Purpose of the Project
Governments regularly transfer funds to individuals for a variety of benefit programs. When funds are transferred by cheque, some individuals access those funds through relatively costly cheque cashing services. Is this a matter for public concern, and if so, are there ways to transfer funds more fairly and effectively?
The Law Commission of Ontario (LCO) initiated a Project on fees for cashing government cheques in response to concerns regarding the impact of cheque cashing fees on low-income communities and on remote Northern communities without access to mainstream financial institutions such as banks or credit unions. Recipients of government benefits generally have very low incomes, and as a result, the fees for cashing their government benefit cheques can have a very significant impact on their finances. The Project was publicly launched in March 2008 with a widely distributed Consultation Paper.
The LCO received written responses from 15 organizations and individuals, and organized further meetings and interviews with 25 organizations. Consultees included a wide range of stakeholders, including financial service providers, academics, municipal and provincial governments, legal clinics, and community and advocacy organizations.
The issues surrounding fees for cashing government cheques are complex and multi-faceted. Low-income individuals are disproportionately likely to have no account with a bank or credit union and to pay the comparatively high fees required to cash a cheque through a cheque cashing service. There are a variety of barriers to accessing mainstream financial institutions; for example, low-income individuals may lack adequate identification to open an account.
The LCO has issued a Report summarizing the results of its independent research and public consultation on this topic, and making recommendations to government and other key actors for reforms to address this issue. The LCO has recommended a package of reforms that combines pragmatic and innovative short-term initiatives to address immediate needs, with recommendations for addressing the underlying causes of the problem over the longer-term. As well as legislative reforms, the LCO recommends complementary program and policy initiatives.