Congresswoman Maxine Waters, chairwoman of the House Committee on Financial Services, wants to stop any new Industrial Loan Company (ILC) charters until further notice, citing concerns about outdated rules.
Waters wrote to Jelena McWilliams, chairwoman of the Federal Deposit Insurance Corporation (FDIC) , requesting the agency wait until new regulatory proposals on ILC charters are given the OK before any more of the charters are passed through.
The FDIC plans to issue a proposal that will change the rules regarding ILCs, so Waters said it would be prudent for the agency not approve any new such applications until after people have had a chance to review the possible changes. Feedback from experts, stakeholders and Congress could be considered.
An ILC allows a firm to go around the usual banking company holding requirements, but it still guarantees deposits from the FDIC. Because of that, retail businesses can have them.
Waters was the ranking member in 2017, when she wrote to the FDIC asking the body to hold at least one public hearing on Social Financial’s application to establish an ILC. In response, Social Financial withdrew its application.
The full letter addresses an upcoming meeting on Tuesday (March 17), specific to one agenda item regarding rule-making for parent companies of industrial banks and ILCs. Waters said the coronavirus outbreak, now nationwide in the U.S., has made it necessary to take a variety of actions.
Waters said the issues in the case of Social Financial still apply now and include, among other things, strong consumer protection and keeping banking and commerce separate. She noted the bipartisan interest in seeing the shortcomings of the current ILC regulatory framework fixed.
"Furthermore, it has been more than a decade since the FDIC approved federal insurance for an ILC application," Waters wrote, "so it is imperative that the FDIC proceed cautiously before setting a new precedent that may be difficult to reverse."