Join us on LinkedIn Follow us on Twitter Like us on Facebook
 
  OCTOBER RESEARCH STORE Already a subscriber? LOG IN
AddControlToContainer_DynamicNavigation6

Banks, credit unions, and consumer groups call for solution to ILC loophole

Add This Email A Friend Printer Friendly Version
0 comments
Banking, Legislation, Nonbank Financial
Wednesday, April 13, 2022
Banks, credit unions, bankers’ associations and consumer groups has sent a letter to Maxine Waters (D-Cal.), chair of the House Committee on Financial Services, and Patrick McHenry (R-N.C.), the House Financial Services Committee’s ranking member, calling for the passage of new legislation to close the industrial loan company (ILC) loophole which exists in current law.

ILCs operate under a special exemption in federal law which permits any type of organization, including technology companies and commercial firms, to control full-service Federal Deposit Insurance Corporation (FDIC) insured banks without being subject to the same oversight, standards and limitations on the mixing of banking and commerce that has been established within the financial industry.

When these exceptions were initially created, ILCs were primarily small companies chartered for the limited purpose of providing small loans to industrial workers. According to Federal Reserve research, larger companies have been using the ILC model in recent years to gain access to the U.S. financial system and control entities that have essentially all the powers of full-service commercial banks, including the ability to accept deposits, make consumer and commercial loans and effectuate payments.

The organizations signing onto this letter express concern over the fact that these ILCs have the powers of commercial banks, while their corporate owners are not subject to the consolidated supervision and regulations by federal banking agency. This allows risks to build up in the organization outside the view of any federal supervisor, the letter asserts.

“The risks to consumers and the financial system from ILCs are not theoretical,” the letter contends. “It should come as no surprise that several large companies that used the loophole to acquire ILCs, evading the type of consolidated supervision meant to ensure soundness and regulatory compliance, then subsequently required public bailouts during the 2007-2008 financial crisis.”

The letter also expresses concern over the growing presence of technology firms in the financial industry. The ILC loophole allows for technology companies entering the financial technology (fintech) realm to acquire full-service banks along with all of the privileges without these technology companies being subjected to the oversight and regulations of a financial company going through a similar merger. Additionally, because these corporate owners of ILCs are not considered bank-holding companies, they also evade the limitations imposed by Congress on the ability of banking companies to expand into new activities if their insured depository institution subsidiaries have a less than satisfactory record of performance under the Community Reinvestment Act.

“The time is now for Congress to close the ILC loophole before it is further exploited by firms seeking to gain all of the advantages of an FDIC-insured bank charter without the concomitant supervision and regulation that Congress has established for the corporate owners of full-service insured banks,” the letter concludes.

 

Today's other top stories
FDIC issues advisory to banks working with crypto companies
SEC files insider trading action against former crypto exchange manager
Senate holds hearing on risks in crypto and securities markets
House Republicans accuse Chopra of conspiring with states’ AGs
Democrats seek DEI data from fintech industry


COMMENT BOX DISCLAIMER:
October Research is not responsible for the comments posted on its websites by readers. We will do our best to remove comments that include profanity or personal attacks or other inappropriate comments.
Comments:

Be the first to leave a comment.

Leave your comment
CAPTCHA Validation
CAPTCHA
Code:
: 
: 
Your Email is for reporting purposes only. It will NOT be displayed.
Popularity:
This article has been viewed 2043 times.

Monthly Newsletter

Dodd Frank Update August 2022

Cover Story:

SCOTUS fires warning shot at overreaching agencies


Tweets from @DoddFrankUpdate/lists/industry-news
News by Topic   News by Edition   News by Agency   News by Industry   Special Reports   Webinars
Banking
Case Law
Consumer Protection
Financial Stability
Industry Spotlight
Legislation
Nonbank Financial
The TRID Journey
 
Dodd Frank Update May 2022
Dodd Frank Update June 2022
Dodd Frank Update July 2022
Dodd Frank Update August 2022
Archives
 
CFPB NCUA
CFTC OCC
FDIC OFR
FHFA SEC
FRB States
FSOC Treasury
FTC  
 
Appraisal
Broker-Dealer
Community Banks & Credit Unions
Land Title
Mortgage
Payday Lending
 
