Sallie Mae, Wal Mart Seek To Enter Banking
Two regulatory bids over the past two weeks are expected to reheat the argument in Congress over non-banks' participation in financial services, just as lawmakers are preparing to vote on the regulatory bill and provisions to oversee industrial loan companies, so-called back-door banks.
In the first, student loan giant Sallie Mae, which has been expanding its business outside of its core educational financing, announced it has been approved by the FDIC for federal deposit insurance to operate a Utah-chartered industrial bank. Utah's industrial banks and industrial loan companies have allowed many non-financial companies, including the auto manufacturers and several large retailers, to collect insured deposits and provide financial services beyond their core businesses.
Sallie Mae, chartered by the federal government in 1972 to facilitate a secondary market for guaranteed student loans originated by credit unions and banks, plans to capitalize Sallie Mae Bank with $100 million and grow it through brokered deposits, escrow accounts and retail services, to as much as $1.2 billion by the end of the first three years.
The operations will be conducted through a single branch in Salt Lake City but will be conducted nationwide by telephone, mail and the Internet. Meantime, credit unions' own Utah-chartered credit card bank is still pending.
In the second bid, retail giant Wal-Mart Stores said last week it has applied to state banking regulators in Massachusetts to offer check cashing services at its 44 Bay State stores. The move comes as the world's largest retail chain is awaiting approval from Utah regulators on its application for a state bank charter.
The application with the Massachusetts Department of Banking seeks approval to open in-store check cashing operations to handle payments made for payroll, government, money-order and insurance payments. Plans call for Wall-Mart to charge a fee of 1% of each check's value, capped at 3%.