A while ago we reported on the growing number of
persons who were buying a car through their membership
retailers like Costco. But it’s not just vehicles that are being
offered at those discounters and warehouse stores. As the
New York Times pointed out in a recent article, shoppers
can now get everything from car loans to start-up money
for small businesses to home mortgages at those stores.
Part of the reason that the business
is available to retailers like Costco and
Walmart is that about 10 million U.S.
households do not use a bank at all and
another 24 million households have a
bank account but still use non-bank
financial services like pre-paid cards.
A few years ago, Walmart tried to
open its own bank, but was rebuffed by government
regulators. But pre-paid cards, like the ones Walmart offers
now, are only loosely regulated. That means that customers
who use that service typically pay more than they would to
a bank, but also might not be eligible for those services at a
regulated financial institution.
The Times says Costco began offering mortgages–
from small lenders–about two years ago. It makes little
money from the service, but the idea is to keep consumers
as members, paying membership fees– the retailer’s real
profit center. And Home Depot has become a kind of bank
itself, lending people the money for major renovations. As
in the case of other retailers, its fees are more than might
be charged by a bank, but its standards for lending are less