DON’T BANK ON IT : Check-cashing stores have filled the void left by the exodus of banks and savings and loans. Though they are expensive, the outlets are often more convenient.

Ada Bonds, a 67-year-old disabled retiree, pays a check-cashing store in South-Central about $13 every month to cash her $620 Social Security check. And Bonds pays $10 for every $100 worth of personal checks and money orders she cashes.

A bank would be less expensive--a checking account at the nearest bank 13 blocks away would cost at most $20 a year. But Bonds, who needs help from her niece to pay her $630 rent, said she uses the check-cashing store “because you have to have money in a bank to cash a check.” Even if Bonds could afford to keep money in an account, the closest bank is about twice as far away as the check-cashing store.

In the past decade, many banks and savings and loans have closed their doors in Central Los Angeles. Their exodus has created a void filled by check-cashing stores, which outnumber banks 7-to-1 in some areas.

Check-cashing stores do a thriving business by catering to the people in diverse Central Los Angeles, where the 1990 U.S. Census shows that 44% of the 1.4 million residents were foreign-born.

Many of the outlets offer a variety of services, including passport photos, income-taxpreparation and wiring money to Mexico and Central America. Check-cashing stores also offer their own photo IDs--for prices ranging from $5 to $16--which are helpful to immigrants who lack the Social Security card now required to obtain a driver’s license or state ID card.

The bread and butter for other outlets is welfare checks, which the stores cash in exchange for about 2% of the total amount. Some stores also serve as food-stamp distribution sites and sell bus passes and California Lottery tickets.

“You can take care everything in one shot,” said Joe Gonzalez, 40, an unemployed warehouse worker who uses a check-cashing store in Westlake to cash his $99 weekly unemployment check and buy lottery tickets and bus passes.

Citywide, the check-cashing industry’s revenues totaled between $50 million and $100 million in 1990, according to an estimate by Union Bank, which plans to begin a pilot check-cashing service this month in Hawthorne.

But consumer groups complain check-cashing stores reinvest little or nothing in the community. And many who use them are low-income people with no connection to the mainstream banking system, leaving them less likely to establish a credit record needed for personal and business loans, the groups say.

Critics say that even for people who can get to a bank, requirements to open accounts--such as the need for two forms of identification or as much as $400 to open a checking account--have put the banking system beyond the reach of many immigrants and the poor.

“What you have are two separate-but-unequal banking systems: one made up of check-cashing stores for poor people and minorities, and the other made up of banks serving middle- and upper-class workers,” said Gilda Haas, spokeswoman for the Communities for Accountable Reinvestment, a coalition of minority and consumer organizations.

However, Ray Parry, vice president of the 23-store Nix Check Cashing chain, said most check-cashing stores are responsible corporate citizens. Every year, he said, Nix participates in a holiday relief effort in which it matches donations of food and money from residents and other corporations. At Thanksgiving the chain and The Boys supermarkets donated $12,400 to help buy 400 turkeys and feed more than 2,000 people, Parry said.

He said many customers prefer check-cashing stores. “A lot of people just don’t like banks,” he said.

Some customers interviewed at check-cashing outlets throughout Central Los Angeles cite convenience as a reason they use the businesses.

Crenshaw resident Lourdes Blackwell said she has a checking account at Security Pacific National Bank, but patronizes a check-cashing store in the Baldwin Hills Crenshaw Plaza mall because “it’s less of a hassle.”

“There’s no lines here,” she said on a recent morning, as she left Continental Currency Services, where brightly colored signs advertise bus passes and lottery tickets.

The nearest bank to retiree Bonds, who does not drive and uses a cane to walk, is a Bank of America branch on Western Avenue, about 13 blocks from her home. A check-cashing store is about five blocks away.

“It’s easier for me,” she said.

The problem for Carlos Franco--and thousands of illegal immigrants like him--is different. Most banks require a driver’s license or a state ID card as primary forms of identification to open an account, but Franco cannot obtain either because he is here illegally. Under a state law that went into effect this month, a Social Security card is required to apply for a driver’s license or state ID.

So Franco spends about $9 each month at a check-cashing store to cash checks and purchase money orders to pay bills and to send money to relatives in Mexico. “Yes, it’s expensive, but that’s what I have to do,” he said.

