Posts tagged ‘Walmart’

Meet Walmart, Your Friendly, Small Town Community Banker

Walmart signaled just how serious it is about expanding its offerings in the consumer banking sphere with the announcement that it lured away Omer Ismail to run its new FinTech joint venture.  On the off chance you don’t know who Omer Ismail is, he has been one of the key architects behind Goldman’s Marcus online consumer bank. 

Last month, Goldman announced that it was starting a joint venture with online FinTech Ribbit Capital.  As Bloomberg reported in breaking the news this morning, “Walmart’s move — depriving one of Wall Street’s elite firms of the talent atop its own foray into online banking — underscores the seriousness of the retailer’s intent to intertwine itself in the financial lives of its customers.” 

Stay tuned.

Surcharge Bans Continue to Fall

A federal court in Kansas last week became the latest court to strike down a state level ban on merchant surcharges for the use of credit cards.  This trend is hardly surprising following the Supreme Court’s ruling in Expressions Hair Design that a similar ban in New York State triggered First Amendment scrutiny. The case is CARDX, LLC, Plaintiff, v DEREK SCHMIDT, in his official capacity as Kansas Attorney Gen., Defendant., 20-2274-JWB, 2021 WL 736322, at *1 [D Kan Feb. 25, 2021]

Yours truly continues to be perplexed as to why so many consumer groups consider surcharging good policy.  The reality is that there after these laws are struck down, there is nothing that requires merchants to pass on the increased revenue to consumers paying cash.  This is a lesson that many New York consumers have already learned the hard way.

On that note, enjoy your day.  Who knew that 46 degrees could feel so balmy?  I, for one, am breaking out the sunscreen!

March 1, 2021 at 9:04 am Leave a comment

Why Google’s Announcement Impacts Your CU’s Plans

Google confirmed yesterday that sometime next year, it would be offering checking accounts to consumers using mobile platforms. This in and of itself would be big enough news, but as the New York Times reports, one of the “banks” it is teaming up with is Stanford Federal Credit Union. By the way, is it asking major news outlets too much to delineate between credit unions and banks?

Stanford FCU is based in the Bay Area in California. It has $2.8 billion in assets and close to 71,000 members. It is a multiple common-bond credit union primarily serving the educational community. In the press release announcing the partnership with Google, the credit union’s CEO suggested “credit unions across the country can benefit from this type of innovative partnership.” In other words, Stanford has not figured out a way around field of membership restrictions. It is, however, getting a high-profile advertisement for the new product by joining up with Google so soon.

The accounts to be offered will reportedly have special features such as budgeting capabilities, but Google was suspiciously vague as to what features will ultimately be included with the accounts. Additionally, Google announced that it would not share the financial information it receives with third parties, but that’s a lot like Saudi Arabia announcing that it won’t share its oil. The value to Google is in the data that it will use to offer even better analytics on banking and who knows what else.

The reaction to this news has been surprisingly muted, and even indifferent. For example, in a snarky analysis by the New York Times, it argues “there are good reasons some of these ideas have sputtered. While customers have plenty of frustrations with their banks — high fees, paltry interest rates and poor service — those aren’t complaints that technology companies are usually positioned to solve. And tech-focused features that bank users want, like fast peer-to-peer payments, card-free transactions and in-app budgeting assistance, are now offered by nearly all large banks.”

In fact, those of you who ignore this news are whistling past the graveyard. First, companies like Google and Apple have as much credibility with consumers as do banks and credit unions. People will be drawn to services offered by these behemoths because they like them more and use them more frequently than they do traditional banks or credit unions. Second, regardless of whether Google succeeds, as people grow more used to banking on their apps, they will see less and less need to stop at the bank. I hear credit union people tell me all the time that members still want a branch, and in fairness to them, the survey results reflect this position. I’m sure that surveys said the same thing about chain bookstores just 10 years ago, but when is the last time you went to Barnes and Noble?

