Senate Passes Bill Blocking Big-Box Banks (1/17/07)

A bill that would close loopholes allowing big-box stores like Wal-Mart to open up their own banks passed the Senate on January 16. Senate Bill 40, sponsored by Sen. Lois Tochtrop, D-Thornton, and Rep. Rosemary Marshall, D-Denver, would ban retailers from operating affiliated industrial banks. The main purpose for these banks would be to serve Big-Box stores by processing credit card transactions and saving the company on the fees it currently pays to third-party credit processors. With banks in Wal-Mart towns losing all of that business, local banks would have less money to invest and loan in the community. Wal-Mart in particular has also petitioned the FDIC for exemption from the CRA, a law that requires financial institutions to reinvest in surrounding areas and provide credit to low-income and minority communities. This would mean Wal-Mart wouldn’t have to invest in low-income communities. Under this scenario, community banks would lose out on Wal-Mart’s business, and less money would go to low-income and minority communities. Similar legislation will soon be introduced in the House.