Why bank with banks when you can bank with ice cream?
April 10th, 2013
In
a free market competition provides much needed quality controls. If
consumers are dissatisfied with a service provider that’s a signal to
entrepreneurs that it’s an industry where competition would be
profitable. With all the outrage people have toward big banks you’d
think there would be small Mom and Pop competitors sprouting everywhere,
but banking regulations largely prevent this from happening. Well, what
happens if someone just ignores those regulations and give their
community the banking services they want? Well, a Shadyside ice cream
shop is finding out, making them our
Rebel of the Week.
Despite threats of big fines, Ethan Clay is not going down without a
fight. He opened his own community bank last summer out of his ice cream
and coffee shop,
The Oh Yeah! and despite the aggressive response of the Pennsylvania Department of Banking and Securities, he’s not shutting his doors.
Ethan is offering check cashing, “neverdraft” loans and interest on
deposits in the form of store credit. Pretty innovative. Avoid bank
fees. Get free ice cream.
Sociocrat Ed Novak said they planned to shut him down because he
never applied for a bank charter. They sent him a letter citing multiple
esoteric violations in the banking regulations they claim could trigger
$10,000 in fines, but Ethan said most of violations were just
semantics, taking issue with the way he phrased his services. He said ”I
learned a lot from the letter. I didn’t know it was against the law or
that you couldn’t say the word ‘bank.’” So, he changed the name and
changed the advertising and kept operating.
It’s no longer the Whalebone Intergalactic Cafe “Bank.” It’s the
Whalebone Intergalactic Cafe “Banco” which is just “bank” in Spanish. He
no longer accepts “deposits” he sells “never-ending gift cards” that
earn store credit. Instead of making “loans” he offers “neverdraft cash
sets” of $100 for a $5 monthly “rental” fee. And he added the
disclaimer, “Whalebone Intergalactic is not a bank or member FDIC.” And
he said, ”Bankers can of course afford to not be at work today (Columbus
Day). Whalebone is open daily, including all imperial holidays.” I like
his style.
Since then, Ethan hasn’t heard back from regulators. He said, “If
there’s still an issue of compliance, they haven’t been in communication
about it.” And the sociocrats have gone quiet. Their spokesman, Novak
declined comment after Ethan changed the rhetoric.
Ethan got started after a bad experience with a big bank that charged
him $1,600 in fees for an overdraft of $200. That’s the free market at
work. See a problem, do it better. Bravo!