The Wal-Mart industrial bank issue is back in the news, with more companies and state legislators piling on against its application to be a bank in Utah, many of them slamming Utah’s industrial loan regulations and its banking commissioner. The primary fear is that Wal-Mart will use its bank status to open branches in its more than 3,500 stores, thereby harming small banks and finance companies in much the same way it is perceived as harming the small hardware and grocery stores each time it opens a new store in their location.
Some states are saying that they will not allow branches of industrial loan corporations into their states, which could have wide ranging impact on the concept of reciprocity. Arguments also are being made that, given Wal-Mart’s size, any economic downturn affecting Wal-Mart’s health also would have wide-ranging, deleterious effects on the financial system. As you can see, the issues go far beyond just the granting of a license.
Opponents now include 45 members of Congress who have asked the FDIC to deny the application. Other opposition is coming from certain nonblank entities, many of whom seem to have an ax to grind. Labor unions that have been frustrated in their attempts to organize unions at Wal-Mart and activists up in arms about what they claim are substandard wages and healthcare coverage are joining forces with the other various other parties.
In spite of all the opposition, Wal-Mart has picked up some allies, including the American Financial Services Association, which represents an array of financial services companies. Not a whole lot of people are jumping on their bandwagon, though. Wal-Mart also has tried to soften opposition to its application by announcing that it will no longer seek exemption from the Community Investment Act which promotes equal credit opportunity. It also has repeatedly stated its intention not to open branches and offer banking services beyond processing its credit card transactions.
I still am uncertain why this issue has not even shown up on the radar screens of the leasing associations, especially those with smaller members. After all, introduction of another broad-based source of financing cannot be good for their business. Many small businesses turn to credit cards to finance their equipment needs. Why not get financing at a place where you can also obtain office supplies and dinner for the family? Wait a minute – enough about Wal-Mart Leasing. What do you think about Costco Financial Services?
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