How Safe is Your Safe (Part 2)



Just how safe is your safe? In the Spring 2012 issue of Cheklist, we took a look at state-of-the-art safes vs. outdated ones, placement of safes, the negative sides of modern technology, and how burglars may gain access to your safe. We also examined safecracking, and detailed non-destructive methods of breaking open a safe.
In this issue, we pick up with the more destructive ways criminals may attack your safe.

Destructive Safecracking Methods

For years, drilling was the most popular method of destructive safe attack. In drilling, a single hole or multiple holes are drilled into the safe’s locking mechanism or face in order to destroy the locking bolt or lock cylinder which would then allow the handle to be turned retracting the bolts.
The first safes were made from metal. The first safecrackers simply drilled them using a drill bit made of a harder metal.
Safe makers then started using really hard metal — a “hardplate.” Eventually, manufacturers settled on cobalt plating, particularly right around the dial and the mechanisms that stop the lock bolt from moving. So the safecrackers started using diamond-tipped drill bits that will eventually drill through cobalt, although the drill motor may burn out first.
In response, the safe makers started using tricks like this: They make a hardplate of a cobalt-vanadium alloy and sprinkle it with tungsten carbide chips, which can shatter the diamond-tipped drill bits.
It was a cat-and-mouse scenario.
Long gone are the old shoulder-brace drills. They’ve have been replaced by portable magnetic drills. You can be sure that the burglar will come with special tungsten-carbide, titanium or diamond drill bits to get through hardened steel or composite materials.
Nowadays safecrackers use only three types of drill bits:
1. High speed drill bits for just drilling metal
2. Carbide drill bits for drilling harden steel
3. Diamond core bits for drilling carbide chips embedded hardplate
So the safe makers started adding other layers of material besides the cobalt, like spongy stuff or angled soft-steel plates in concrete to tangle drill bits instead of stopping them cold.
They also came up with the concept of “relockers.” Typically, if you trigger the relocker, a new set of bolts spring into place.
The trigger mechanism in some cases is a glass panel which holds a relocking mechanism in place. If the hole is drilled in the wrong area, the glass panel will break, triggering the relockers. If the drill or any other impact tool strikes and breaks this glass panel, the burglar will never get the door open.
Relocking devices were first fitted to safes in the 1950s to prevent safe doors from being opened through the use of explosives. Originally, steel cables were routed around the inside of a safe’s door and connected to a lever that would release a second set of bolts that block the retraction of the main locking bolts in case of a forced breach. The cable was held in place by a piece of hardened glass. Any explosion would shatter the glass, causing the additional boltwork to be activated.
Changes in design led to using a larger plate of glass that covers the entire inside of the safe’s door, which can still be broken by explosives, but also by drilling or impact.
Now keep in mind, a true safecracker will know something about the safe that he is planning on attacking. He will know of the burglary countermeasures the manufacturer has put in place; about the relockers, reinforced areas around the lock itself and where the points of least resistance are located.
Manufactures publish drill-point diagrams for their safes and although highly protective of this information, it is available to locksmiths and has been known to be leaked. This could allow the safecracker to drill from a steep angle above the lock and then drill into it.
The objective here is to not destroy the wheel pack, but to be able to look inside it. Once the safecracker can see inside the wheel pack, he can watch the wheels spin as he turns the dial to line them up to open the door.
This is also where a borescope or other electronic viewing devices, like fiber optics, come into play. Fiber optics brought a tremendous advancement in the ability to manipulate combination locks from outside the safe.
Today, for example, a digital inspection camera is available at Harbor Freight for $80. It has a 38-in. long flexible shaft, a 2.4-in. color LCD display and two white LED lamps for low light viewing.
Again, to combat frontal drilling, the safe manufacturing industry now incorporates hardplate steel or composite hardplate steel (a casting of metal such as cobalt-vanadium with embedded tungsten-carbide chips designed to shatter the cutting tip of drill bits) in high security safes.
If relockers and hardplate are installed in the door of the safe, another drilling option would be the side of the safe. Side drilling is a method used to reach the bolt itself. Again, the safecracker would use a borescope or similar tool to view the bolt inside the lock and then use a long punch to push it out of the way or destroy it.
Safes may also be drilled from the rear. This method is often easier than an attack from the front, especially if the safe is not an X6 model (an X6 designation indicates all six walls
of the safe provide the same level of protection).

