Senators introduce bill to ban ILCs by retailers

WASHINGTON (AP) — Bipartisan support is growing in Congress for legislation that would ban retailers such as Wal-Mart Stores Inc. and Home Depot Inc. from operating their own bank branches.

On Thursday, Sens. Sherrod Brown, D-Ohio, Wayne Allard, R-Colo., and Tim Johnson, D-S.D., introduced a bill that would prevent more companies from setting up or buying so-called "industrial loan corporations" that can issue credit cards, make loans and, in some cases, take deposits.

"Congress has made it clear a number of times that we do not support the mixture of banking and commerce," Allard said in a prepared statement.

Similar legislation passed the House Financial Services Committee last week. A bill sailed through the House last year but failed to pass the Senate.

Wal-Mart had been seeking federal approval to create an industrial loan corporation in Utah, but withdrew its bid in March.

The company, based in Bentonville, Ark., repeatedly said its bid was about payment processing, not branch banking for consumers. Wal-Mart said it wanted to open an industrial bank to save millions of dollars it now pays outside banks to handle credit and debit card payments in its stores.

But the retailer's application aroused widespread opposition from banks, lawmakers, unions and consumer groups, who claimed the company was secretly planning to start branch banking.

Industrial banks have been proliferating in recent years with 15 nonfinancial companies — including Target Corp., UnitedHealth Group Inc., Toyota Motor Corp. and Harley-Davidson Inc. — among the 58 owners.

Seven states grant charters for such banks, which are concentrated in Utah and California. While some states do not allow industrial banks to offer deposit accounts, others allow them to operate much like traditional banks.