With the pluck of a cornered cat arching its back, Ethan Clay is not going down without a fight.
Despite threats of big fines by state banking regulators, the owner of a Shadyside ice cream shop who opened his own version of a community bank last summer isn't abandoning his mission -- although he has made some changes in the way he advertises his services.
In September, the Pennsylvania Department of Banking and Securities said it did not approve of the operation inside the Oh Yeah! ice cream and coffee shop on Highland Avenue that Mr. Clay launched -- offering check cashing, "neverdraft" loans and interest on deposits in the form of store credit -- as a low-cost alternative to fee-gouging banks.
"We're [going to be] telling him to stop," spokesman Ed Novak said at the time, noting that among other problems, Mr. Clay had not applied for a banking charter.
The department followed up with a letter in late November citing "multiple violations" that could trigger $10,000 fines, according to Mr. Clay.
He said the warning letter primarily took issue with "semantics, the way we phrased what we are doing." So he promptly made some changes.
The name of the operation went from Whalebone Intergalactic Cafe Bank to Whalebone Intergalactic Cafe Banco.
Instead of accepting deposits, Mr. Clay started advertising "never-ending gift cards" that earn store credit. Instead of making loans, he began offering "neverdraft cash sets" of $100 for a $5 monthly "rental" fee.
On his website -- www.theohyeah.com -- he added this disclaimer: "Whalebone Intergalactic is not a bank or member FDIC."
"I followed their letter to a 'T,"' he said.
Since then, Mr. Clay said he hasn't heard from regulators. "If there's still an issue of compliance, they haven't been in communication about it," he said Wednesday.
At this point, the banking department isn't talking. Mr. Novak declined comment this week when asked for an update. The department generally does not discuss ongoing regulatory matters unless a cease-and-desist order has been issued or a consent agreement has been reached settling the dispute.
Changes aside, if the posts on Mr. Clay's website, Twitter and Facebook pages are any indication, he remains committed to his cause.
"We are taking on the challenge of transforming the retail banking industry," his website states.
"PA dept of banks threatening us ... we keep growing," he tweeted in late December.
In November when Mr. Clay received the warning letter, he took time to post a word of appreciation. "Thank you Pa Dept of banking for primer on naughty words for non-banks," he tweeted.
Mr. Clay said Wednesday that he was being sincere.
"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,' " he said. "All of my old business cards, I have those in my secret stash."
Mr. Clay said any disdain he has is for big banks, which he likes to needle online.
"Typical banks run on interest, profit and greed. Whalebone runs on principle," he tweeted last fall.
"Bankers can of course afford to not be at work today," he posted on Columbus Day. "Whalebone is open daily, including all imperial holidays."
Mr. Clay said he got the idea for Whalebone -- an anagram of the words "whole bean" -- after unpleasant experiences with banks, including racking up some $1,600 in overdraft fees after overdrawing his account by $200.
So far, he said he has opened about 25 never-ending gift card accounts and has sold about a dozen "cash sets," with no defaults.
"Our aim is to create a model for future banking, even though we aren't a bank," he said.
He said he recently opened an "outpost" in Detroit, where he uses word of mouth to make short-term loans in the community.
"I haven't had any issues in Detroit yet," he said.
Mr. Clay said he is resolute in his goal of helping struggling people by lending them money so they can avoid big overdraft fees.
"Call it economic justice."
Patricia Sabatini: email@example.com or 412-263-3066. First Published March 29, 2013 4:00 AM