Impact is a method of attack where a safe may be dropped from sufficient height to cause enough damage to the exterior that the door may be pried open.
Other forms of impact would be to knock off the combination lock dial and then drive the spindle and wheel pack into the safe with a large punch. A default relocking mechanism on a modern safe may defeat this method.

In peeling, an axe and/or a hammer and chisel are used to breach the external layer of material of a safe and a large crowbar type tool is used to peel away the protective outer covering.
This was a very common method of breaching older safes with an outer layer of protective material.
Although this may be a time- and labor-intensive endeavor, remember, even a TRTL-60X6 safe is only rated for a 60-minute attack.

Prying is very similar to peeling. The same tools are used, but instead of peeling off the protective outer covering, this method involves tearing open the safe or prying off the door or sides.
This method is also very time- and labor-intensive, but may have better results than peeling.

Cutting is by far the most popular method for successful safe attacks by professional burglars. Cutting may include grinding, sawing or use of a cutting torch.
a. Cutting with hand tools
A common handheld electric saw or electric high-speed angle grinder fitted with a modern cutting blade or disc will inch its way through the hardest materials, including concrete.
These tools are readily available, easily transported and not too expensive. If you deal in tools at your pawnshop, you frequently see saws and grinders fitted with fiber or diamond cutting blades or discs that are being used to cut both concrete and metal. In my mind, these would be the ideal tool for a safe attack.
Also, using a disc cutter, unlike a torch, doesn’t require much skill.
Since we’re talking about cutting, rather than chopping with an axe, the burglars may just cut through the roof with a battery-operated saw. Roofs and roofing material are not as hard as a composite safe body.
Cut, not burn — one of the last things a burglar may want to do is set fire to the cash or melt the gold in a safe. Locked doors and a secure-looking building may cause the police to turn away. The fire department has its own attitude and usually the persuasiveness to show a door who’s boss.
b. Cutting with torches
All metals and composites burn at certain temperatures. Cutting with a torch of some kind is a very efficient method to access the contents of a safe.
Torch attacks, like many other cutting method attacks, are often performed on the side or back of the safe. This avoids the relocking mechanisms in the door. However, it is not uncommon to have a combination lock wheel pack cut out of a safe door.
Oxy-acetylene torches have been the torch of choice in the past. They can operate at temperatures up to 4,500°F, and are still the most used torch for gaining access to a safe.
But today a portable plasma cutter is often taking its place. While some models will work on 120 volts, there are also portable devices that will convert common 120 volts found in all businesses to 240 volts for use with heavier, more powerful, but still portable plasma torches.
Both these torches are capable of creating enough heat to burn through a large safe or vault. The downside is the amount of smoke and heat generated.
To combat torching, safe manufacturers often include a layer of high-strength concrete in between the inner and outer layers of the safe shell. So the reactive safecrackers had to move on to the next level as well: the thermic lance.
A thermic lance is typically a hollow fuel rod with a high-pressure oxygen source in the center used to burn through anything that gets in its way. However, they are very messy, loud, emit a lot of light and often burn up everything in a safe. There is also the possibility of burning down the entire building.
A thermic lance, thermal lance, oxygen lance or burning bar is a tool that burns iron in the presence of pressurized oxygen to create very high temperatures for cutting. It consists of a long iron tube packed with iron rods, sometimes mixed with aluminum or magnesium rods to increase the heat output. One end of the tube is placed in a holder and oxygen is fed through the tube.
The far end of the tube is pre-heated and lit by an oxy-acetylene torch. An intense stream of burning iron is produced at the lit end and can be used to cut rapidly through thick materials including steel and concrete.
The tube is consumed, so every few minutes the operator shuts off the oxygen, discards the remaining stub of a lance tube and starts using a new one.
Besides its ability to cut through just about any man-made or metal material, the thermic lance will also burn through, or melt, concrete.
And while a thermic lance requires a large amount of oxygen to operate, I remember reading a little while back where one was used to cut into a bank vault from an exterior wall in a parking garage over a weekend.
The thieves merely draped off the area of attack to look like a construction job was being performed in the garage itself (not too uncommon over a weekend) and then proceeded to cut into the vault.
The use of torches does, however, requires a skill level that can’t be learned on the job. Still, there are lots of employed and unemployed construction and demolition workers, trained military personnel, factory workers and a host of others who possess the necessary skills already.
One possible exception to the old TL-30 standard may be the Roland Pawn Safe. This system affords an additional level of protection against armed robbery through its built-in electronic time-delayed drawer system, which is enclosed in an additional steel shell inside the safe.
Even if breached by a cutting disc or a torch, access to its contents is limited to only a small area of the safe, resulting in minimal loss. This goes back to the “safe within a safe” concept.

