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!
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