Magazine article American Banker

Echo Clearing Firm Drops Plans for Bank Charter

Magazine article American Banker

Echo Clearing Firm Drops Plans for Bank Charter

Article excerpt

Electronic Clearing House Inc., a credit card and check processor, has withdrawn its applications for a bank charter, saying its slumping stock price and an unwarranted association with Internet-only banking had hurt its prospects.

Echo, which serves more than 58,000 merchants and U-Haul dealers, applied in 1999 to the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. for a bank charter so it could hold deposits for those customers. On Wednesday the Agoura Hills, Calif., company announced that it had given up.

It said that it had intended to use the Internet to communicate with the bank's merchant customers, but that regulators mistakenly believed it wanted to use the Internet to attract depositors. Many Internet banks have struggled in recent months.

"We weren't a true Internet bank, but we were getting lumped together with Internet banks," said Jack Wilson, senior vice president of Echo. "There was a thin line, and it became a little bit blurred."

If Echo applies again it will be much more specific about how it plans to use the Internet, he said.

Another problem was Echo's wavering stock price, Mr. Wilson said. "When we initially applied the market conditions were pretty good and our stock value was pretty good, but in the time it has taken the process the entire market has declined," he said. "We are concerned about the treatment of our current shareholders."

Echo's stock traded at about $2.81 at the end of December 1999, when it applied for the charter. …

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