Explosives are still an option for gaining access to a safe, but are rarely used today. Although this method may be very successful, it is not very discreet. Even if used to destroy a lock, bolt or hinge, the results would also likely activate any relocking mechanism. There is also the likelihood of alerting someone (by way of the explosion) and personal injury.
The burglar must also possess the knowledge that the safe’s contents will survive the forthcoming explosion.
The method of choice to blow a door off a safe is a “jam shot,” which gets its name from a highly explosive mixture of nitroglycerin [C3H5(NON2)3] (glycerin, nitric and sulfuric acids) that takes the form of a jelly-like substance. I’m not going into all the details of how to prepare and execute a jam shot, but it is not that difficult.
For a true professional with more connections in the explosives world, C-4, PETN or RDX may be the choice explosive. The advantage of these compounds is that they are more stable than nitroglycerin and come in a moldable, clay-like form that is ready to use.

The general rule for vault breaching is to never use the door. Always attempt to breach the walls, floor or ceiling. Security precautions are taken with walls, floors and ceilings, but not usually to the extent as with the vault door. Vault doors look big and mean. It is a psychological defense mechanism and works. People feel they are impenetrable.

Transparency? No Problem!


By now, most of you are familiar with the Consumer Financial Protection Bureau. Created with the passage of Dodd-Frank in July 2010, the CFPB is charged with representing the interests of American consumers in connection with financial-related products and services. Its director is Richard Cordray.
I recently attended a Town Hall Meeting called by the CFPB to obtain comments from the public regarding checking accounts.
Where and When
The meeting was held at Hunter College — located at 68th Street and Park Avenue in New York City — at 5:30 p.m. on a Wednesday. Having been raised in New York, my initial reaction was, “Where and when?”
For non-New Yorkers, the area surrounding 68th and Park happens to be one of the most expensive neighborhoods in America. According to Bloomberg News, the median apartment runs north of $2.8 million. If you drove to the meeting, you could spend $45 just to park your car.
It seemed pretty unlikely that an ordinary, individual consumer from Brooklyn — after getting off work at 5 — would make the effort to get there. So you can appreciate my difficulty in seeing this location and the timing of the meeting as geared to drawing attendance by individual consumers desiring to relate their checking account experiences.
On the other side of the coin, I applaud the CFPB’s director for personally getting on the road to meet with consumers. I am also keenly aware that a large percentage of young adults incur overdraft fees, so some student comments on checking accounts would be relevant.
I also recognize the desire to have members of the media attend, as well as consumer groups, for whom a Manhattan location would be convenient.

Who — the Audience

I arrived early, took a seat, and observed. The largest group in the audience was students at Hunter College, followed by representatives of various community service and other organizations, law students, labor representatives and some individual consumers. I also spotted a few bankers. Press attendance was relatively modest.
The Town Hall opened with an introductory program including the president of Hunter College, as well as Rep. Carolyn Maloney, New York State Attorney General Eric T. Schneiderman, and CFPB Director Richard Cordray. After those brief remarks, Cordray and CFPB Assistant Director for Community Affairs Zixta Martinez took their places on stage and the floor was opened for comments.

How — A Well-run Meeting

Cordray and Martinez handled the public session extremely well. They are very smart people: professional, charming, confident and excellent communicators.
In responding to comments, the director exhibited the ability to think on his feet – a rare commodity these days.

