Getty Images/Photo Researchers R
Pittsburgh businessman's idea for a community bank that pays interest in ice cream shop gift cards drew scrutiny from state bank officials.
State regulators are cool on a Pittsburgh businessman's idea for a bank that pays interest in ice cream shop gift cards.
The Pennsylvania Department of Banking says they want Ethan Clay, 31, to shut down the community bank he's set up at Oh Yeah! ice cream and coffee shop.
"It's a strange case, we don't have the authority to go close an ice-cream store," Ed Novak, a spokesman for the Pennsylvania Department of Banking told The World Street Journal. "But we are going to do something. You can't mess with people's money."
Clay says he was motivated by unpleasant bank experiences to provide a simplified community bank offering savings accounts, check-cashing and loans. He calls the venture Whalebone Cafe Bank.
According to the WSJ, Clay charges a $4 fee for cashing checks, unless the customer has an account set up with him, in which case there is no charge. "You have to account for people bouncing checks, and we've had two checks bounce out of the 20 we've cashed."
Clay tells the Pittsburgh Post-Gazette he's not subject to the usual banking rules because his "bank" is actually a gift card program that pays out its 5.5 percent monthly interest in a made-up currency that can be used at his store.
Clay said he has $550 from depositors and has loaned $1,700, including his own seed money. "My goal is to get to $100,000 in deposits by Dec. 21," he said, according to the WSJ. "This is the prototype, but I hope to become the neighborhood bank."
Regulators are unmoved. Novak says if Clay doesn't close down "he will be hearing from the district attorney."
"If a bank goes under, the depositors get their money back," Novak said, according to the WSJ. "If the ice-cream store goes under, who knows what happens?"