ICBA Urges FDIC to Reject Applications Under Industrial Loan Company Loophole to Prevent Risks to Consumers

Washington, D.C. (Sept. 19, 2025) — The Independent Community Bankers of America (ICBA) today told the Federal Deposit Insurance Corporation (FDIC) that it has a statutory duty to reject the applications of industrial loan companies (ILCs) that pose undue risks to the Deposit Insurance Fund and that fail to serve the convenience and needs of their communities.

In a comment letter responding to the FDIC’s request for information on how the agency reviews filings submitted by ILCs, ICBA noted these institutions present outsized risks to the Deposit Insurance Fund and consumers due to their exemption from consolidated supervision by the Federal Reserve Board under the Bank Holding Company Act and their ownership by non-financial parent companies. This loophole allows large commercial-financial conglomerates to introduce unnecessary systemic risk into the banking system, as illustrated by the 2008 failure of the General Motors Acceptance Corporation and its $17.2 billion taxpayer-funded bailout.

“ICBA and the nation’s community banks call on the FDIC to reject deposit insurance applications from industrial loan companies, which present excessive risks to the nation’s financial stability and U.S. taxpayers,” ICBA President and CEO Rebeca Romero Rainey said today. “Rejecting ILC applications in line with the FDIC’s duties under the Federal Deposit Insurance Act will ensure commercial firms do not benefit from the federal safety net while they avoid prudential regulation and supervision at the holding company level. 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.”

As ICBA has detailed in a comprehensive white paper, the ILC charter allows applicants’ parent companies to own and operate FDIC-insured banks while avoiding the Bank Holding Company Act regulations that apply to other traditional banks. In addition to creating conflicts of interest, the commercial activities of ILC applicants pose risks to the FDIC's Deposit Insurance Fund, the financial system, and consumer privacy. Further, only Utah and a few other states grant ILC charters, allowing this handful of states to dictate U.S. banking policy while serving as safe havens for companies that are unwilling to comply with the same set of rules and regulations that otherwise apply to the traditional bank charter.

Today’s ICBA comment letter aligns with recent ICBA polling showing consumer 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.

Today’s ICBA comment letter is available on its website. Supporting a level regulatory playing field to ensure financial policies do not erode the competitive landscape is a key priority of ICBA’s “Repair, Reform, and Thrive” plan and open letter to the 119th Congress.

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.