Industrial Loan Company Charter

The Industrial Loan Company (ILC) charter dates back to the late 1950s, when the FDIC began insuring ILC deposits. Over the years, competitive fears and changing Administrations have caused the charter's use to wax and wane. The current Administration is focused on deregulation, innovation, and open-market opportunity. This outlook has sparked renewed interest in these banking charters.

The ILC charter and regulation 

An ILC is a state financial institution that may be chartered in one of seven States – Utah, Nevada, California, Colorado, Minnesota, Hawaii, and Indiana. Utah hosts the majority of active charters. The States require the ILCs' deposits to be insured by the Federal Deposit Insurance Corporation (FDIC). As a result, the FDIC has federal supervisory oversight. 

Information regarding ILCs under Title 12 of the United States Code (USC) can be found within the provisions governing the FDIC and the Bank Holding Company Act (BHCA). 

BHCA key items: 

• ILCs are excluded from the definition of a bank in the BHCA: 
  • They must be organized in one of the seven States under the statute and required to have FDIC insurance, and 
  • Have assets under $100 million or cannot accept demand deposits (either one).  
• Because of this exemption, a company (parent) can own or control an ILC without being classified as a bank holding company (BHC). As a result, this allows commercial firms to own a bank-like entity without being subject to Federal Reserve supervision.   

FDIC key items: 

• Along with the ILC’s state supervisory, they are supervised by the FDIC, subject to the Federal Deposit Insurance Act
• As an insured and federally supervised bank, they must file a call report (FFIEC 031 041 or 051) 
• ILCs are also subject to restrictions on transactions with affiliates 
• Parents must show they are a “source of strength” to the ILC. 
  • The ILC Parent must enter into a written agreement with the FDIC 
  • The Parent must maintain the ILC’s capital and liquidity at levels the FDIC deems appropriate 
  • Provide an annual report on operations, a list of subsidiaries, and such 
  • They must consent to examinations 

With the change in Administration, the FDIC was tasked with reviewing the ILC regulations. As a result, in 2025, the FDIC withdrew the previous Administration’s 2024 proposal, which would have imposed stricter regulations on ILCs and their parents. Later in 2025, the FDIC posted a Request for Information (RFI) on ILCs and their parent companies. The FDIC is soliciting comments on its approach to evaluating the statutory factors applicable to certain ILC filings.  

Impact and opportunity for commercial enterprises 

In the last 12 months, a number of applications and conditional approvals have been issued, with a concentration in the automotive and fintech industries. Applications have been filed by: Stellantis, Nissan, OneMain, Affirm, and PayPal. Three conditional approvals have also been given: Ford Credit, GM Financial, and Edward Jones. More approvals are expected soon. The recent approvals demonstrate a shift from policy to practice, signaling that the path is open for companies that meet the FDIC’s safety and soundness standards. 

An ILC charter allows non-financial firms and fintechs to own a bank, accept insured deposits, and access the federal payments system without being classified as a bank holding company. The key benefits include: 

Key challenges for applicants 

There are risks and disadvantages to an ILC charter; they stem from regulatory scrutiny and the potential for reputational damage. The primary challenges include: 

How Regnology can support 

A successful ILC strategy requires a technology infrastructure that can meet federal banking standards from day one. Regnology’s solutions are designed to address these specific compliance and operational challenges. 

• To manage supervisory reporting, Regulatory Reporting Hub (RRH) automates the data and submission requirements of the FDIC, ensuring accuracy and timeliness.  
• To support governance and financial control, Regnology Finance Hub (RFH) centralizes financial data, automates core accounting processes, and ensures full transparency across the finance workflows. Features include an accounting engine, reconciliations, data lineage, built-in analytics and reports, and IFRS/GAAP compliance. Capabilities include: IFRS-9, Expected Credit Loss (ECL), Ledger, and Financial Consolidation.  

By implementing a robust compliance framework from the start, your organization can confidently pursue the strategic benefits of an ILC charter while effectively managing its risks.