Nevada lawmakers are taking a second stab at legislation to prevent Wal-Mart Stores Inc. from obtaining an industrial loan company charter - even though the retail giant is not seeking one there.
What's more, some bankers are opposing the lawmakers' efforts.
The Nevada Bankers Association argues that the bill, as written, could force two nonbanks, Toyota Motor Corp. and Harley-Davidson Motor Co., to give up their industrial loan charters and could cost the state hundreds of jobs. Both Toyota and Harley-Davidson are Nevada Bankers Association members.
The trade group's position has put it at odds with the western regional office of the Independent Community Bankers of America, which adamantly opposes giving industrial loan charters to retailers, manufacturers, and other companies outside of the financial services industry.
"We do not support the ownership of ILCs by any nonfinancial company, because we don't support mixing banking and commerce," said Denyette DePierro, an ICBA lobbyist.
Nevada lawmakers proposed a similar bill in 2003, but it died in the Senate after passing the Assembly.
The fate of this year's bill is still unclear. Though the Assembly Committee on Commerce and Labor failed to vote by an April 15 deadline to pass bills out of committee, sponsors said they have the support to either call for a floor vote in the full Assembly or attach amendments to other bills that would accomplish the same thing as the bill. Moreover, members of the Senate said they are considering attaching an amendment to a bill in their chamber.
The Nevada Legislature's 2005 session is scheduled to end June 6.
Both California and Colorado have passed laws in recent years that prohibit nonbanks from owning industrial loan companies. Wal-Mart tried but failed to gain an industrial loan charter in California in 2002.
The Nevada bill appears to be aimed squarely at Wal-Mart. It would prohibit the control of a thrift company by a store that sells six or more of these categories of merchandise: apparel, appliances, automotive accessories, cosmetics, electronics, furniture and home furnishings, hardware, jewelry, photographic equipment, sporting goods, toiletries, toys, and other household goods.
But there is some disagreement over whether the bill would affect existing industrial loan companies.
Ms. DePierro said it would grandfather the existing industrial loan companies but stop other manufacturers, as well as retailers, from opening similar ones.
However, the Nevada Bankers Association said the bill would prohibit Toyota and Harley-Davidson from keeping their charters, since both manufacturers sell some of the listed merchandise in their showrooms.
Even Scott Wasserman, the chief deputy legislative counsel of the Nevada Legislative Counsel Bureau, acknowledged that the language is unclear. He said that a provision of the bill - "department stores shall not acquire control of a thrift" - could be construed to refer only to future charter applications, and that lawmakers should amend it to clarify whether it would affect existing industrial loan companies.
The Nevada Bankers Association also argues that revoking Toyota's and Harley-Davidson's charters could cause economic hardship.
"They bring good jobs to the community - Harley-Davidson employs 500 people in their back-room operations in Carson City," said Bill Uffelman, the trade group's chief executive officer. "This is the kind of economic development that the state is trying to attract."
Eaglemark Savings Bank, which Harley-Davidson opened in Carson City in 1997, now has $12.4 million of assets. The $10.3 million-asset Toyota Financial Savings Bank in Hendersonville opened in August.
Both industrial loan companies market cash management services, certificates of deposit, commercial real estate loans, and personal lines of credit to dealers. However, only Eaglemark has reported making loans: according to the Federal Deposit Insurance Corp., Harley had $1.7 million of loans to individuals on its books at yearend.
Still, two Nevada members of the ICBA say they are concerned about what the owners of the two industrial loan companies would like to do in the future. In its charter application to the FDIC, Toyota said it would like to make mortgages and home equity loans not only to its dealers, but also to individuals who have bought cars from them. (Harley-Davidson has expressed similar goals, the bankers said.)
Jacqueline DeLaney, the president and CEO of the $284 million-asset Sun West Bank in Las Vegas, said industrial loan companies face a lighter compliance load than banks, because their parent companies are not regulated as bank holding companies. That difference could give industrial loan companies a competitive advantage over community banks, she said.
"They could get into the real estate business, which would be extremely difficult for a financial services company to do," Ms. Delaney said. "It's not about competition in and of itself. It's about being able to compete on a level playing field."
But Mr. Uffelman said that it is not necessary to block the activities of Toyota and Harley-Davidson, because even if the industrial loan companies did try to get into any of these other lines of businesses, they would never pose a real threat to the community banks.
"Most people don't mind financing their cars through an office that's 1,000 miles a away from them, but they still want to take out home mortgages face-to-face with someone locally," he said. "That's why people still prefer banks - they can get that personal relationship."
