U.S. House Looks to Slam Legislative Door on WalMart Bank Bid

by Mike Bevel CollectionIndustry.com

And in the end, ?twill be Beauty ? in the shapes of Ohio Republican Paul Gillmor and Massachusetts Democrat Barney Frank ? who may kill the Beast in the shape of WalMart and its long-suffering bank application. Together, Frank and Gillmor introduced legislation on Monday that could prove fatal to WalMart?s plans for a wider sphere in the financial services arena.

For those just tuning in, once upon a time, WalMart wanted some banks. Just a few. In Utah. The banks wouldn?t be branches. The discount superstore giant with the ubiquitous smiley face that struck terror in the hearts of small town mom-and-pop stores nationwide simply wanted some banks to process its credit card transactions.

WalMart isn?t new to the financial services arena. They are one of the primary check cashing resources in many of the communities it?s located in. This, according to many in the banking and financial services arena, is bad enough. The fear is that WalMart won?t hold true to its word, and that that handful of Utah banks used solely for credit card processing would eventually rise up as full-formed banks, undercutting and under-pricing dramatically local and smaller banks.

That WalMart even made it as far as it has with its questionable bank application is due, in some small part, to a loophole that allows industrial loan companies to function as traditional banks ? including opening branches nationwide. Sponsors Gillmor and Frank said their legislation would restore the traditional separation and bar these ILCs, like WalMart and Home Depot from opening branches nationwide.

This could spell doom for WalMart and other ILCs.

According to Frank, “Congress must set appropriate policy to preserve the integrity of the banking system.”

Is the integrity of the banking system really in jeopardy? And is it in jeopardy specifically from ILCs? Not according to Lynne Strang, vice president of communications for AFSA. Speaking for the AFSA, she said that ILCs allow commercial firms to be more efficient and lower costs. ?Ultimately, this means lower prices and increased product choice for consumers.?

Whether that?s the case or not, WalMart has little goodwill shored up, and potential competition from the likes of WalMart and Home Depot has not been looked upon kindly by industry insiders, politicians, and, well, almost anyone else who isn?t an ILC looking for banks in all the wrong places. It is unlikely WalMart will pull through this with any banks in Utah.