Wal-Mart banking plans causing distress | VailDaily.com

Wal-Mart banking plans causing distress

Daniel Welch

WASHINGTON Unless government regulators decide to roll back Wal-Mart’s plan to open its own banks, local lenders may one day face competition from the world’s largest retailer. “The real threat might be that Wal-Mart would provide generic banking service,” said New West Bank President Bill Hertneky. “There would definitely be increased competition, but the end result might be the customer getting used to this impersonal banking.” Consumer and banking groups on Tuesday told U.S. regulators that the retail behemoth’s entry into the banking industry would crowd out smaller lenders and violate federal law that restricts mixing commerce and banking. The hearings, held by the Federal Deposit Insurance Corp., have generated more than 2,000 letters in opposition. The FDIC had never held public hearings to discuss a bank application. Colorado Rep. Bob Beauprez, a Republican who is running for governor, was one of 45 lawmakers who signed a letter urging the FDIC to deny Wal-Mart’s application, saying the “integrity and competitiveness of the financial system” would be jeopardized by “Wal-Mart’s massive scope and international dealings.” “It’s like the old days, when you had full-service gas stations,” Hertneky said. “But then they’d build a newer one down the road with self-service, and of course you couldn’t compete with prices.” To date, Wal-Mart has only applied to open a limited-purpose bank called an industrial loan company, or ILC. The retail giant would be able to process debit and credit card transactions with the ILC, but would not provide services like checking or savings accounts. “The purpose of the proposed Wal-Mart Bank would be to sponsor credit card, debit card and electronic check transactions – nothing more,” said Jane Thompson, president of Wal-Mart’s financial services. “Wal-Mart is absolutely and unequivocally committed not to engage in branch banking.” But Wal-Mart’s opponents are skeptical that the company, which has more than 3,500 stores across the country and close to $300 billion per year in revenues, will be content to stay out of the lucrative retail banking business. “This is Wal-Mart’s fourth attempt to get into the banking industry,” said James Sower, president of Independent Bankers of Colorado. “It is not much of a stretch to conclude that somewhere down the road, Wal-Mart will be amending its business plan to offer a full array of banking services. This must not be allowed to happen.” Employees at the Colorado State Bank in Walsh, a tiny town in the southeastern corner of the state, signed a letter to the FDIC saying their community “had numerous small businesses close their doors because they are unable to compete with Wal-Mart’s low prices.” – Medill News ServiceVail Daily, Vail, Colorado

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