Lie #6: Wal-Mart Is Not Interested in Consumer Banking Operations
“Lest anybody forget, 20 percent of Wal-Mart’s customers don’t have a checking account…” - Lee Scott, Wal-Mart CEO [AP via MSNBC, 10/11/07]
We're not interested in opening a consumer bank," a Wal-Mart spokesman said. [Wall Street Journal, 1/19/07]
Wal-Mart spokesman Marty Heires says the company has no plans to create branches or provide lending services to consumers. [CNNMoney, 10/27/05]
"Wal-Mart is absolutely and unequivocally committed not to engage in branch banking," Jane Thompson, president of Wal-Mart Financial Services, testified at the first day of the hearings. "In fact and in practice, Wal-Mart is clearly committed to supporting community banking, not undermining it." [AP via USA Today, 4/10/06]
The Truth:
With no luck in the United States, Wal-Mart opens its first bank in Mexico. In November 2007, Wal-Mart de Mexico opened its first consumer bank in Toluca. Wal-Mart plans to launch 80 more by the end of the year. Unfortunately, with an annual interest rate as high as 75% for consumer loans and a 1% return rate on savings accounts, Wal-Mart’s bank will not provide for the needs of the Mexican consumer. According to Refugio Rochin, a professor of Chicana/Chicano Studies and an economist at the University of California at Davis, the 75% interest rate seems excessive. If Mexicans fully understood the rate, "they would probably choke and not do it. The problem has been they often trust American businesses, and they may be taken in by this trust without realizing what they would end up paying." [Fortune, 1/29/08; Arkansas Business, 2/25/08]
Wal-Mart expands banking services. In June 2007, Wal-Mart said it was planning to double the number of its existing MoneyCenters, where customers can also pay bills or transfer cash, to 450 from 225 by the end of the year. By the end of 2008, about 1,000 stores are expected to have MoneyCenters, roughly a quarter of Wal-Mart’s locations. [Washington Post, 6/21/07]
States do not want Wal-Mart banks. In January 2007, bills that would exclude Wal-Mart and other ILC-chartered banks from establishing branches in stores have been filed in Colorado, Kansas, Maine, Nebraska and Texas. In 2006, similar legislation passed in five states. Wal-Mart said it wants the license for credit- and debit-card transactions, reducing its processing costs. [Wall Street Journal, 1/19/07]
Wal-Mart gives inaccurate testimony to FDIC. In an effort to advance its bid to open in-store 'industrial' banks, Wal-Mart gave regulators misleading statements about whether the company could muscle out the traditional banks already based in its stores. Wal-Mart told the Federal Depository Insurance Corporation -- the nation's bank regulator -- that long-term leases with banks blocked Wal-Mart from moving into commercial banking, because the "leases signed by banks were renewed at the discretion of the banks alone." After a report by Reuters, however, forced Wal-Mart to admit that leases with at least some banks could be renewed only if both the banks and Wal-Mart approve, Rep. Paul Gillmor (R-Ohio), a member of the House Financial Services Committee, said: "We are beginning to see a pattern of misleading or false statements from Wal-Mart with regard to their interests in branch banking." [Reuters, 5/9/06; Cox News Service, 5/11/06]
Wal-Mart fails to purchase banking institutions. After trying and failing over the past five years to buy financial institutions in California and Oklahoma, Wal-Mart has applied to use a regulatory loophole that allows companies to own an industrial loan corporation. [Forbes, 4/10/06]
Many oppose Wal-Mart’s ILC. Wal-Mart's application to set up an industrial loan company created a fuss. The FDIC received a flood of letters protesting the application and 38 members of Congress wrote to the FDIC's chairman to warn that granting deposit insurance to the retail giant would drive community banks out of business and create more risk for the banking system. [Forbes, 4/10/06]
Wal-Mart would have to skirt the laws. The laws were designed to prevent a big player such as Wal-Mart from denying credit to competitors or shifting losses from its retail business to an insured bank. [Business Week, 2/7/05]
Wal-Mart lobbies for bank rights. Ronald K. Ence, vice-president of Independent Community Bankers of America, says Wal-Mart lobbied last year to expand the bank-like powers of the ILCs. A bill that passed the House, but not the Senate, in 2004 would have allowed unlimited interstate banking, but only for those with at least 85% of their business in financial services. Wal-Mart denies any such lobbying. [Business Week, 2/7/05]
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