CNN reports that the US House of Representatives’ Financial Services Subcommittee will begin considering new legislation this week that would prevent retailers such as Wal-Mart and Home Depot from buying or creating industrial loan companies (ILC) that would permit the retailers to offer financial services.
The Federal Deposit Insurance Corporation (FDIC) is reviewing applications by the retailers to run industrial loan companies; Wal-Mart has said it wants to use an ILC to reduce transaction fees on credit/debit card transactions, and Home Depot says that it wants to be able to provide loans to customers wanting to do home improvement projects.
However, the House move seems to be designed to send “a loud, clear message” to the FDIC, according to CNN. A number of consumer and banking groups already have objected to the applications, saying that the retailers eventually would be able to offer a broader array of financial services.
CNN writes: “The FDIC has given no indication of when it will act on the applications. U.S. laws historically have sought to separate commerce and banking activities to avoid placing the federal deposit insurance fund - which currently amounts to $49 billion -- at risk if the bank fails. However, an exception now on the books allows commercial firms to own an ILC.”
A loophole that more than a few people want to close.
The Federal Deposit Insurance Corporation (FDIC) is reviewing applications by the retailers to run industrial loan companies; Wal-Mart has said it wants to use an ILC to reduce transaction fees on credit/debit card transactions, and Home Depot says that it wants to be able to provide loans to customers wanting to do home improvement projects.
However, the House move seems to be designed to send “a loud, clear message” to the FDIC, according to CNN. A number of consumer and banking groups already have objected to the applications, saying that the retailers eventually would be able to offer a broader array of financial services.
CNN writes: “The FDIC has given no indication of when it will act on the applications. U.S. laws historically have sought to separate commerce and banking activities to avoid placing the federal deposit insurance fund - which currently amounts to $49 billion -- at risk if the bank fails. However, an exception now on the books allows commercial firms to own an ILC.”
A loophole that more than a few people want to close.
- KC's View:
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We’d love to find out how many banks and banking lobbyists give money to those wonderful public servants on the House Financial Services Subcommittee.
This is an effort at old-fashioned protectionism, engineered by an industry that fears what could happen if a company like Wal-Mart decides to really compete in a wide range of financial services.
Preventing the competition from taking place, after all, is a lot easier than actually competing.
