(Washington, DC) – The United Food and Commercial Workers International Union (UFCW) applauds the Federal Deposit Insurance Corporation’s (FDIC) decision to place a six-month moratorium on applications for deposit insurance by Industrial Loan Companies (ILCs). The FDIC has stated that it will not make final decisions or accept future applications for deposit insurance or notices of change in control for ILCs during this time period.
The FDIC put the moratorium in place in order to assess developments in the ILC industry, and to determine whether statutory, regulatory or policy changes need to be made in the oversight of ILC charters and ILC applications procedures and standards.
“This moratorium is a good first step in preventing the mix of commerce and banking,” said Michael J. Wilson, UFCW International Vice President and Director of Legislative and Political Action. “The FDIC’s concern with the application by Wal-Mart and other large commercial firms is well grounded, and this moratorium is an appropriate response.”
Earlier this year, UFCW participated in public hearings held by the FDIC. These unprecedented hearings were held in two cities over three days in order to accommodate the large number of elected officials, organizations, and associations who voiced concerns about Wal-Mart’s application for an ILC.
ILCs are regulated differently than banks because they were originally small entities permitted by a loophole in the Bank Holding Act. If Wal-Mart—the world’s largest retailer with a history of unethical business practices—is granted access into banking via an ILC charter, there will be far-reaching consequences beyond the original intent of the Act.
If Wal-Mart is chartered in Utah, a “Wal-Mart bank” could branch out into more than 20 states because of state reciprocal branching laws. Approving the Wal-Mart application risks not only undermining the separation between commerce and banking, but threatens an expansion of “Wal-Mart banks” in multiple states, and in multiple aspects of the banking industry.
“UFCW will continue working with its partners in the Sound Banking Coalition, in the labor movement, and with consumer and community groups to make sure the FDIC is aware of the serious concerns about Wal-Mart’s application into banking,” said Wilson. “In addition, we will also continue working with our partners in the states to enact state banking protection laws to prevent Wal-Mart from expanding to states beyond Utah.”
The FDIC’s six-month moratorium expires on January 31, 2007.