Joint Consumer Group and Bank Trades Letter To Congress

On HR5912, To Close the Industrial Bank Loophole
Last updated: 4/5/2022

Download this letter from a coalition representing a broad cross-section of regulated banks, credit unions, and consumer protection organizations to strongly urge Congress to promptly close the industrial loan company (ILC) loophole in current law by passing the bipartisan H.R. 5912, The Close the ILC Loophole Act, introduced by Representatives Chuy Garcia (D-IL) and Lance Gooden (R-TX).


"ILCs operate under a special exemption in federal law that permits any type of organization — including a large technology company or commercial firm — to control a full-service FDIC-insured bank without being subject to the same oversight and prudential standards or limitations on the mixing of banking and commerce that Congress has established for the U.S. financial system. When this exception was initially created, ILCs were typically small financial institutions, and companies used the charter for the limited purpose of providing small loans to industrial workers who could not otherwise obtain credit. However, since that time, large commercial companies have used the ILC charter to gain access to the U.S. financial system and control entities that have essentially all of the powers of a full-service commercial bank, including the ability to accept deposits, make consumer and commercial loans and effectuate payments."

"Although ILCs have the powers of a commercial bank, their corporate owners — unlike the owners of commercial banks — are not subject to consolidated supervision and regulation by a federal banking agency, which can allow risks to build up in the organization outside the view of any federal supervisor. Simply put, this regulatory loophole creates safety and soundness risks for the institution, risks to the financial system and additional risks for consumers and taxpayers."

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