Legislation aims to head off Wal-Mart-style banks
Legislation aims to head off Wal-Mart-style banks
The Denver Business Journal - 3:07 PM MST Tuesday
by Renee McGawDenver Business Journal
Colorado's bankers are launching a pre-emptive strike against retailers who want to get into the banking business.
Senate Bill 40, introduced Jan. 10, would prevent a business from running a bank within one-and-a-half miles of its own retail or commercial premises.
"We want to protect the independent banker," said Sen. Lois Tochtrop, D-Westminster, who is sponsoring the bill in the Senate. Rep. Rosemary Marshall, D-Denver, is the bill's House sponsor.
Tochtrop refused to name names. But one of the bill's obvious targets is Wal-Mart, the retailing giant whose 18-month effort to enter the banking business worries commercial bankers nationwide.
Wal-Mart's July 2005 application to the Federal Deposit Insurance Corp. (FDIC) to open an industrial bank in Utah caused such an uproar that the FDIC last summer placed a six-month freeze on new industrial bank applications, to give itself time to consider the issue more carefully. That freeze is scheduled to end on Jan. 31.
Industrial banks -- also known as industrial loan corporations, or ILCs -- were first chartered in the early 1900s as small loan companies for industrial workers. But over time, chartering states gradually have allowed them greater powers, and ILCs now offer many of the same products and services as state commercial banks.
Other retailers operate them, including Target and Nordstrom. Still others would like to -- Home Depot and DaimlerChrysler both have ILC applications pending at the FDIC.
But it's the application by retailing juggernaut Wal-Mart that has caused the most consternation, with groups including the AFL-CIO and American Bankers Association urging the FDIC to reject the request.
Wal-Mart told the FDIC that it isn't interested in lending, but wants to be able to handle its own electronic check processing, and credit card and debt card payments from its customers, instead of paying third-party service providers to do it.
But many bankers believe that if Wal-Mart enters the industry, community banks will face the same challenges that have overwhelmed many mom-and-pop retailers in the small towns where Wal-Mart has opened stores.
"If [retailers] are allowed to open their own banks, and can offer discounts to people opening accounts there, it's going to hurt the independent bankers and all the branch banks," Tochtrop said. "In the long run, it also hurts the consumer, because people lose the one-on-one, face-to-face relationship that they have with an independent banker."
"Small businesses depend on their community banks for unbiased credit decisions in order to sustain and grow their operations," officials at Independent Bankers of Colorado (IBC), the driving force behind the bill, said in a statement. "Would a retailer's bank loan money to competing businesses?"
SBl 40 would prohibit a financial institution from establishing an office, loan production office, deposit production office or branch within 1.5 miles of premises owned, leased or otherwise controlled by an affiliate that engages in commercial activities.
On Tuesday, the Senate Business, Labor and Technology Committee approved the bill by a 5-to-1 vote. The measure will now move to the Senate floor.
The ban wouldn't affect commercial bank branches located inside supermarkets or other commercial establishments, because the banks don't own those retail businesses.
Don Childears, president and CEO of the Colorado Bankers Association, said that his group supports SB 40. The CBA also plans to introduce a separate, similar bill within the next couple of weeks.
"We and the IBC have met and discussed our respective bills several times," Childears said. "We found that we took different approaches, but they are not inconsistent. So we felt that the best thing was to proceed with both of them, and I think generally both of us are supportive of the other's bill."
© 2006 American City Business Journals, Inc. and its licensors. All rights reserved.
All contents of this site © American City Business Journals Inc. All rights reserved.
The Denver Business Journal - 3:07 PM MST Tuesday
by Renee McGawDenver Business Journal
Colorado's bankers are launching a pre-emptive strike against retailers who want to get into the banking business.
Senate Bill 40, introduced Jan. 10, would prevent a business from running a bank within one-and-a-half miles of its own retail or commercial premises.
"We want to protect the independent banker," said Sen. Lois Tochtrop, D-Westminster, who is sponsoring the bill in the Senate. Rep. Rosemary Marshall, D-Denver, is the bill's House sponsor.
Tochtrop refused to name names. But one of the bill's obvious targets is Wal-Mart, the retailing giant whose 18-month effort to enter the banking business worries commercial bankers nationwide.
Wal-Mart's July 2005 application to the Federal Deposit Insurance Corp. (FDIC) to open an industrial bank in Utah caused such an uproar that the FDIC last summer placed a six-month freeze on new industrial bank applications, to give itself time to consider the issue more carefully. That freeze is scheduled to end on Jan. 31.
Industrial banks -- also known as industrial loan corporations, or ILCs -- were first chartered in the early 1900s as small loan companies for industrial workers. But over time, chartering states gradually have allowed them greater powers, and ILCs now offer many of the same products and services as state commercial banks.
Other retailers operate them, including Target and Nordstrom. Still others would like to -- Home Depot and DaimlerChrysler both have ILC applications pending at the FDIC.
But it's the application by retailing juggernaut Wal-Mart that has caused the most consternation, with groups including the AFL-CIO and American Bankers Association urging the FDIC to reject the request.
Wal-Mart told the FDIC that it isn't interested in lending, but wants to be able to handle its own electronic check processing, and credit card and debt card payments from its customers, instead of paying third-party service providers to do it.
But many bankers believe that if Wal-Mart enters the industry, community banks will face the same challenges that have overwhelmed many mom-and-pop retailers in the small towns where Wal-Mart has opened stores.
"If [retailers] are allowed to open their own banks, and can offer discounts to people opening accounts there, it's going to hurt the independent bankers and all the branch banks," Tochtrop said. "In the long run, it also hurts the consumer, because people lose the one-on-one, face-to-face relationship that they have with an independent banker."
"Small businesses depend on their community banks for unbiased credit decisions in order to sustain and grow their operations," officials at Independent Bankers of Colorado (IBC), the driving force behind the bill, said in a statement. "Would a retailer's bank loan money to competing businesses?"
SBl 40 would prohibit a financial institution from establishing an office, loan production office, deposit production office or branch within 1.5 miles of premises owned, leased or otherwise controlled by an affiliate that engages in commercial activities.
On Tuesday, the Senate Business, Labor and Technology Committee approved the bill by a 5-to-1 vote. The measure will now move to the Senate floor.
The ban wouldn't affect commercial bank branches located inside supermarkets or other commercial establishments, because the banks don't own those retail businesses.
Don Childears, president and CEO of the Colorado Bankers Association, said that his group supports SB 40. The CBA also plans to introduce a separate, similar bill within the next couple of weeks.
"We and the IBC have met and discussed our respective bills several times," Childears said. "We found that we took different approaches, but they are not inconsistent. So we felt that the best thing was to proceed with both of them, and I think generally both of us are supportive of the other's bill."
© 2006 American City Business Journals, Inc. and its licensors. All rights reserved.
All contents of this site © American City Business Journals Inc. All rights reserved.
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