Turns Out Regulators Aren't Too Keen On Ice Cream Shops Going Into The Banking Business

Although federal regulators never caught onto my father’s First Bank of Dad, they’re totally paying attention to a Pittsburgh man who’s set up his own community bank right at his ice cream and coffee shop. He even doles out interest in the form of gift cards to his business, which might go over well with his customers, but there are rules against that sort of thing.

The Pittsburgh Post-Gazette says the man is just trying to offer residents low-cost banking services after his bad experiences with big banks. He has a handful of depositors and has even made three loans, but his ice cream social might be ruined by state banking regulators before that ever happens.

“I’m just really clear that the retail banks in Pittsburgh are not out in the best interest of small businesses or individuals,” he said. His fliers advertise the bank’s services as “low cost and non-punitive.”

Unfortunately, any place that takes money or makes loans has to be on the up-and-up with regulators.

“We’re not OK with what he is doing. We’re [going to be] telling him to stop,” a Pennsylvania Department of Banking spokesman said, adding that the ice cream shop is now in a gray area. “We don’t have the authority to punish him, but the DA does. If he doesn’t stop, I think he will be hearing from the district attorney.”

The owner claims that he doesn’t have to follow the charter requirements because his bank is actually a gift card program. Customers who deposit at least $100 earn 5% interest in credits that can be used to shop at the store. However, he does admit that it’s actually pretty much a bank, when you get down to brass tacks.

“Quite frankly, it is a bank,” the owner said. “It really is a creative solution to banking in a new economy.”

I’d like sprinkles on my next cash withdrawal, please.

Shadyside ice cream bank wants to handle your cold, hard cash [Pittsburgh Post-Gazette]

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  1. dolemite says:

    Banks: “Look, we’ve all colluded, bribed and scraped for YEARS to be able to fleece billions out of consumers with our arbitrary feels and high interest rates. We’ll be damned if we let some schmoe start a new business model that actually provides benefit to both consumer and financial institution”.

    • failfailfail says:

      Consumerist readers: “We need to regulate the banks. Except this one that ignores all banking regulations.”

      • HomerSimpson says:

        Ice cream shop opener: “Hey why can’t I rip people off like the banks do? IT’S NOT FAIR!!!!”

      • Gameover says:

        actually as this article seems to show, he’s not breaking any of the banking regulation rules or else they I presume they would have the power to do anything. As mentioned by the shop owner, the way he runs it doesn’t fit in the mold of a “bank” so it’s not actually breaking any laws at all if what he says is true. Might just be a loophole though

        • MarkFL says:

          Actually there are all sorts of requirements for banks. I’m not expert on this, but I know they have to maintain a certain level of cash on hand in relation to the the deposits and loans they are dealing with.

          The shop owner is very much accountable for what he does with, let’s be honest, other people’s money. What he does with the money is probably the key. If he’s investing the money, one could argue he’s also acting as a securities broker, which also has requirements (like having a license).

  2. Sarek says:

    And if his ice cream business goes belly-up, what happens to my deposit?

    • Oh_No84 says:

      Same thing as any bank or investment that does not have FDIC insurance. You lose your money.
      Not a big deal, if the benefits outweigh the risks for you.

    • Maxedaddy says:

      Well, since the FDIC insurance money is basically our own tax money used to pay our own losses? Just what do you think you are gaining by banking with big banks? All they do is have insurance that makes the public foot the bill if anything goes wrong!

    • arcticJKL says:

      Interesting question, what happens if I buy $500 in gift cards at any other ice cream store and it goes belly up?

  3. Applekid says:

    What sets us apart from other banks is that other banks are banks.

    • MarkFL says:

      I’m trying to decipher whether you mean it’s good that he’s not a bank or bad. Could easily go either way.

  4. nugatory says:

    ebay/paypal does it, so why not this guy?

    • Blueskylaw says:

      Because ebay/paypal follow, umm, because the law let’s
      ebay/paypal pra. . . umm, Damn, that’s a REALLY good question.

