John Boucher, president and chief operating officer of South Shore Savings Bank, gave testimony opposing Wal-Mart’s application to offer check-cashing services in Massachusetts at the final public hearing on the matter, which was held in Quincy last week.
Wal-Mart last week took one final shot at convincing the state Division of Banks it would be filling a community need by offering check-cashing services at all of its 44 retail stores in Massachusetts.
The 44 applications filed by the 800-pound gorilla of the retail world have faced opposition from community bankers, credit unions, financial services trade associations and other check cashers from the onset. During the past few weeks, the DOB held seven hearings across the commonwealth to give members of several communities a chance to weigh in on the matter, culminating with a final session in Quincy last Wednesday, the only hearing among the seven set in a Greater Boston venue.
Representatives of Wal-Mart Stores East touted the retail chain’s record regarding current check-cashing operations outside of Massachusetts and pointed to charitable contributions made by the company locally and nationally, hoping to convince state regulators of Wal-Mart’s character and intent.
Scott Sandlin, senior director of Wal-Mart’s financial service division, said on Wednesday that the retailer already is cashing checks in 45 other states. He said the store cashed $9.2 billion worth of checks last year. Responding to criticism that Wal-Mart offers check-cashing to entice spending in their stores, Sandlin said that 98 percent of the face value of those checks was cashed without store purchases.
He said Wal-Mart is thinking about the consumer when it comes to check-cashing services, claiming the company’s $3 fee cap is the lowest around.
“Check-cashing services would be an important addition to the services Wal-Mart provides in Massachusetts,” said Sandlin. “Wal-Mart’s experience shows that its consumers find the lower fees and the ability to cash checks while shopping at any checkout counter preferable to other means that may be available.”
At a previous hearing in Framingham on June 8, one woman testified on the store’s behalf and agreed that the service would be a benefit to consumers.
However, the written comments and testimony submitted in opposition to the applications has far outweighed comments backing the plan. Still, the hearings remained sparsely attended. One local bank executive and one check cashier testified against Wal-Mart last week.
According to David Cotney, chief executive officer of the DOB, six banks, two credit unions, two check cashiers, two trade associations and two state representatives showed up at the previous hearings to speak in opposition to the applications. The DOB did receive several other written comments and will be collecting those until Wednesday of this week, when the comment period on the applications ends.
Cotney said there in no time limit on how long the DOB will take to make a decision. However, he did say the process would likely be completed within the next year. Cotney said the DOB plans to fully evaluate the situation.
“Obviously, there are a substantial number of applications,” he said, adding that regulators have the ability to approve or deny each of the 44 applications separately.
Cotney also said the DOB recently has rejected check-cashing licenses from other applicants for failing to demonstrate a public need for the service.
John Boucher, president and chief operating officer of South Shore Savings Bank, gave testimony on behalf of the Massachusetts Bankers Association, which represents 210 banks, at the final hearing. The Weymouth-based bank also has a branch in Quincy where the hearing was held. Boucher told DOB officials that Wal-Mart would not be filling a void for the unbanked population of the area. In fact, he said, Wal-Mart’s plan could be counterproductive to efforts by area banks to reach out to new segments of the population and encourage them to save money by opening accounts.
Boucher told representatives from the DOB that the last thing Quincy needs is another place to cash checks.
“There are 12 banks and three credit unions that service 90,000 residents in the city through 28 branches,” said Boucher. “The South Shore is an extremely competitive market, with depository institutions offering a wide range of products and services to all members of the community. The public is well served, and we do not believe that approval of [Wal-Mart’s check-cashing] license will provide any significant convenience to the residents of this area.”
Boucher also expressed concerns about Wal-Mart’s motives for entering the check-cashing business in the Bay State. He said the pricing for Wal-Mart’s check-cashing service is competitive with a $3 cap, but said a low cost for the service doesn’t mean consumers will benefit.
“I hope we can all agree that their motivation for such cannibalistic pricing is not altruistic. In fact, their check-cashing model throughout the country can be summed up as making it easier for consumers to spend their hard-earned paycheck at Wal-Mart rather than setting aside some as savings,” he said. “The fact that Wal-Mart will cash checks at the register in their stores is a clear sign that those using the service will cash their hard-earned payroll check only when making a purchase.”
Sandlin said Wal-Mart cashed approximately 24.7 million checks across the country in 2005. He said 21.2 million of the consumers using the service cashed checks without buying anything from the store. “So, approximately 86 percent did not make a purchase,” he said,
While both DOB officials and bankers questioned how reliable the retailer’s statistics were, Sandlin was not able to say if customers could have used other forms of payment besides the cash they received from their check to make purchases.
Adding to the controversy is Wal-Mart’s federal application for an industrial loan charter. Local bankers worry if the ILC is approved Wal-Mart could be in a position to enter the retail banking business. Boucher is one of the bankers who worries that Wal-Mart has bigger plans in the financial services area than it is letting on.
“Wal-Mart’s management cannot have it both ways. In Washington, the company claims to need an ILC to process back-office debit and credit card transactions and has no interest in retail banking. In Massachusetts, they’re applying for a retail check-cashing license to serve the unbanked. Which statement is correct?” said Boucher.
