Wal-Mart Drops Bid to Get Into Banking
Washington Post Staff Writer
Saturday, March 17, 2007; Page D02
Wal-Mart dropped its bid yesterday to get into the banking business at its stores in the United States after critics charged that the world's largest retailer was trying to gain too much financial leverage over its customers and mislead federal regulators.
Wal-Mart Stores Inc. withdrew its application to establish an industrial loan corporation -- a limited-purpose bank that processes credit card and other payments -- a day after a U.S. congressman offered evidence that the company had secret plans to also provide retail services such as home loans. Wal-Mart's application to the Federal Deposit Insurance Corp. did not permit such services.
  A Wal-Mart worker pulls carts at a Wal-Mart store in Mountain View, Calif., in this Jan. 4, 2007 file photo. (AP Photo/Paul Sakuma, file) (Paul Sakuma - AP) |
The firestorm over Wal-Mart's banking ambitions began in July 2005 when the Bentonville, Ark., company filed its application with the FDIC. Banks not associated with the company already have branches inside Wal-Mart stores, but critics saw the application as a first step toward taking over a large chunk of the retail banking business.
Wal-Mart Watch, a union-funded group that often criticizes the company's wages, benefits and business practices, alleged that the chain was determined to make payday loans, for example, to financially vulnerable Americans.
Yesterday, Wal-Mart Financial Services President Jane Thompson said critics "manufactured" the controversy that forced the company to withdraw its FDIC application.
"At no stage did we intend to . . . establish branch banking operations as critics have suggested," she said in a statement. Rather, Thompson said, "we simply sought to reduce credit and debit card transaction costs."
Wal-Mart offers financial services such as money orders and check cashing that save customers "over $245 million a year so they can live better," Thompson said. The company also issues its own credit cards, including a Discover card as well as its own store card. .
FDIC Chairman Sheila C. Bair applauded Wal-Mart's decision.
"Wal-Mart made a wise choice," she said. "This decision will remove the controversy surrounding their intentions."
Rep. Paul E. Gillmor (R-Ohio), a member of the House Financial Services Committee, said Thursday that he had evidence Wal-Mart was seeking to offer banking services not covered by its FDIC application.
