Wal-Mart Credit Union—“Sam's Club”

by Christopher Menkin

Credit unions, like other financial institutions, are closely regulated. And they operate in a very prudent manner. The National Credit Union Share Insurance Fund (NCUSIF), administered by the National Credit Union Administration, an agency of the federal government, insures deposits of credit union members at more than 9,000 federal and state-chartered credit unions nationwide. Deposits are insured up to $100,000.

What makes a credit union different from a bank or savings & loan? Like credit unions, these financial institutions accept deposits and make loans--but unlike credit unions, they are in business to make a profit. Banks and savings and loans are owned by groups of stockholders whose interests include earning a healthy return on their investments. Credit Unions are non-profit organizations.

In a possible move to be denied an industrial bank license in Salt Lake City, Utah, be prepared to see Wal-Mart Credit Union take over this function.

The Federal Deposit Insurance Commission is holding its first hearing this Monday on Wal-Mart's application to open an industrial bank in Salt Lake City, Utah. Inside sources say they are working on expanding their credit union not only with credit cards, but auto loans, and mortgages. If these banks want a “low price war,” look out!!!

Their goal was to reduce credit card processing costs, plus offer their customers a lower rate than they can get at their bank or savings and loan institution.

More than 40 are scheduled to testify at the first hearing to be held on both Monday and Tuesday in Arlington, Va., with a second round to be held in Kansas on April 25. The great majority are opposed to granting Wal-Mart an industrial bank license.

“Wal-Mart's application presents an unprecedented challenge to the settled policy of keeping banking separate from non-financial commerce," says testimony by the American Bankers Association prepared for the hearing.

"There is reason to believe that the current and future plans for banking activities could be expansive," the testimony says.

The group and others worry the company has its sights set on retail banking. Bankers and others are also concerned that Wal-Mart's industrial-loan company -- which would allow the retailer to offer consumer loans and other services to its customers -- could endanger federal deposit insurance funds.

"If Wal-Mart trips, the whole world stumbles," says Terry Jorde, who will testify Monday on behalf of the Independent Community Bankers of America.

Over 45 congressman have written the FDIC stating they are opposed to "more industrial banks," stating they are afraid the retailer will open bank branches in their stores.

Wal-Mart says it just wants to handle its credit cards out of Salt Lake City, save over $5 million in costs yearly, plus be able to offer lower credit card rates to customers so they will utilize the Wal-Mart card at their stores. What's the matter with offering their customers the lowest price, they say.

The issue of bank branches being located in supermarkets, pharmacies, even large retailers such as Costco or K-Mart has not been addressed. That these companies want to have the ability to have more than an ATM machine at their facility is obviously preposterous. Why, what will be next, Google and Yahoo running newspaper classified ads and real estate for sale information—on line with interior and satellite video and photographs?

Not only is congress worried about Wal-Mart, but the state legislators have gotten into the act with Iowa Governor Tom Vilsack signing legislation to prohibit commercially owned industrial loan companies (ILCs) from opening branches in Iowa store locations. California and Colorado also restrict ILCs, and seven other states are considering restrictions.

The congressman want to question Wal-Mart application re: FDIC insurance; if parent goes broke, will it affect their industrial bank solvency? That Wal-Mart wants to have its own credit card at lower rates that banks can offer, why next they may want their own credit union.

The legislators say they are not against low prices, as evidenced what it costs to buy a better congressman or U.S. senator today. Ask any lobbyist.

Join “Sam's Club” Credit Union and get a better credit card rate, perhaps auto loan, mortgage, and maybe free checking and more convenient locations than anyone else can offer. Is small ticket leasing next?