The banking industry is airing concerns about Wal-Mart’s bid to provide checking accounts.
With the nation’s largest retailer positioning itself as a new competitor, banks argued Thursday that regulators at all levels need to make sure the retail giant adheres to all the same rules they do if they want to get into the banking business.
“These accounts should be subject to the same legal and regulatory framework, consumer protections, and oversight as traditional checking accounts offered by banks,” said Camden Fine, president and CEO of the Independent Community Bankers of America (ICBA).
Wal-Mart, which operates more than 11,000 stores worldwide, announced Wednesday that it was partnering with Green Dot, a prepaid debit card issuer, to begin offering checking accounts to customers.
The retailer had previously explored getting into the banking business, but this new venture will allow customers to open accounts that do not come with overdraft fees or minimum balance requirements. Instead, accounts that direct-deposit up to $500 monthly will pay a monthly membership fee to use the service, which will include mobile banking and the ability to send funds electronically.
The accounts are also aimed at providing banking services to people who struggle to qualify for traditional banking services. People applying for such accounts will also not go through a traditional credit check, but rather a proprietary check that Wal-Mart said would allow almost anyone with a valid photo ID to receive an account.
Wal-Mart said it plans to begin offering these accounts by the end of October. The retailer will offer the accounts, which will then be handled by Green Dot.
The Consumer Bankers Association, of which Green Dot is a member, said the company should be “commended” for trying to expand banking services to people who may not have access to traditional resources. However, the group also emphasized that if Wal-Mart wants to get into the banking business, it should be treated like a bank.
“With this new partnership, it begs the question of Walmart’s role in the financial services sector, whether the [Consumer Financial Protection Bureau] should explore ensuring Walmart is responsibly serving consumers in the financial services arena,” said Richard Hunt, the group’s president and CEO.
The ICBA argued Thursday that it is dangerous to pair retail services with banking, and emphasized that regulators need to eye Wal-Mart closely to make sure the company is complying with the host of new banking laws and regulations it will be subject to under the service.
“Our nation’s policy makers have separated the business of retail from the business of banking for a reason, for which the wisdom of such policies became crystal clear during the Great Recession,” said Fine. “If consumers are interested in checking accounts, they can look to their local community bank for the best possible customer service that’s based on the time-tested community bank relationship business model.”
This post updated Sept. 29 to clarify that Wal-Mart will offer the accounts, which will then be managed by Green Dot.