What — Audience Comments

The comments from the floor were generally very passionate. Many were delivered by representatives of organizations, rather than individual consumers. Some of those representatives also included an aspect of personal experience in their comments, most commonly relating to overdraft protection, multiple overdraft charges and transaction ordering by banks.
Other comments touched on student loans, bank debit cards, mandatory placement of earnings on cards, prepaid debit cards and payday loans. This was somewhat curious because they are not allowed in New York — although, since payday loans are routinely obtained by New Yorkers over the Internet in an unregulated environment, the comments could reflect on-line experiences. Speakers also addressed the cost of maintaining a checking account, credit checks in connection with retail employment applications, Wal-Mart, and made a couple of comments — not necessarily negative — about check cashing.
Cordray’s answers were measured, responsive, and demonstrated a keen understanding of the CFPB’s mission. It appeared to me that the director is focused on transparency of disclosure. I did not get the feeling that promoting Machiavellian legislation was on the near-term agenda.

Interest Rates vs. APRs, Rollovers

During the course of the meeting, I was concerned about a few references to payday lending “interest rates” (including the use of the term “usury”) and “rollovers.”
Putting aside the numerous state law issues involved, most people discussing payday lending interchangeably refer to APRs as “interest rates” — even though they are materially different terms.
APRs include fees as well as interest rates in the calculation. In addition, it is also generally understood that APRs were intended for comparing longer-term loans (in order to consider the effect of up-front fees over the term of the loan) and as a tool for evaluating loans of comparable duration.
For example, a payday loan of $100, with 0 percent interest (yes, zero percent), a two-week term and the only charge being a fee of $10, would have a calculated APR of more than 260 percent.
Given the combination of short term, amount, risk, and the costs incurred in documenting, issuing and processing the loan (including labor, rent, cost of money, insurance, and all other expenses of running a business), it is simply not appropriate to paint this APR with a broad “interest rate” brush or casually use the term “usury.”
Usury is defined by state law on a state-by-state basis — often including exemptions for particular types of loans. Similarly, in many states, payday loan rollovers (as well as multiple loans) are controlled by state law and loan databases.
It may surprise some readers to learn that while payday loan APRs are fully disclosed, bank overdraft fees have no APR disclosures. That is because it was somehow decided that overdraft protection is not a loan.
What would the effective APR be on a $34 overdraft charge for a $2 cup of coffee — for a five-day term? (Hint: 124,000 percent — yes, one-hundred-twenty-four thousand percent.) How about $34 on that $1 refill for the same 5 days? (Hint: Double it).

Unbiased Transparency

Understandable disclosures are good things, provided that they are intended and written so as to help consumers make informed decisions, not to make decisions for them.
No matter what subject you pick, there are always extreme cases that can make headlines. We issue ten million life-saving prescriptions with “package insert” disclosures stapled to every prescription bag, but the headline we read is about a handful who misused the drug.
Similarly, in virtually every industry, the actions of a few bad apples overshadow the good practices of the overwhelming majority. Disclosures should inform, without bias, thereby allowing the consumer to independently decide.
Successful neighborhood financial service providers have always earned their customers’ business through clearly stated charges and extraordinarily efficient delivery of courteous service, often on an extended hours or 24/7 basis.
In my experience, their customers are extremely aware of all charges and closely examine their receipts and documents.
In one check casher’s comments during the Town Hall meeting, he summed up succinctly that as the operator of a group of check cashing stores in New York, he provides the combination of transparency, level of service, range of services, reasonableness of charges and environment that consumers want.
To that point, one of the commenting community service organization representatives acknowledged that check cashers are less expensive than banks for many consumers.

Educated Free Market Makes Choices

Over the past couple of years, prepaid debit cards went mainstream. Just like smart phones, TVs and cars, different brands have different features and costs.
Much depends on how the individual consumer puts the card to use. While some were calling for more regulation, consumers became more aware and better educated about prepaid cards, what they cost and how they work, and the free market has defined their terms, acceptance and success.
Sure, there are charges – as they say, “there ain’t no such thing as a free lunch” — but now, numerous reports have found more and more consumers opting for prepaid debit cards in lieu of checking accounts, primarily based upon ease of use, certainty of cost, and lack of surprises.
Over time, a more informed consumer has contributed to the industry’s product evolution and mainstream acceptance.
Having visited more than a thousand neighborhood financial service businesses, and having spoken with customers, employees and owners, I am confident that transparency of charges and terms is the industry norm and the level of customer awareness is very high.
Can you imagine a bank posting its charges in its lobby? How about a bank providing each customer with a detailed transaction-by-transaction receipt? Or a bank giving a customer the opportunity to choose from a range of alternative products for the same service?
In neighborhood financial services, that is a part of everyday business.
While many remain concerned, I am optimistic about the CFPB. I am not a fan of business-hampering legislation, or imposing regulation over many for the acts of a few. I am, however, in favor of consumers receiving clear and unbiased disclosures leading to informed, independent choice.
If the CFPB accomplishes that result across the entire financial sector, it is good for everyone — and the free market will dictate the outcome.

