House Bill Would Close Wal-Mart Bank Loophole
by July 17, 2006 12:00 am 74 views
A bipartisan bill aimed at closing a loophole that allows retailers such as Wal-Mart Stores Inc. to own industrial loan companies (ILCs) was introduced in the U.S. House of Representatives on July 10.
Reps. Paul Gillmor, R-Ohio, and Barney Frank, D-Mass., say the legislation they sponsored would restore the traditional separation between banking and commerce.
The bill would prohibit the Federal Deposit Insurance Corp. from granting new charters to commercial companies seeking to start or acquire ILCs and give the FDIC more enforcement authority to regulate and examine ILCs. It would also block Target Corp., which already owns an ILC in Utah, from expanding into other states.
ILCs have been around since the early 1990s and are chartered by only a few states, most notably Utah. ILCs are regulated by the FDIC.
Wal-Mart has asked the FDIC to approve an application for the retailer to open an ILC to process electronic payments from its stores involving credit and debit card transactions, according to the Reuters news agency. Another retailer, Home Depot Inc., recently announced a plan to buy an ILC to provide home improvement loans to its customers.
Both applications face opposition from consumer groups and banks who fear the companies could eventually provide other retail banking services.
Last month, 98 members of Congress wrote to the FDIC asking it to halt new approvals for commercially-owned ILCs until Congress considers the matter.
The new legislation introduced would not affect the activities of ILCs chartered before Oct. 1, 2003.