US FDIC Requests Comment on Industrial Loan Company Framework

On July 15, 2025, the Federal Deposit Insurance Corporation (“FDIC”) requested comment on its framework for reviewing applications for deposit insurance from industrial loan companies and industrial banks (collectively, “ILCs”). In doing so, the FDIC has signaled that it will seriously consider applications from ILCs for deposit insurance.

The ILC option has generated a significant amount of public interest in recent years, as various entities explored the feasibility and business opportunities of including an ILC as part of their operations. This interest has only increased as fintechs and other companies see the potential benefits from nationwide lending programs, interest rate exportation, state licensing exemptions, and inexpensive deposit funding.

The FDIC will accept comments in response to this Request for Information (“RFI”) until September 19, 2025.

Background of ILCs

ILCs are state-chartered entities that are authorized to engage in certain banking activities but are not treated as banks for other regulatory purposes. Specifically, an ILC is excluded from the definition of “bank” in the Bank Holding Company Act (“BHCA”), meaning that a company that controls an ILC is not a bank holding company (“BHC”). Only a handful of states are authorized to charter ILCs that qualify for the relevant exemption in the BHCA, and that list cannot be expanded without Congressional action. ILCs are currently operating or offered in California, Utah, Nevada, Hawaii, and Minnesota.¹

ILCs are generally permitted to exercise powers and privileges similar to those of a traditional commercial bank. ILCs can offer a full range of loans, such as consumer, commercial and residential real estate, and small business loans. As state-chartered, FDIC-insured depository institutions, ILCs also can export their home state’s interest rates and certain fees to customers residing elsewhere (effectively allowing ILCs offering credit to charge their state’s maximum allowable interest rates in other states), and can generally branch across multiple states (although most do not). Where authorized by state law, an ILC can offer demand deposits if its assets are less than $100 million and still qualify for the bank exemption in the BHCA.

While an ILC is established under state corporate law, ILCs generally seek deposit insurance from the FDIC, which in turn subjects them to FDIC supervision and regulation. As noted in the RFI, this includes restrictions on transactions with affiliates, insider lending regulations, community reinvestment obligations, and anti-money laundering compliance requirements. Since at least 2006, the FDIC has discouraged most ILC applications, particularly those from ILCs that would be controlled by companies that engage in non-financial activities. However, recent changes in

FDIC leadership indicate that the agency will be much more receptive to applications for deposit insurance from ILCs.

The main difference between an ILC and a traditional insured bank is how the ILC’s parent company is regulated. A company that controls an insured bank generally is a BHC under the BHCA. BHCs are subject to consolidated federal supervision by banking regulators, and the BHC and its subsidiaries are restricted from engaging in most commercial activities. By contrast, the owner of an ILC is not a BHC, and therefore, it and its nonbank subsidiaries are not subject to the BHCA’s activity restrictions or consolidated federal supervision by the Federal Reserve.

While the FDIC has imposed some restrictions and requirements on parent companies of ILC to address its concerns with the charter, those restrictions apply only to companies that acquire or establish an ILC after April 1, 2021, and do not address preexisting charters.

Request for Comment

The RFI is partially structured around the six statutory factors that the FDIC is required to consider when reviewing applications for deposit insurance, including applications from ILCs. Each section has one or more questions that the FDIC is seeking information on.

1. General Questions: The RFI asks how the FDIC should apply and tailor its application of the statutory factors for evaluating an ILC’s request for deposit insurance. In particular, it asks how the analysis should be tailored if the parent company of an ILC is (i) a retail company, (ii) a company that is financial in nature, (iii) a manufacturing or other industrial company, or (iv) a technology company. It also asks whether the presence of an affiliate that provides the same lending (or other) services to customers of the parent company should affect the analysis of the ILC’s application for deposit insurance.
2. Capital Structure and Adequacy: The FDIC asks how it should assess an ILC’s capital adequacy. This may relate to the extensive agreements that the FDIC has required some parent companies to individually negotiate as a condition of an ILC receiving deposit insurance (e.g., capital and liquidity maintenance agreements).
3. Risk to the Deposit Insurance Fund (“DIF”): The RFI asks whether certain business models an ILC might pursue present unique risks to the DIF. It also asks how an ILC’s reliance on a financial parent company compares to reliance on a non-financial or commercial parent company.
   
