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the government bailout of so many of the nation's largest financial institutions, WalMart's unsuccessful 2005 bid -- withdrawn in the face of opposition from consumer groups, banking industry groups, members of Congress, and regulatory stonewalling in 2007 -- to form an industrial loan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.
Why bother with another ILC application?Once the ILC moratorium ends next July, WalMart may try again to form an ILC, and this time around, the company could face less opposition. After all, how much more risk can a WalMart bank subsidiary represent to the U.S. financial system than the largest bank holding companies that received bailout funds through the Troubled Assets Relief Program, or TARP, or the 464 banks that have failed since the beginning of 2008? Comizio says "you may see less objection from community banks, since WalMart has been leasing space to community banks across the country in their stores. WalMart will have to make the banks comfortable that those relationships continue." There could also be far less of a protest from consumer groups, who would have a tough time arguing that WalMart is unfriendly to consumers, considering that it is easy to use Bluebird as an alternative to a traditional checking account, while avoiding any minimum balance requirements and easily avoiding any fees. "The practical reality is that Congress will kick the can down the road, or use the intermediate holding company," Comizio says. The banking industry also shouldn't be counted out, according to Christopher Cole -- Senior VP and Senior Regulatory Counsel for the Independent Community Bankers of America -- who says that the regulation that WalMart "would have to comply with at this point would be significant under Dodd-Frank, since they would have to be a bank holding company and a source of strength for the bank and be subject to restrictions on affiliate transactions." "Bluebird looks like a comprehensive deposit product, and they may stop with it," Cole says, but if WalMart presses ahead with the ILC charter, his organization will put up another fight. "We had a lot to do with stopping WalMart from getting approved by the FDIC for an ILC charter," Cole says, and the Independent Community Banks of America "are still concerned about bib box retailers getting into the banking business... we have always thought that the commercial side would conflict with the banking side. There were concerns that the interest of the bank would not always be consistent with the commercial side."
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