Richard Kelsky is president of TellerMetrix, Inc. a provider of POS transaction, compliance, interface, electronic deposit and marketing software to check cashers, payday lenders and retail banks. He is also a New York and Connecticut Bar member, a Polytechnic Institute of NYU and New York Law School grad, a Certified Anti-Money Laundering Specialist and a frequent lecturer on business, legal, compliance, and technology issues. He can be reached at:

Check Cashers Triumph in Long Zoning Battle



Although local governments have always enjoyed wide control over zoning matters, that power is not without its limits. Recently, after a town in New York made major changes to its zoning ordinance governing where check cashing businesses could operate, the check cashers sought to have the changes overturned.
On Jan. 10, 2006, the Town of Hempstead adopted Section 302(K) of the town’s Building Zone Ordinance. Section 302(K) prohibited check cashing businesses within the town in any districts other than industrial and light manufacturing.
Under an amortization provision in 302(K), check cashing businesses already operating in districts where such businesses would be prohibited were required to terminate or relocate to industrial or light manufacturing districts within five years.

Suit Filed

A number of check cashers filed suit seeking a judgment declaring, among other things, that Section 302(K) was void and of no effect, that Section 302(K) was preempted by state law, that it was not a valid exercise of the town’s zoning power, and that it was unconstitutional.
The check cashers asked for a summary judgment on the complaint. The town, likewise in a cross motion, sought a summary judgment, in effect, to declare that Section 302(K) was valid.
The section provided that:
“ (1) Prohibition. In any use district except Y Industrial and LM Light Manufacturing Districts, check cashing establishments are hereby expressly prohibited.”
“(2) Definition. A check cashing establishment is defined as a place where checks are cashed and/or payday or other short term type loans are offered, but where general banking services, including but not limited to the establishment of savings and checking accounts, provision for deposits and withdrawals therefrom, and payment of accrued interest, are not offered on a regular basis.”
“(3) Amortization. Any check cashing establishment that is in violation of this subsection but is lawfully in existence in any unincorporated portion of the Town of Hempstead upon the effective date of this subsection shall become a legal nonconforming use and shall terminate by amortization no later than five years immediately following the effective date of this subsection.”

Check Cashers’ Arguments

First, the check cashers operating in the town’s business district claimed that Section 302(K) conflicted with New York State law.
Second, they asserted that the five-year amortization period constituted an unlawful taking of their property without due process of law.
Third, they claimed that Section 302(K) was not reasonably related to promoting the public health, safety, morals, or general welfare of the town. They further argued that its enactment was not a valid exercise of the town’s zoning power because, rather than dealing with the zoning of property, it impermissibly addressed the operation of the check cashers’ businesses. They complained that check cashing was not a use that can be regulated by zoning.
Fourth, the check cashers said that the section deprived them of their rights in property without due process of law.
And finally, they sought to permanently enjoin the town from enforcing Section 302(K) against them. In connection with the first four causes of action, the check cashers sought a judgment declaring the section null and void.
The check cashers argued that check cashing businesses in New York State were completely regulated by the New York State Banking Department and the Superintendent of Banks. They said that the Banking Law preempted Section 302(K) because it set forth a detailed and comprehensive regulatory scheme that demonstrated the state’s intent to reserve the field of banking for state oversight and control.
The check cashers contended that, because the field was preempted by the state, the town was precluded from enacting legislation in the same area.
In addition, they claimed that the section conflicted with provisions of the Banking Law. Accordingly, the check cashers argued that Section 302(K) was preempted based on both conflict and field preemption.

