Wal-Mart gives banks, CU common ground, say analysts

MINNEAPOLIS and ARLINGTON, Va. (4/12/06)--Credit unions are monitoring what happens with Wal-Mart Stores Inc.'s application for an industrial loan bank charter in Utah. And some analysts say credit unions and banks are on common ground regarding their unease about the charter.

"We're watching it," said Pat Keefe, spokesman for the Credit Union National Association (CUNA), told the Star-Tribune (April 9). "It certainly is in the back of everyone's mind."

He told News Now, "Credit unions have taken note that Wal-Mart is notorious for being a voracious competitor." CUNA has no official position on the issue.

While the Federal Deposit Insurance Corp. (FDIC) conducts three days of unprecedented hearings on the world's largest retailer's charter application--70 groups signed up to testify at the hearings--bankers have been vocal in their opposition to the giant retailer's encroachment into their domain of services (The New York Times April 11).

Credit unions have kept a lower profile on the issue. As consumer advocates, they "would be hard pressed to argue against lower-priced loans and services," says the Star-Tribune.

Wal-Mart says it won't lend funds or open branches, and that the charter would merely allow it to have a back-office operation to process its own check and credit and debit card transactions.

But V. Gerard Comizio, managing partner at Washington, D.C.-based law firm Thacher Proffitt & Woodlaw, says the application is "a landmark battle in the history of U.S. financial services."

"Wal-Mart's quest for a bank charter shows how the rules that govern the financial services industry have become increasingly fuzzy in recent years as nontraditional players such as retailers, investment firms and insurance companies offer banking services to consumers," the article says.

It discusses the battle between credit unions and banks on the tax-exemption issue, and quotes Kyle Markland, CEO of St. Paul-based Affinity Plus FCU: "Our motive is to do everything we can for our members. The banks' motive is to do everything for the benefit of their stockholders."

Credit unions control only 6% of total assets in the national market.

Wal-Mart's scale and pricing power "could take customers away from credit unions," the article says.

"What should worry banks and credit unions, analysts say, is the prospect of a Wal-Mart bank at all its 2,000-plus Supercenters," the article said.

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