Posted by: Patricia Salkin | March 17, 2013

NY Court of Appeals Invalidates Local Law Prohibiting Check Cashing Establishments Avoiding Preemption Challenge

In January 2006, the Town of Hempstead passed an ordinance prohibiting check cashing establishments in any zone but those reserved for industrial and light manufacturing, and requiring that check cashing establishments currently operating in other zones relocate their operations within five years. The Town based its decision on a memorandum written four weeks prior to the ordinance’s passage by the deputy town attorney, outlining the various public policy reasons for imposing restrictive zoning controls on check cashing businesses, which were largely based on the perception of these establishments as exploitative and “seedy,” and the belief that banning them would encourage young and lower income people to use savings and checking accounts.

Check cashing businesses challenged the ordinance, seeking an injunction against enforcement of the law as well as a declaration the law was invalid. The New York Supreme Court granted summary judgment in the Town’s favor, dismissing the check cashing businesses’ complaint. The Appellate Division reversed, holding that the ordinance was preempted by state banking laws and regulations governing check-cashing businesses. The Town appealed.

The Court of Appeals invalidated the ordinance, holding that the law violated the general principle that “zoning is concerned with the use of land, not the identity of the user.” The court did not reach the question of preemption, because it held that this ordinance was not a proper exercise of the Town’s zoning powers.

Sunrise Check Cashing v. Town of Hempstead, 2013 WL 530640 (NY 2/14/13)

The opinion can be accessed at:

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