ICBA supports Senate bill to close ILC loophole

ICBA expressed strong support for bipartisan legislation to close the industrial loan company loophole, which allows commercial companies to own full-service banks without full regulatory oversight.

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.

Bill Details: Introduced by Senate Banking Committee members John Kennedy (R-La.) and Andy Kim (D-N.J.), the Close the Shadow Banking Loophole Act would close the ILC loophole to mitigate risks to consumer privacy, the financial system, and the economy.

ICBA Statement: In a national news release, ICBA President and CEO Rebeca Romero Rainey said the legislation will ensure any company that wishes to own a full-service bank is subject to the same restrictions and supervision that apply to any other bank holding company.

Joint Letter: In a joint letter to Kennedy and Kim, ICBA and other groups thanked the lawmakers for introducing the Close the Shadow Banking Loophole Act, noting the loophole violates the longstanding U.S. policy that banking and commerce should remain separate.

Recent ICBA Advocacy:

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

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

• 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 Deposit Insurance Fund and fail to serve the convenience and needs of their community.