   In the context of the FDIC’s resolution authority, the RFI asks if ILCs present different types of resolvability concerns depending on the nature of the parent company or the business plan of the ILC. If ILCs do present a heighted level of risk to the DIF, the FDIC asks how it could mitigate that risk, such as by requiring the submission of a resolution plan.
   
   
4. Convenience and Needs of the Community: The RFI asks how the FDIC should assess the convenience and needs of a community to be served by an ILC applicant. For example, it asks whether an applicant intends to use the ILC to enable the parent company or its affiliates to offer products and services at a reduced cost be viewed favorably for purposes of this factor because of those consumer benefits.
5. Corporate Powers: The RFI asks how the FDIC should assess whether an ILC’s corporate powers are consistent with the purposes of the Federal Deposit Insurance Act (“FDI Act”).
6. Other Statutory Factors: The RFI asks how the FDIC should assess the other statutory factors under the FDI Act, Change in Bank Control Act, and Bank Merger Act with respect to a filing involving an ILC.

The RFI also requests comment on four topics related to the parent companies of ILCs.

1. Foreign-Owned ILCs: The RFI asks whether applications relating to ILCs controlled by foreign (non-US) parent companies present unique considerations, and if so, what types of mitigants the FDIC could consider for mitigating related risks.
2. Size and Market Share: The FDIC asks how it should evaluate ILC applications where the parent company is dominant in a non-financial industry and whether the proposed business model of the ILC should affect that view.
   
   The RFI also asks if a larger, more complex parent company with diverse product lines (e.g., retail e-commerce, cloud hosting, artificial intelligence) would be better able to weather economic downturns, and thus, be better able to serve as a source of strength to the ILC.
   
   
3. Non-Financial Parent Companies: The RFI requests information on the advantages and disadvantages of allowing non-financial parent companies to operate ILCs, and how such benefits and costs could be factored into the FDIC’s analysis of the statutory factors. Of particular note, it asks how the FDIC’s analysis should change if non-financial companies begin offering payment stablecoins.
4. Other Considerations: The FDIC asks whether it should consider factors, such as funding sources and degree of leverage for purposes of determining the ability of the parent to serve as a source of strength. Additionally, the RFI asks if there are conditions that the FDIC should consider including in an order of approval or non-objection to ensure an ILC’s parent company serves as a source of strength.

There are two other brief sections that ask (i) about the effectiveness of the regulatory and supervisory framework for ILCs and generally applicable banking laws that apply to ILCs (e.g., affiliate transaction restrictions, loan-to-one-borrower limits), and (ii) for any other comments on ILCs and their supervision.

Lastly, on the same day that the RFI was issued, the FDIC withdrew a 2024 proposal on changes to its process for assessing risks posed by parent companies of ILCs. This proposed rule would have enhanced and expanded the earlier FDIC regulations that imposed requirements on new parent companies of ILCs. Based on the feedback to the RFI, the FDIC will decide whether to pursue a new rulemaking on the topic.

Concluding Thoughts

The FDIC’s recent approval of deposit insurance for a Utah ILC, the issuance of the RFI, and the withdrawal of the 2024 proposed rule all signal the FDIC’s reopening of the path to deposit insurance for ILC applicants. As the Utah Department of Financial Institutions has at least six applications for ILC charters pending, including several from non-financial parent companies, the FDIC will need to evaluate these deposit insurance applications in the near future.

Fintechs and other entities thinking about an ILC, or another type of novel bank charter, should consider responding to the RFI to ensure that the FDIC understands their concerns and the continuing value of the charter. Based on the difficult experiences of prior ILC applicants, it will be important for the FDIC to understand the various business models and parent company activities when evaluating new applications and the long-term value of the charter.

 

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¹ ILCs formerly were offered in Colorado, but the law allowing ILC charters has since been repealed. Indiana’s status as a “grandfathered” state is unclear, with conflicting views by the FDIC and Federal Reserve, and it generally is not considered to be a viable state for future ILC charters.