- The Washington Times - Wednesday, December 22, 1999

A recent brouhaha over a local toy store's refusal to accept checks in certain neighborhoods again illustrates how far we have traveled from the edicts of common sense.

KB Toys is the object of a lawsuit filed by the District-based Equal Rights Center, alleging discrimination and racial bias for its policy of not accepting personal checks at some of its 19 stores. The complaint, filed in U.S. District Court in Greenbelt, asks the court to stop the store's discrimination that is, force it to accept personal checks and to force it to hand over unspecified damages. The case could get expensive if the plaintiffs' lawyers have anything to say about it. "Obviously, a lot of people have been affected by this practice, clearly thousands," John P. Relman, a D.C. attorney for the Equal Rights Center, told The Washington Post.

Consolidated Stores, the company that owns KB, says the policy has nothing to do with race or any attempt to deny minorities their civil rights. Rather, the policy arose in response to the high rate of bad checks that stores in these areas had to deal with. Consolidated says the bounced-check rate can be as high as 20 percent of all such transactions, even though screening mechanisms are in place to detect check fraud. The bottom line appears to be that in some areas, there are a fair number of people who write checks without adequate funds in their accounts to cover their purchases.

There is really no way to protect against this, because until a check has bounced, the store has no way of knowing the customer's financial status. Checking IDs and so forth cannot prevent this type of delinquency. And it costs the store money a lot of it. Each bounced check means the store must turn over that account to a collection agency, which charges for its services. It may take weeks or even months to recover either the monies owed or the merchandise.

When this becomes a significant problem, as it often does in low-income neighborhoods for the obvious reason that people with low-incomes often don't have a lot of money stores such as KB take steps to limit their exposure. Refusing personal checks is one such step. But KB nowhere said that it would accept checks from people with some racial or ethnic characteristics, but not others. Nobody was allowed to pay by personal check.

The group suing KB may not have stopped to consider that it could be hurting the very people it is trying to protect. KB Toys might decide to leave these neighborhoods entirely, making it tougher for parents to get their hands on those all important Pokemon cards, Nintendo games and Barbi dolls for Christmas. Or other businesses, having watched as activists try to dictate exactly what form of payment KB must accept to remain in business, decide not to locate in the District in the first place.

Sometimes, business practices are based on the economics of staying in business; losing money taking bad checks doesn't usually qualify. To some critics it may seem a heartless policy, but going out of business tends to reduce levels of service, rather than raise them. The activists are welcome to compete with KB by setting up shop to sell toys and accept checks, but the guess here is that won't happen.

In any event, those who find KB's check policy objectionable have a potent way to make their point, one that is guaranteed to be noticed by company managers: They have every right to take their business elsewhere.

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