Banks become Wal-Mart's new biggest enemy
Financial institutions ask the Fed to regulate the discount retailer, saying its prepaid cards subvert the swipe-fee limits the chain fought for.
Unions have been hammering away at the nonunion discount mega-chain over worker compensation, hours, its stance on minimum wage increases and hiring practices for much of the past year. Yet it's Wal-Mart's "backdoor" foray into the banking industry and its sales of prepaid cards that brought banks into the battle against the retailer.
The Federal Advisory Council, a group of banks including PNC Financial Services Group (PNC) and BB&T (BBT), told the Federal Reserve at a meeting in December that Wal-Mart's sales of prepaid cards warranted greater federal oversight, according to meeting minutes obtained by Bloomberg and cited in a story published Wednesday.
The council urged the Fed to consider limiting payment-related services like prepaid cards to "regulated banking institutions" or to step up regulation of that business. It also suggested the government unleash the Consumer Financial Protection Bureau, created by the 2010 Dodd-Frank law, on nonbank companies like Wal-Mart that provide financial services.
Banks are becoming a fairly regular opponent of Wal-Mart and haven't been shy about teaming up with some of the chain's other enemies to block expansion onto their turf. In 2005, banks joined labor unions and community groups to oppose Wal-Mart's application to open a limited-service bank based in Utah. The retailer eventually abandoned that plan.
In 2011, banks asked the consumer bureau to consider Wal-Mart as a "larger participant" in financial services, which would lead to direct oversight.
As if to taunt the banks, Wal-Mart immediately followed up the council's request by partnering with American Express (AXP) and offering a prepaid card called Bluebird. While similar to a card offered by JPMorgan Chase (JPM), Bluebird raised eyebrows among banks by detaching itself from banks entirely. Wal-Mart says its partners like American Express are already regulated, but the banks aren't having any of it.
The strongest argument the banks make is that Wal-Mart's plan is just a big ploy to get around interchange, or card swipe, fees by hoarding all the fee money for itself. In 2010 and 2011, retailers including Wal-Mart, Target (TGT) and Home Depot (HD) successfully fought the banks to get the Fed to mandate limits on swipe fees.
Prepaid cards, however, are exempt from those limits. The banks argue that the exemption "appears to permit Wal-Mart, a strong proponent of lower debit interchange rates, to benefit indirectly from the very thing it opposed: unregulated interchange."
With customers knocking Wal-Mart in increasing numbers for its empty shelves and long checkout lines, the retailer's banking strategy is attracting more enemies than business.
“When plunder becomes a way of life for a group of men living together in society, they create for themselves, in the course of time, a legal system that authorizes it and a moral code that glorifies it.” – Frédéric Bastiat,"The Law"1850
I am not a Wal-Mart customer.
However big banks have not proved to be good custodian or good steward of customers money or customers interest or interest of the People of United states.
If Wal-Mart s a vulture, banks are also one. Swipe fees are manipulated and abused by Interbank organizations and banks. particularly their charge backs when they take no responsibility for transaction they approve. Banks operate on a base heads we win and tail you lose.
Just remember that the Federal Reserve System was created by a congressional act. The "Federal Reserve" is a Board, Committee and 12 Regional Banks representing whom.... wait for it, yes that
is right ... Other Private / member BANKS!!!
The FR was created to control monetary policy in order to avoid panics.
Walmart and banks are both thieves, also the prepaid cards are a scam.
Getting the public that falls for prepaid cards for it to advance money to retailers and credit card companies for no advantage in return.
It is worse than a mafia organization.
Let's break this down:
- I pay Walmart (buy a card) $20
- No additional fees are charged, because Walmart is using Walmart's servers and network to deduct from the rolling balance
- My parents must use the card in another Walmart
- I pay American Express (again buy a card) $20
- AmEx charges 4% to Walmart to use Walmart's system to connect to them to have them manage the rolling balance
- My parents can use the card in another store, other than Walmart
- The second store more than likely pays another 4% of the total to AmEx when the card is used.
The banks can suck it. Their cards are usable anywhere, and Walmart's is not. I remember the last time I tried to cash a paycheck at Bank of America (it was drawn from a Bank of America account). They were going to charge me $5 to honor a check drawn from their own accounts, and they had the security guard usher me out the door when I told them I had a problem with that. This is essentially what they want Walmart to do; charge you for drawing on your own money so they can continue to 'compete'.
Walmart is no saint, but the banks are simply dirty.
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