ICBA Opposes PayPal Application to Form Industrial Loan Company 

Washington, D.C. — The Independent Community Bankers of America (ICBA) today expressed strong opposition to PayPal’s application to form an industrial loan company—a type of financial institution that receives federal deposit insurance while avoiding full regulatory oversight.  

“The FDIC should deny ILC applications from PayPal and other Big Tech companies and not allow these nonbank firms to benefit from the federal safety net while avoiding prudential regulation and supervision at the holding company level,” ICBA President and CEO Rebeca Romero Rainey said today. “Any company that wishes to own a full-service bank should be subject to the same restrictions and supervision that apply to any other bank holding company.” 

In a recent white paper, ICBA details why Congress should close the loophole and the FDIC should delay final decisions on pending ILC deposit insurance applications until all stakeholder feedback is fully incorporated. As the white paper recounts, 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, leaving a dangerous gap in safety and soundness oversight and introducing unnecessary systemic risk into the banking system. 

Recent ICBA polling shows consumers share ICBA’s concerns with the ILC loophole. According to the polling of U.S. adults conducted by Morning Consult in June: 

• 61% — including 64% of Democrats and 64% of Republicans — agree that allowing commercial companies to own banks without being subject to all banking regulations could make the financial system riskier. 

• 59% — including 61% of Democrats and 61% of Republicans — agree that the ILC charter creates a loophole for companies to avoid regulations that traditional banks must follow. 

With a troubling number of new ILC applications for deposit insurance pending before the FDIC, ICBA recently called on the FDIC to reject the applications of ILCs that pose undue risks to the Deposit Insurance Fund and that fail to serve the convenience and needs of their communities. ICBA looks forward to continuing to work with policymakers on concerns with the ILC loophole. 

About ICBA 
The Independent Community Bankers of America® has one mission: to create and promote an environment where community banks flourish. We power the potential of the nation’s community banks through effective advocacy, education, and innovation. 

As local and trusted sources of credit, America’s community banks leverage their relationship-based business model and innovative offerings to channel deposits into the neighborhoods they serve, creating jobs, fostering economic prosperity, and fueling their customers’ financial goals and dreams. For more information, visit ICBA’s website at icba.org.