The regulatory moratorium on new industrial loan companies ends on July 21, 2013, opening the way for the giant retailer to restart its bank plans..
An industrial loan company, or ILC, is a bank owned by a non-financial company. Like other banks, ILCs are supervised by their chartering authority -- in this case, any of seven states, but mainly Utah and Nevada -- as well as the Federal Deposit Insurance Corp., while enjoying FDIC deposit insurance.
It's been over five years since WalMart gave up -- at least temporarily -- its attempt to charter an ILC, but the company has succeeded in making a huge foray into financial services, first with WalMart Money Card, in partnership with Green Dot (GDOT), and more recently with Bluebird, in partnership with American Express (AXP).
The Bluebird service offers consumers nearly all of the deposit services offered by a bank, including direct deposit, ATM access, electronic bill paying, while allowing checks to be deposited using a smart phone, or, of course at a WalMart store. All of the bluebird services are fee, except for a $2 fee if a customer uses an out-of-network ATM, or of a customer refills the Bluebird debt card using another debit card. So what's left? Credit. WalMart would need the ILC charter in order to begin lending to its customers. The company didn't respond to a request for comment on whether it wishes to file a new application to form a bank subsidiary. The FDIC declined to comment.
WalMart's previous attempt.In light of the real estate bubble, the financial crisis and the government bailout of so many of the nation's largest financial institutions, WalMart's unsuccessful 2005 bid -- withdrawn in the face of opposition from consumer groups, banking industry groups, members of Congress, and regulatory stonewalling in 2007 -- to form an industrial loan company may seem like ancient history. While many retailers, including Target (TGT), Home Depot (HD) and Sears (SHLD), and other non-financial companies, including General Motors (GM) and Harley Davidson (HOG) already had bank subsidiaries, there was quite an outcry from consumer, member groups concerned that the "WalMart" effect could eventually limit consumers' choices, bank industry groups, who said it was unfair that WalMart might enjoy the advantage of instantly competing with thousands of branch locations, while not facing the same parent company restrictions that bank holding companies have to endure, and members of Congress, who were concerned over the continual breakdown of the barriers between commerce and banking.
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