Wal-Mart can break leases with some banks in stores

Wal-Mart Stores Inc. acknowledged Wednesday that it can cancel leases with some banks in its stores more easily than it indicated in testimony given to federal regulators as it sought permission to set up an in-house payment center.

The acknowledgment came in response to questions from a reporter for The Associated Press who viewed the lease terms for at least one community bank with a contract with Wal-Mart.

Wal-Mart said Wednesday that, under some of its contracts, it and its tenant banks can cancel long-term leases after five years. Wal-Mart had told the Federal Deposit Insurance Corp. last month that banks alone could decide whether to stretch their five-year leases.

The contract also limits Wal-Mart’s costs if it breaks the lease at any point, capping damages at the equivalent of one year’s rent. Wal-Mart declined to say how much a typical rent runs, but a spokesman said the lease provides protection for banks against early termination by allowing a tenant bank to go to court to challenge such a move.

The issue is important because longer-term leases are part of Wal-Mart’s defense against community bankers and others who oppose the world’s largest retailer’s bid to run its own bank.

Wal-Mart acknowledged Wednesday that some leases give both sides the option to end a lease — but said the majority of contracts it holds reserve that right to the tenant banks. It said it was in the process of changing all remaining leases to put opt-out decisions solely in the tenant banks’ hands.

“Our intent is to eliminate those exceptions,” Wal-Mart spokesman Marty Heires said.