Forbearance Has Ended, Now What?
2022 State of the Industry
Mortgage Technology
Real Estate Compliance Outlook
Optimizing AI and Blockchain for the Future
Archives
 
Utilizing Tech for RESPA Compliance
Collaborating on eClosings
Economic Forecast Series
Industry and Regulatory Outlook
Archives

Library   About   Subscribe   Store
The Dodd-Frank Act Position Papers
Dodd-Frank Summary & History Legislation
Court Actions Regulations
Enforcement Documents Reports, Studies and Surveys
Guidance Documents Federal Register Notices
White Papers  
 
Dodd Frank Update
Contact / Editors
Advertise
Social Media
Are You An Expert?
Subscriber Agreement
 
Subscriptions
Free Email Updates
Try a Free Edition
 
NS3 The Summit
Other Newsletters
The Title Report
The Legal Description
Valuation Review
RESPA News
Copyright © 2011-2022 Dodd Frank Update
An October Research, LLC publication
3046 Brecksville Road, Suite D, Richfield, OH 44286
(330) 659-6101, All Rights Reserved
www.doddfrankupdate.com | Privacy Policy
VISIT OUR OTHER WEBSITES
> The Legal Description
> RESPA News
> The Title Report
> Valuation Review
> The October Store


Loading... Loading...
Featuring:
  • Delivery 3X a week plus breaking news as it happens
  • Comprehensive title insurance industry news
  • Recent acquisitions, mergers, real estate stats
  • Exclusive in-depth coverage of the industry's hottest stories
Featuring:
  • Delivery 2X a week plus breaking news as it happens
  • Comprehensive Dodd-Frank coverage
  • The latest information from the CFPB
  • Full coverage of Congressional hearings
  • Updates on all agency actions
  • Analysis of controversial provisions
  • Release of newest studies and reports
Sign up today and...
  • Be one of the first to know where NS3 is being held
  • Learn about NS3 speakers and sessions
  • Save on registration with Super-Early Bird rates
  • Discover the networking opportunities NS3 offers
  • Find out if CE credits will be offered for your area
  • And much more
Featuring:
  • Delivery 2X a week plus breaking news as it happens
  • Preview the latest RESPAnews.com Top Story
  • RESPA related headline news
  • Quote of the Week
Featuring:
  • Delivery 2X a week plus breaking news as it happens
  • Legal, regulatory and legislative information impacting the settlement services industry
  • News from HUD, Congress, state legislatures and other regulatory agencies
  • Follow the lobbying efforts of all the major national real estate services organizations.
Featuring:
  • Delivery 2X a week plus breaking news as it happens
  • The industry's only full-time newsroom
  • Relevant, up-to-date appraisal industry news
  • Covering the hottest stories and industry trends
NEWS BY TOPIC
EDITION
AGENCY
INDUSTRY
SPECIAL REPORTS
WEBINARS
LIBRARY
EMAIL UPDATES
ABOUT
SUBSCRIBE
Banking
Case Law
Consumer Protection
Financial Stability
Industry Spotlight
Legislation
Nonbank Financial
The TRID Journey
CFPB
CFTC
FDIC
FHFA
FRB
FSOC
NCUA
OCC
OFR
SEC
States
Treasury
Appraisal
Broker-Dealer
Community Banks & Credit Unions
Land Title
Mortgage
Payday Lending
Marketing Compliance for Lenders
Real Estate Compliance Outlook
Best Practices
Forbearance
2022 State of the Industry
Archives
2022 Economic Forecast Series
CFPB Update
Move to ANSI Standards
Tech for RESPA Compliance
Collaborating on eClosings
Industry and Regulatory Outlook
Complying with the New CFPB
Evolving Lender Relationships
RESPA Section 9
Getting to Know Your Regulators
Webinar Archives
Executive Interview Series
eClosing Solutions Showcase
Lender Associations
The Dodd-Frank Act
Dodd-Frank Summary
Court Actions
Enforcement Documents
Guidance Documents
White Papers
Position Papers
Legislation
Regulations
Reports, Studies and Surveys
Federal Register Notices
Proposals
Final Rules
GAO
Agency
Contact Us
Advertise
Social Media
Are You An Expert?
Subscriber Agreement