At Currency of East Los Angeles, about 40% of the customers are “teen-age girls out of school with one or two kids” who cash welfare checks on the first and 15th of each month, said co-owner Isaac Kitover.

“If I didn’t have welfare people, I’d have to close this place down,” said Kitover, as he sat behind bullet-resistant plastic separating him from the lobby.

The store also draws customers because it has a hot line to the downtown Orlandi-Valuta Foreign Exchange, which wires money to Mexico for $12 for every $100 sent. Kitover keeps about 5% of the $12 as his profit.

Critics say check-cashing stores charge exorbitant rates. A City Times survey of 17 check-cashing stores in the area found that most charged fees of about 2% for payroll and government checks. Fees of 7% to 10% were charged for personal or out-of-state checks, which store operators say are riskier to cash. One place offered free money orders to customers, but most charged 25 to 75 cents.

The risks of cashing checks vary from store to store. But in general, the money lost on bad checks is less than 10% of the of the fees stores charge to cash checks, said Parry of the Nix chain.

A state law that went into effect this month caps fees for government and payroll checks at 3.5%.

But Parry and other store operators say the industry is undeserving of criticism caused by a few unscrupulous stores that charge as much as 20% of a check’s value to cash it. The stores are providing important services, they say--services the banks are failing to provide.

In a 40-square-mile area of South-Central, there were 133 check-cashing stores but just 19 bank and savings and loans branches, according to a 1991 City Council study. About 587,000 people live in the area, which is bounded by the Santa Monica Freeway on the north, Van Ness Avenue on the west, 120th Street on the south and Alameda Street on the east.

In contrast, nearby Gardena had 21 bank and savings and loan branches serving 49,800 residents, the study found.

With the deregulation of the banking industry in the early 1980s, banks were faced with stiffer competition and closed some unprofitable branches in Los Angeles.

Those closures hit Central Los Angeles especially hard, according to a study presented last year to the Federal Reserve System by the Communities for Accountable Reinvestment, which monitors banking practices.

Security Pacific National Bank, for example, closed 21 branches citywide between 1980 and 1989, 67% of which were in areas such as the Eastside and South-Central, the report said. B of A closed 30 branches citywide, 43% of them in the same areas. Information was not available regarding branch closures by other banks.

City Councilman Mark Ridley-Thomas, who represents parts of South-Central, said the “inadequate” level of banking services will be compounded in April by B of A’s merger with Security Pacific. Together, the two banks account for 12 of the 19 branches in South-Central.

B of A spokesman Russ Yarrow said officials have not decided how many branches would be closed when the merger is completed. But he added that any closures would likely be in areas such as Western and Vernon avenues, where the two banks have branches next to each other.

Banks make their profits on the difference between the interest they pay on savings and checking accounts and the interest they charge for loans. To a lesser extent, they also make money on fees for credit cards. In general, the fewer customers a branch has, the less profitable it will be.

Local activists cite the closures as evidence that banks are not living up to the federal Community Reinvestment Act, which requires banks to meet the credit needs of the neighborhoods in which they operate.

In Central Los Angeles, those neighborhoods are among the most diverse in the nation, with Spanish the main language spoken at home by 49% of the area’s residents and Asian languages spoken by an additional 9%, the census showed.

Yarrow said B of A has Spanish-language instructions in all its teller machines, advertises in the Spanish-language media and has produced a video on the basics of banking narrated by Luis Valdez, who directed the movie “La Bamba.” Of the approximately 400 B of A branches in Los Angeles County, 199 are bilingual or multilingual, with employees speaking Spanish, Korean, Chinese, Japanese and Hindi.

Sea Houston, Wells Fargo Bank executive vice president, said his bank publishes brochures in Spanish and also has bilingual employees.

But Haas and other critics say those efforts are not enough, and that banks are not complying with the federal law. But getting banks to change is difficult, Haas said, because the law does not specify what a bank must do other than “help meet the credit needs of the local communities.”

The lack of banks has contributed to redlining, in which the insurance industry, grocery chains and other businesses discriminate against poor areas, said Robert Gnaizda, general counsel of the Greenlining Coalition, an alliance of minority and consumer organizations.

“The biggest statement about a community is the local banking system,” he said. “That’s what other businesses look to in deciding whether they will locate in a particular area.”

Banking officials deny any discrimination.

