ICBA opposes Affirm Bank’s ILC application

ICBA and the Bank Policy Institute said the FDIC should not issue deposit insurance to Affirm Bank or any other industrial loan company applicant until Congress closes the ILC loophole.

Details: In a joint letter to the FDIC, ICBA and BPI said the Affirm application:

• Exploits the ILC loophole to avoid consolidated Federal Reserve supervision, relies heavily on its nonbank parent for core operations, and introduces potential conflicts of interest.

• Fails to satisfy key statutory factors under the Federal Deposit Insurance Act.

• Could pose a significant and unnecessary risk to the Deposit Insurance Fund and the broader financial system.

Background: A loophole in the Bank Holding Company Act allows commercial and fintech companies to own or acquire ILCs chartered in a handful of states without being subject to federal consolidated supervision.

New Legislation: ICBA last month expressed strong support for the Close the Shadow Banking Loophole Act introduced by Senate Banking Committee members John Kennedy (R-La.) and Andy Kim (D-N.J.) to close the ILC loophole.

More ICBA Advocacy:

• In a joint letter this month and national news release in December, ICBA expressed opposition to PayPal’s application to form an ILC.

• After the FDIC approved applications from Ford and General Motors to establish industrial loan companies, ICBA recently expressed serious concern with the approvals, citing the 2008 failure of GM’s ILC and its $17 billion bailout.

• ICBA last fall published a white paper detailing why policymakers should close the ILC loophole.

• ICBA in September told the FDIC that it has a statutory duty to reject ILC applications that pose undue risks to the DIF and fail to serve the convenience and needs of their community.