Finally, there is the Walmart effect. The key to its success was that Walmart became large and dominant enough such that it could dictate prices offered by wholesalers. The same thing will happen with banking. Increasingly, the Googles and Apples of the world that will dictate the terms of the account agreements you will offer to your members. If the Walmart analogy holds, larger institutions will survive and even prosper due to increased volume. The smaller ones will suffer the same fate as the local hardware store or independent book seller.

On that happy note, enjoy your day.

 

November 14, 2019 at 9:10 am Leave a comment

Handle Electronic Repo Man With Care

Let me start this morning’s blog by announcing that I am dedicating it to Derek Jeter and formally throwing my weight behind his beatification at the earliest possible opportunity.  However, let me remind Yankee fans that Derek is not dead, life will go on, and yes, the Yankees will win championships without him.

Now for today’s blog.  One issue that got a surprising amount of attention recently was highlighted in a New York Times article about the increasing use of GPS-based technology that allows lenders to freeze vehicles in place.  According to the Times, with the growth of so-called subprime car lending, lenders have increasingly turned to technology that allows them to stall a vehicle being driven by a delinquent driver.  As one financer happily explained that without the technology, “we would be unable to extend loans because of the high risk nature of the loans.”

First, there is nothing in state or federal law that would prohibit the installation of these ignition freeze devices.  In fact, right now the field is wide open.  I say right now because it is the type of technology that state legislators, in particular, will scrutinize to ensure that it is implemented consistent with a state’s general repossession requirements.  Does this mean that anything goes when it comes to using this technology?  Absolutely not.  In fact, aspects of the way it is already being used make the hair on the back of my lawyer’s neck stand up. 

For example, if the paper is correct that lenders are disproportionately using this technology for subprime borrowers, then what we have is an Equal Credit Opportunity Act lawsuit in waiting.  Remember that under federal law, you can’t have policies that have either the intention or effect of imposing higher lending standards for applicants based on their race, sex, and other types of protected classifications.  If a lawyer can prove that a bank or credit union disproportionately conditions the granting of car loans to African-Americans, for example, on agreeing to the installation of GPS technology, then he has proven a violation of federal lending law.  One easy way to avoid this problem is to simply make GPS technology a condition of all your car loans.  Here’s some advice for you:  if you can’t justify using this technology on all of your members, then don’t ask any of them to agree to have it installed.

Another legal landmine to be avoided has to do with negligence.  In a nutshell, make sure you have common sense policies in place to protect you.  For example, the article highlights delinquent borrowers whose cars were frozen in the middle of the day.  Simply put, any money that the credit union recoups as a result of repossessing a delinquent owner’s vehicle is going to be miniscule compared to the damage award it will pay out when a jury hears that a credit union member was broadsided in the middle of the day after their vehicle was frozen in the middle of an intersection or that a member’s infant was locked inside a vehicle on 100 degree day.  Let’s use common sense here.  First, the use of the technology should be reserved only for car loans that are at least 30 days delinquent.  Secondly, members should be called and told in advance that they are in danger of having their car frozen.

Third, a tremendous amount of information can be derived about a member’s personal life from tracking their movements.  For instance, New York’s Court of Appeals examined a case in which a state employee’s extramarital affair was exposed tracking his whereabouts in a state vehicle.  Have strict policies in place about who can access the GPS technology and under what circumstances.  This is one of the few areas where there are things you are better off not knowing.

Finally, reserve your right to use this technology explicitly in your lending documents.  The use of tracking devices on someone’s personal vehicle understandably raises privacy concerns.  The more members are put on notice about the use of the technology, the better off everyone is going to be.

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A lot of people disagreed with my blog yesterday assessing the impact that Walmart’s entrance into banking will have on the credit union industry.  This article in today’s CU Times provides further arguments for those of you who mistakenly think that I have exaggerated the impact.

September 26, 2014 at 8:42 am 3 comments


Authored By:

Henry Meier, Esq., Senior Vice President, General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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