Ingo, a new subsidiary of CHEXAR, has a new advance product which gives early access to funds deposited by check through remote deposit to a prepaid card.
While the better point of comparison is to a traditional check cashing service, the
advance may be conflated with a loan product. However, that is probably a mistake, given that through both a legal and structural framework it is not a loan, nor does it pose a safety and soundness risk to a bank.
It works like this: a consumer presents a check via remote deposit. Ingo/CHEXAR vets the check for a variety of fraud a risk filters. In minutes, they assign a level of risk to the check. In some instances, the check will be refused. In other cases, it will be accepted but with some conditions. Otherwise, it will be treated as standard and cashed for fee. The consumer must take an advance for the entire amount - there is no partial advance option.
The Rush Card (not Rush Card Live by Green Dot) has been offering the service in pilot since last fall. BankingUp/UPside VISA, AccountNow, and a few other cards are offering it as well.
The fee can be as low as one percent or as high as four percent, depending upon the risk profile of a check. Check risk is differentiated by check type - personal, government, employer - and by various indicators drawn from what INGO knows about the person presenting the check. But given that the one percent fee applies to government and payroll checks, most will be priced at one percent.
For some time, Rush has let its customers with an established direct deposit to receive access to their paycheck two days in advance. This is different than the Ingo service, most notably in that it is free.
Most people never pay as much as one percent to cash a check. Wal-Mart charges three dollars to cash checks worth up to $1000 and six dollars for those with a face value of between $1,000 and $5,000. ACE Cash Express will cash almost any kind of check, but the cost can be far more than four percent. It is easy to imagine, though, that anyone could pay more than one percent if they pay a flat fee of three dollars to a check casher and then buy a load for their prepaid card.
Ingo takes the risk on losses which result from bad checks that pass through its filters. Thus, it seems unlikely that it will attract safety and soundness concerns from regulators.