They asked Waters to schedule a markup of H.R. 5912, introduced by Reps. Chuy Garcia, D-Ill., and Lance Gooden, R-Texas. The legislation would eliminate an exemption to the Bank Holding Company Act that permits ILCs and their corporate owner to operate outside that law’s regulatory framework.
Why the Groups Involved Want Stricter Regulations
The groups said that currently any organization may own a full-service, FDIC-insured bank, without being subjected to the same oversight or limitations on the mixing of banking services and commerce that Congress has instituted. They noted that when the exemption was established, ILCs were small financial institutions that provided small loans to industrial workers who did not qualify for credit elsewhere.
Since then, large commercial companies have used the ILC charter to gain access to the financial system. The groups said that ILCs can offer mortgages, credit cards and consumer loans. For instance, Wal-Mart applied for an ILC charter, but withdrew it in 2007 after the FDIC extended a temporary moratorium on charters.
In their letter to Chairwoman Waters, the groups noted that technology firms offering a wide variety of services may acquire a full-service bank.
Earlier this year, the FDIC said it expected additional applications for ILC charters. “The FDIC anticipates potential continued interest in the establishment of industrial banks, particularly with regard to proposed institutions that plan to pursue a specialty or limited purpose business model,” stated the agency.