      • TheRealDeal says:

        Paypal doesn’t make loans. That’s usually the key item about what makes a bank a bank. Believe me, I’ve been a huge believer that Paypal should be subject to banking regulations, but that’s the reasoning currently.

        • Blueskylaw says:

          So I can open up an ice cream shop that takes deposits and
          pays interest on said deposits as long as I don’t give out loans?

          • NeverLetMeDown2 says:

            That’s called “letting people lend you money,” and yes, you can let people lend you money.

          • humphrmi says:

            Without the loans, he is – as he first claimed – offering rewards on buying gift cards. Deposit $50? Doesn’t Target take $25, $50, and $100 “deposits” all the time, and then later let customers “withdrawal” those deposits by redeeming a plastic card? So what’s the problem with offering a reward on that gift card, instead of gouging the customer for every penny in fees?

            • MarkFL says:

              Gift cards generally don’t charge interest. They are not inherently money-making operations, unless they charge fees for non-usage, but most places have stopped doing that. They’re more like layaway, but you don’t have to pick out the product right away.

        • There's room to move as a fry cook says:

          … and PayPal don’t take deposits.

        • YouDidWhatNow? says:

          Yes they do. You can get a PayPal credit card. Which is a loan.

    • Tedicles says:

      Exactly…I thought Paypal had some special exemption to do what they do and not get regulated like a bank. Since they are not regulated in the same way, they can keep on with their shenanigans and hold people’s money, etc. I can only assume they have a business license which specifies how they need to deal with the transactions, but they are certainly NOT a bank and not beholden to the sames rules and regulations as normal banks.

    • There's room to move as a fry cook says:

      Paypal is a payment processor – you don’t make deposits to your own account. What is in your account is money you’ve received from sales or other transactions from others and not yet withdrawn.

  5. Blueskylaw says:

    “However, he does admit that it’s actually pretty
    much a bank, when you get down to brass tacks”

    This man is practicing honesty with a statement
    like that, unlike any big bank in existence right now.

  6. Maxedaddy says:

    Well if corporations are people too, that makes this man a corporation. So under that scrutiny he should have the free market right to be a banking corporation if he wants? But then the regulators would say, “You have to have to meet certain criteria!” Well, If Corporations are people then he meets the criteria of being a people! Nuff said! We need to do this everywhere! The banking regulators are keeping us from deciding where and who we can bank with! That is gangster politics!

  7. ancientone567 says:

    The man should say, Look I am just a transfer service NOT A BANK! So you can’t regulate me” ;)

  8. Jane_Gage says:

    So where does he keep it? A safe in his office? Sounds like a crack addict magnet to me.

  9. Rivercat says:

    My local bubble tea place has a sign in the window that says they offer loans. Must be making the Wells Fargo next door and the Chase across the parking lot quake in their boots.

  10. ahecht says:

    Every time you use that picture it makes me miss Thrifty Ice Cream. There’s nowhere on the east coast to get cylindrical ice cream.

    • Shinzakura says:

      According to an article in the OC Register last year, apparently Rite Aid plans to take Thrifty’s Ice Cream nationwide. Hoping they’ll plant one in the DC area soon.

  11. Lt. Coke says:

    This is an interesting business model. Invest in your local business, gain a small interest rate and maybe ‘cash back’ on purchases at that store.

    I think the better solution, though, is for local businesses to team up with credit unions to make these kinds of offers.

  12. dcatz says:

    Government tyrants at work again.

    If he wants to loan his money to people or to accept deposits from people, it is none of the state’s business unless he commits an act of fraud.

  13. quail20 says:

    His downfall is that he said “yes” he is a bank. Now if he said he wasn’t a bank like PayPal does, then he could get away with it.

  14. dush says:

    Deposit your money, get services in return. In this case gift cards for his product.
    That general description could make any business into a “bank.”

  15. momosgarage says:

    Can’t he just get a pawnbrokers license and call it a day? They can legally make loans, but I’m not sure if he has to tie the license to his actual ice cream shop locations. If he does need to do that, he most likley will have some trouble getting the permit from the local government.