Large Zoning Out

The check cashers also contended that Section 302(K) was an invalid exercise of the town’s zoning power.
They claimed that the section was enacted with an exclusionary and discriminatory purpose, and that the town sought to “zone out” the check cashing establishment from certain districts simply because it deems such establishments undesirable for reasons completely unrelated to land use. The check cashers argued that this was not a permissible and valid use of the town’s zoning power.
Next, the check cashers said that the section was arbitrary and capricious because it was not enacted to further a legitimate government purpose and was not reasonably related to the end the town sought to achieve.
They argued that the town ignored the fact that their check cashing businesses were lawful, licensed and state regulated. The check cashers claimed that the town’s alleged comparison of check cashing establishments to “seedy” operations “akin to pawnshops and strip clubs” was irresponsible and demonstrated that it acted in an arbitrary and capricious manner because it perceived check cashing establishments as undesirable, clearly demonstrating a bias toward such establishments and the communities they serve. The check cashers asserted that Section 302(K) was “completely unrelated to the ‘evils’ imagined by the town.”
The check cashers then claimed that Section 302(K) was unconstitutional and that its passage violated their due process rights because they were not afforded sufficient notice or an opportunity to be heard. Although the check cashers acknowledged that a public hearing was held prior to the enactment, they argued that they did not receive adequate notice of the specific risk they faced in having their businesses terminated.
Finally, the check cashers claimed that Section 302(K) violated the Equal Protection Clause of the United States Constitution because it had a discriminatory and disparate impact. They said that the section effected an unconstitutional taking of their property because they would be forced to relocate or close their operations within the five year amortization period.

Submit Memo

In support of their motion for a summary judgment, the check cashers submitted an unsigned and unaffirmed “Inter Departmental Memo” dated Dec. 13, 2005. The subject of the memo was “Public Policy behind Check Cashing Ordinance,” and it stated that Section 302(K) represented “sound public policy.”
According to the memo, “Essentially, it serves the interest 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. It also eliminates predatory and exploitative finance enterprises from commercial areas, which is beneficial because these enterprises tend to keep a neighborhood down.”
The memo went on to state that, “Studies have found that a substantial portion of young and lower income people don’t have a bank account. Check cashing and payday loan establishments help to perpetuate this condition, by making it convenient for them to remain in the cash only economy. This is bad for society as a whole because it discourages savings and the development of credit ratings that will help young and lower income people later in life.”
The memo also observed that, “orthodox studies have found that check cashing establishments actually exploit the poor and African Americans” and that the high fees charged by check cashing establishments constituted a form of racial discrimination.
It indicated that check cashing businesses tend to cater disproportionately to minorities and pop up predominately in minority neighborhoods, keeping its patrons in the cash economy, to their detriment.
It also noted that the proposed ordinance would seek to end this pernicious exploitation and encourage banks and other financial institutions to become more conveniently located for everyone, including the poor and minorities.
Finally, the memo concluded that enactment of Section 302(K) would remove “a seedy type of operation, akin to pawnshops and strip clubs, from the commercial areas of the town.”

Town Response

The town largely denied the allegations in the check cashers complaint and asserted seven affirmative defenses, including that the check cashers’ claims were barred by the Municipal Home Rule Law. The town filed a cross motion for a summary judgment that would, in effect, declare that Section 302(K) was valid.
The town claimed that in the absence of substantial evidence to the contrary, the court was required to assume, as a matter of law, that the town acted rationally in enacting the section.
It asserted that the check cashers had no vested constitutionally protected property interest in the prior zoning classification of their properties, and accordingly, there could be no actionable claim of a taking. Moreover, the town claimed that the check cashers had not been denied due process.
Among the documents it submitted was a notice of a public hearing, dated Nov. 29, 2005, which stated that a hearing would be held on Dec. 13, 2005, to consider the proposed Section 302(K), “Restrictions on Check Cashing Establishments” and an affirmation of publication.
The town also submitted a summary of the law arguing, among other things, that the superintendent of Banks of the State of New York, as a defendant in the case of American Broadcasting Cos. v Siebert, provided a rational basis for the town’s concern that check cashing businesses represented a potential threat to public welfare.
In that case, the then superintendent conceded that, “the risk of robberies inherently exists in the check cashing business.”

