Financial Service Command Center: Legal Trends and Analysis for Financial Service Providers (Vol. I, No. 2) New York's High Court Voids Anti-Check Casher Ordinance

Briefings on significant legislative, regulatory and judicial developments affecting the financial service industry.




(April 11, 2013) 

The New York Court of Appeals in February struck down a Long Island town zoning ordinance that restricted the operation of check cashing businesses. This is a meaningful victory for money service businesses (“MSB’s”). More broadly, the decision provides a roadmap for future challenges by MSB’s to economically harmful land use legislation.

The Facts

The Town of Hempstead is a densely populated town of 760,000 in western Nassau County, New York. In 2006, the town adopted an ordinance that prohibited the operation of check cashing businesses everywhere except for areas zoned for industrial and manufacturing operations. The town’s rationale for adopting the ordinance appeared in a memorandum prepared by a deputy town attorney for use at the hearing at which the ordinance was adopted. The memorandum, which cited no sources, statistical data or other evidence, declared that the ordinance:


  • “serves the interests of encouraging young people and those of lower incomes to establish savings and checking accounts, do their banking at sound and reputable banking institutions and develop credit ratings”;
  •  “eliminates predatory and exploitative finance enterprises from commercial areas, which is beneficial because these enterprises tend to keep a neighborhood down”;
  •  “removes a seedy type of operation, akin to pawnshops and strip clubs”; and
    is beneficial because “check cashing establishments actually exploit the poor and African Americans”. 

A number of licensed check cashers challenged the ordinance. They lost in the trial court and won in the Appellate Division. The Town appealed to the Court of Appeals.

The Law and the Decision

The check cashers argued that because they are licensed by the state and subject to extensive regulation, supervision and examination by the New York Department of Financial Services, the ordinance is trumped by state law and should be voided under the preemption doctrine (which also nullifies state laws that conflict with federal laws, under the federal Constitution’s Supremacy Clause).

The Court of Appeals declined to decide the case on preemption grounds, choosing instead to rely on established zoning law principles. The Court noted that “Our cases make clear that the zoning power is not a general police power, but a power to regulate land use: ‘[I]t is a fundamental principle of zoning that a zoning board is charged with the regulation of land use and not with the person who owns or occupies it.’”
The challenged ordinance violated this principle, since it was “obviously concerned not with the use of the land, but by the business done by those who occupy it”. The Court observed that there are cases in which the nature of the business is relevant to zoning because of the businesses “negative secondary effects”. Here however, despite the memorandum’s reference to pawnshops and strip clubs, the Town made no effort to demonstrate that check cashers occupy the same unseemly category. The Court was equally unimpressed with the Town’s belated argument that the ordinance protected the public health and safety, remarking that the record contained no evidence that the Town Board was “worrying about armed robbery”. Accordingly, the Court enjoined enforcement of the ordinance.


The result here is not surprising: the Town’s justification for its enactment of the ordinance was based on unsupported surmise and conclusions, instead of evidence. As the Court noted, local legislative bodies can use the negative social consequences of a particular business as a basis for a restrictive zoning law. Adult entertainment emporia are the classic example. But a detailed evidentiary record must be there to support the law, otherwise it will not survive a challenge.

Given the politicized world that MSB’s inhabit, we can plausibly envision that local governments will try again to restrict their operations through the zoning power. If they heed the Court’s guidance, they will buttress those efforts with defensible evidence. MSB’s, on the other hand, should also be instructed by this case so that the next time they face such a law, they marshal evidence demonstrating the positive good they do for people who won’t, or more often can’t, maintain traditional bank accounts. Documentation of the service MSB’s provide to the unbanked is readily available from numerous government and private sources.


Article written by Clifford S. Weber, Esq., a partner at the HH&K White Plains office. For more information contact Mr. Weber at (914) 694-4102 or

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