Hi, I’m thinking about starting a check cashing business in California
and was wondering if its legal to electronically cash third party
checks? Example: Company “X” pays an employee with a check, the
employee comes to our store and requests us to cash it, once he hands
us the check can we electronically deduct the money from company “X”?
If so, what hardware/software can we use?

Thanks

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Clarification of Question by device-ga on 24 Sep 2003 13:06 PDT

Hi, thank you for helping me out!  

I use Bank of America but don’t have a merchant account. I prefer
using B of A but don’t mind using a different bank if necessary.

<The type of check cashing business you describe can be legally
operated with a permit which can be obtained from the Department of
justice. http://www.paydayplus.com/Legislation_CA_California's_Law_Regulating_Payday_Advances.htm

New legislation affecting check cashers comes into force on 1st March
2004. http://www.leginfo.ca.gov/pub/01-02/bill/sen/sb_0851-0900/sb_898_bill_20020922_chaptered.pdf

Check cashers – California civil code.
http://www.cardreport.com/laws/california/1789-30-1789-37.html

Under Californian law lenders are required to be licensed. They need
to have a net worth of at least $25,000 and to have a surety bond of
$25,000. In addition the company’s principals must not have a criminal
record or a history of non-compliance with regulatory requirements.
http://www.corp.ca.gov/pub/lender.htm

California deferred deposit transaction law
http://www.corp.ca.gov/pub/cddtl.htm

A guide to running a business can be purchased for $240.00
http://www.paydayadvanceguide.com/bible.html

A similar guide is available for $290.45 at
http://www.paydayandpaycheckloans.com/payday-training-manual.html

I answered a previous question about the cash checking business which
will give you background information which will be useful for a
business plan. See
http://answers.google.com/answers/threadview?id=225792

Check cashing businesses often offer a number of services including
pay day loans.
How pay day loans work.
http://www.corp.ca.gov/pub/payday.htm

Equipment  
There are a number of companies offering check cashing equipment
packages.

Global Traders Direct offer a check cashing systems which uses a
fingerprint to verify the customer’s true identity.
http://www.globaltradersdirect.com/mall/Cash%20Registers%20&%20POS%20Point%20Of%20Sales%20Systems/Secure%20check%20Cashing%20Solution.asp
 
Secure cash checking systems.
http://www.securecheckcashing.com/

Bio pay check cashing system.
http://www.ibpos.com/services/checkcash/cc.php


<Search strategy:>

<"check cashing permit">
<://www.google.com/search?hl=en&lr=&ie=ISO-8859-1&q=%22check+cashing+permit%22>
<"check cashing system">
<://www.google.com/search?hl=en&lr=&ie=ISO-8859-1&q=%22check+cashing+system%22>


<"check cashing" California>

<://www.google.com/search?hl=en&lr=&ie=ISO-8859-1&q=%22check+cashing%22+california>


<Hope this helps.>

thanks for your help

I'm researching this now. I have 2 questions:
1. Do you have a merchant account with any banks right now?
2. If not, are you looking to do this through your current bank, or
would any bank work?

Thanks,

Jeff

Dear Device, 

As far as I know, YOU cannot electronically deduct funds directly 
from anyone's account. 

Checks go through central processing via Federal Reserve Bank's
ACH system. (Automated Clearing House)
http://www.ny.frb.org/pihome/fedpoint/fed31.html

And a warning, be VERY careful. When you accept third party checks, 
at least in California, if they are forged or stolen, you will either
not get paid by the bank, if it's caught - OR you will have to 
repay the company on whose account it was drawn. 

Oh, and one more fun fact. Expect frequent visits from IRS's fraud
units as they look for money laundering or patterns of unreported
income by your customers. 

There's a lot more to this check cashing thing than meets they eye. 
But, once you get going, you're right it is a really, really 
lucrative business. 

Your TaxMama-ga

I just read belindalevez-ga's answer. What an amazingly detailed bit
of research! Well done. This will be a terrific resource for anyone
smart enough to search Google Answers.

Best wishes

Your TaxMama-ga 

P.S. There are so many excellent answers in this database.