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Roman Check Cashing Inc. v. New Jersey Department of Banking and Insurance

324 N.J. Super. 581, 734 A.2d 346 (App. Div. 1999)

CHECK CASHING—The statute denying licenses to check cashing establishments that are located too close to existing establishments is constitutionally invalid.

A check cashing company challenged the constitutionality of a New Jersey statute which provided that no licensed check cashing office may be located within 2,500 feet of another such office. The application for a license met all conditions of the Act, but it was only located 1,004 feet from an existing licensed facility. The Department of Banking rejected the application for that reason. The Court, in determining whether the regulation violated the check cashing company’s substantive due process rights, was required to determine whether there was any rational relationship between the regulation and a legitimate State purpose. If there was, and if the regulation was not arbitrary, capricious or unreasonable, the regulation would be sustained. Economic regulations need only be rationally related to a legitimate State purpose to satisfy requirements of substantive due process. Further, the presumption of validity in favor of a statute is strong, and one challenging that validity has a heavy burden to bear. The State claimed that the policy of the Act was to prevent illegal money laundering through check cashing facilities and, to that end, the State has an interest in maintaining the economic soundness of check cashing facilities. To accomplish that end, it argued that the State had an interest in “preventing dangerous geographical saturation of the market,” to avoid having those market forces “drive business-persons to desperate choices, including money laundering.” The State believed that the distance requirement fostered healthy competition among check cashers and that the distance requirement was an “even handed approach” with the virtues of “ease of administration and equal treatment.” The Court did not disagree with the principles cited by the State or the strong presumption that the State urged for the validity of any economic regulation. However, it found difficulty with the State’s inability to point to any rational relationship between the legitimate ends it sought to accomplish and the apparently arbitrary selection of a 2,500 foot distance limitation, applicable alike to the most sparsely populated rural area and the most densely populated urban area. In addition, it was not clear to the Court how the distance requirement related in any way to the economic health or stability of a check cashing business. Consequently, the Court was convinced that there was no rational basis for the regulation and that the regulation was arbitrary, capricious and unreasonable. Therefore, the regulation could not stand.


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