitter license. The next day creditors
forced CashPoint into involuntary bankruptcy. Upon learning of the New
York State Banking Department’s determination, check cashers moved to
freeze CashPoint transfer accounts to prevent further withdrawals and
protect consumers.
In a decision dated May 13th,
Judge Gerber ordered “Any and all money in the possession, custody or
control of any Agent that was designated by a customer of a payee as
payment(s) to such a Payee, and that is not on deposit in an account in
the name of CashPoint (as of the date of service of this Order upon such
Agent) shall be delivered, paid or turned over by each Agent to the Payee
on whose behalf the payment was collected, without deduction of any fees
or charges by such Agent, within five (5) business days after the entry
and service of this Order.” FSCNY and NJCCA General Counsel Gerald
Goldman said members would comply in sending the funds that remained in
accounts after CashPoint ceased operation directly to utilities and other
companies. It is likely that additional funds still remain in the accounts
of other CashPoint agents.
In his ruling, Judge Gerber noted that
he could not require individual creditors to cease collection actions or
service terminations of consumers whose payments are caught up in the
bankruptcy. Judge Gerber did note it would be “good corporate citizenship”
for utilities and other creditors to voluntarily refrain from taking
actions against consumers. Millions of dollars in additional payments had
been taken from the transfer accounts by CashPoint prior to the shutdown,
but have not reached the utilities and other companies. Judge Gerber did
require creditors to file a statement of position with the court
indicating if they would voluntarily agree with his request.
“Our goal as an association is to see
that payments made by consumers reach the intended creditors and that the
consumer accounts are immediately credited. We are pleased that with Judge
Gerber’s ruling our members and other CashPoint agents can pass the
payments they have been holding directly to the utilities,” said Goldman.
“We are also hopeful that all creditors will cease termination
activities. No one who made payments on time should face an interruption
of services.”
FSCNY and NJCCA papers filed with the
Bankruptcy Court objected to the fact that the CashPoint Bankruptcy
Trustee’s order to turn over the funds did not have consumer protection
provisions that would guarantee immediate credit of the funds towards the
intended bills. FSCNY and NJCCA also argued that utilities and other
creditors should not be allowed to terminate customers who had paid their
bills on time using CashPoint. CashPoint contracted with FSCNY and NJCCA
members, as well as supermarket chains, convenience stores and a number of
municipalities in several states, to act as a third-party money
transmitter, accepting consumer payments and then electronically
transferring the funds to creditors.
FSCNY, formerly known as the Check
Cashers Association of New York, has been working closely with the New
York State Banking Department and other regulators and government
investigators since the CashPoint situation developed in late April.
Regulators in several states suspended CashPoint’s money transmitter
license once it was discovered that millions of dollars in consumer
payments were missing.
Speaking to FSCNY members at the
group’s annual Conference and Vendor Show held in Brooklyn on May 11th,
New York Banking Superintendent Diana Taylor commended FSCNY for its quick
action and cooperation during the CashPoint situation.
“You have my appreciation for the way
the check cashing industry has come together to reassure the public and
assist my department in dealing with the CashPoint situation,” Taylor
said.
FSCNY represents approximately 500
licensed financial service centers across New York. The group is the
leading voice for the financial service center industry with government
officials, provides training opportunities and regulatory compliance
support for member companies and their employees, contributes to the
quality of life in neighborhoods across the state in a variety of ways
including a college scholarship program, and acts as an informational
resource to help reduce check fraud and the potential for money laundering
across New York.
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