From the Associated Press:
Wal-Mart Stores Inc., facing broad opposition at April regulatory hearings on its plan to open an in-house bank, is changing its application. It will now comply with federal rules that require lenders to serve low- and moderate-income clients.Wal-Mart said yesterday that it would no longer seek an exemption from the Community Reinvestment Act, passed by Congress in 1977 to end the practice of "redlining" poorer neighborhoods by denying credit and services to customers there.
The retailer said it was originally advised by experts that it would qualify for an exemption because it did not plan to open branches and provide services to the public.
Instead, Wal-Mart wants a charter for a special type of bank based in Utah called an industrial loan corporation that would only process Wal-Mart's millions of credit, debit-card and check transactions. Wal-Mart said it wanted to save costs by keeping the processing fees that are now paid to third parties.
Opponents, who will testify in two hearings scheduled to be held next month by the Federal Deposit Insurance Corp., were unmoved by the change.
"It's crumbs," said John Taylor, president and chief executive officer of the National Community Reinvestment Coalition, which is scheduled to testify against the plan at the first FDIC hearing April 10 in Arlington, Va.
Opponents have argued that Wal-Mart's size means it could put community banks out of business by opening branches in its stores. They fear that would concentrate too much economic power in a single company with no ties to communities.Wal-Mart said the decision to drop the exemption request in a March 1 letter to the FDIC was not connected to a broad range of opposition expected at the FDIC hearings from groups including bankers, community activists and unions.
Wal-Mart spokesman Marty Heires said the company "had always felt that we should comply" with the Community Reinvestment Act. "But because so many people counseled us against that, we took that counsel. But we have been leaning this way for a long time."
"The reason we did that was to fully demonstrate our commitment to the community," he said.
Heires said Wal-Mart had a history of supporting communities, spending more than $200 million on charities last year in the United States. It already has about 1,150 bank branches in its stores run by about 300 institutions, and it does not want to compete with them, Heires said.
WakeUpWalMart.com, a union-funded campaign group that opposes the banking plan, said Wal-Mart's reversal was not enough to calm critics.
"None of the changes address the key point: that a 'Wal-Mart bank' would result in a dangerous concentration of economic power, which is bad for consumers, small business, and our nation's economy," said Chris Kofinis, communications director for WakeUpWalMart.com.
Posted by Laura - March 26, 2006 05:05 PM - In The News