Court’s Order

The court issued an order April 16, 2010, that denied the check cashers’ motion for a summary judgment and granted the town’s cross-motion, basically declaring that Section 302(K) was valid in all respects.
The court, in effect, ruled that the relevant body of state law did not demonstrate that the legislature intended to occupy the field of regulating check cashing establishments.
The court concluded that the check cashers failed to demonstrate that the doctrines of field preemption or conflict preemption prevented the town from enacting Section 302(K) and that they failed to rebut the presumption of validity. Finally, the court ruled that the check cashers failed to demonstrate that the section had violated the Equal Protection Clause of the United States Constitution.
The check cashers then appealed to the Supreme Court of the State of New York, Appellate Division. The Appellate Court noted that New York’s constitutional home rule provision “confers broad police powers upon local governments relating to the welfare of its citizens.”
Yet, noted the Appellate Court, although local governments do possess broad authority to enact legislation that promotes the welfare of their citizens, they cannot adopt laws that are inconsistent with the Constitution or with any general law of the state, and their power to enact laws is subject to the fundamental limitation of the preemption doctrine
Conflict Preemption
Broadly speaking, said the court, state preemption occurs in one of two ways: First, when a local government adopts a law that directly conflicts with a state statute; and second, when a local government legislates in a field for which the state legislature has assumed full regulatory responsibility.
The Appellate Court noted that conflict preemption occurs when a local law prohibits what a state law explicitly allows, or when a state law prohibits what a local law explicitly allows.
In determining the applicability of conflict preemption, the court said it examines not only the language of the local ordinance and the state statute but also whether the direct consequences of a local ordinance renders illegal what is specifically allowed by state law.
The crux of conflict preemption is whether there is a head on collision between the ordinance, as it is applied, and a state statute.

Field Preemption

Under the doctrine of field preemption, noted the Appellate Court, a local law regulating the same subject matter as a state law is deemed inconsistent with the state’s superior interest, whether or not the terms of the local law actually conflict with a state wide statute.
Such local laws, were they permitted to operate in a field preempted by state law, said the court, would tend to inhibit the operation of the state’s general law and thereby thwart the operation of the state’s overriding policy concerns.
Field preemption applies under any of three different scenarios, noted the court. First, an express statement in the state statute explicitly asserting that it preempts all local laws on the same subject matter. Second, a declaration of state policy demonstrates the intent of the legislature to preempt local laws on the same subject matter. And third, the legislature’s enactment of a comprehensive and detailed regulatory scheme in an area in controversy is deemed to demonstrate an intent to preempt local laws.

Banking Law Article 9 A

To determine whether Section 302(K) was preempted by state law, the Appellate Court said it needed to examine certain provisions of the Banking Law, specifically Banking Law Article 9 A, and related materials.
Article 9 A pertains to “Licensed Cashers of Checks.” A note accompanying Article 9 A, setting forth the legislative findings, states, in part, that “the legislature hereby finds and declares that the purpose and objective of article 9 A of the banking law, and specifically section 367, is to provide for the regulation of the business of cashing checks by the Superintendent of Banks whether the cashing of checks, drafts and money orders … is performed for customers that are natural persons or any business, corporation, partnership, limited liability company or partnership, association or sole proprietorship, or any other entity”
Section 367 pertains to license requirements for cashers of checks. Under that section, “No person, partnership, association or corporation shall engage in the business of cashing checks, drafts or money orders for a consideration without first obtaining a license from the superintendent.” To obtain a license, a person or entity must apply, in writing, under oath, “in the form prescribed by the superintendent.” The applicant must also pay to the superintendent a fee “for investigating the application.”
Section 369 of the banking law addresses conditions precedent to the issuance of a license, the issuance, and filing, and posting of a license. It provides, in part, that:
In setting forth the legislative intent in connection with the 1994 amendment of Section 369(1) of the banking law, which added a substantial portion of the foregoing language, the legislature stated:
“The legislature hereby finds and declares that check cashers provide important and vital services to New York citizens; that the business of check cashers shall be supervised and regulated through the banking department in such a manner as to maintain consumer confidence in such business and protect the public interest; that the licensing of check cashers shall be determined in accordance with the needs of the communities they are to serve; and that it is in the public interest to promote the stability of the check cashing business for the purpose of meeting the needs of the communities that are served by check cashers.”