Karen Wegmann, executive vice president of Wells Fargo, said such criticism is based on the faulty premise that bank branches are solely responsible for what happens in a community. In the case of Wells Fargo, she said, the bank is a “premier player” in financing the construction of affordable housing in Watts and has provided more than 2,000 small-business loans in Central Los Angeles.

“You can offer banking services,” Wegmann said, “but that, in and of itself, does not create the infrastructure needed for rebuilding (communities).”

Though check-cashing businesses have come under fire, even critics acknowledge that the services the outlets provide are needed by the community. And now some banks are following the lead of check-cashing stores in exploring new ways to serve the city.

Founders Bank, for example, is considering starting a check-cashing service to attract new customers. Once the customers are at the bank, managing director Carlton Jenkins said, they could open savings and checking accounts.

Richard Hartnack, vice chairman of Union Bank, said it will begin a pilot check-cashing service later this month, which will be expanded to branches in the central city if the program is successful.

Founders and Wells Fargo also require only one form of identification to open an account, and that ID does not have to be a driver’s license or state ID card.

Houston and Yarrow of B of A said some of their branch managers talk to churches and schools, offering advice on how to obtain credit and open accounts.

But critics of banks remain skeptical.

“All those things are nice, but they don’t make much of an impact,” said Clyde Johnson, whose South-Central credit union is scheduled to open this month. “It (also) doesn’t reduce the gut-level animosity that people here feel toward banks.”

Jenkins said banks in the area must start working together to provide better service to Central Los Angeles. “The banks that are here, including ourselves, need to make a much more concerted effort to make things happen,” he said. “We all need to let folks know there are alternatives.”

Still, check-cashing stores have become so entrenched in the community that banks would have a hard time competing even if they increased their presence and offered new services, check-cashing store operators say.

“It doesn’t seem practical for (banks) to compete with us because they’re in the business of making loans,” said Parry of the Nix chain. “(But) we’re like a convenience store. We offer services that people need.”

Requirements for Opening Accounts Here are the requirements and fees for opening savings and checking accounts. INSTITUTION: REQUIREMENTS: SAVINGS: CHECKING: INSTITUTION: American Savings REQUIREMENTS: Driver’s license and Social Security card * SAVINGS: $300 to open, $2 per month if balance below $300 CHECKING: $500 to open, $3.50 per month plus 50 cents per check INSTITUTION: Bank of America REQUIREMENTS: Driver’s license and second ID * SAVINGS: $100 to open, $5 per quarter if balance below $300 CHECKING: $100 to open, $3.50 monthly (10 checks per month) INSTITUTION: Broadway Federal Savings and Loan REQUIREMENTS: Driver’s license and Social Security card SAVINGS: $25 to open, $3 monthly if balance below $200 CHECKING: $100 to open, $7 monthly if balance below $500 INSTITUTION: California Federal Bank REQUIREMENTS: Driver’s license and Social Security card SAVINGS: $100 to open, ($5 for minors) $5 per quarter if balance below $300 except for minors or those 62 or older CHECKING: $100 to open (no service charge) INSTITUTION: Family Savings REQUIREMENTS: Driver’s license and Social Security for savings; license or credit card for checking (or submit to credit check) SAVINGS: $400 to open, $4 monthly fee if balance below $400 CHECKING: $100 to open, $6 monthly fee if balance below $1,000 INSTITUTION: First Interstate REQUIREMENTS: Driver’s license Social Security card, credit card and fourth ID SAVINGS: $100 to open, $5 per month if balance below $300 CHECKING: $200 to open, $4.50 monthly INSTITUTION: Founders National REQUIREMENTS: Driver’s license and second ID SAVINGS: $100 to open, $3 monthly fee if balance below $100 CHECKING: $25 to open, $2.50 monthly fee if balance below $100 INSTITUTION: Great Western REQUIREMENTS: Driver’s license and credit card or work ID SAVINGS: $100 to open, $1.50 monthly fee if balance below $250 CHECKING: $100 to open, $7 monthly fee if balance below $500 unless paychecks transferred by direct deposit INSTITUTION: Wells Fargo REQUIREMENTS: Driver’s license and second ID SAVINGS: $100 to open, $3 monthly fee if balance below $300 CHECKING: No minimum to open, $3.50 monthly fee * Some requirements can be negotiated with the branch manager Source: banks in Central Los Angeles -- Researched by Times staff writer Robert J. Lopez