Jelena McWilliams, nominated by President Donald Trump to head the Federal Deposit Insurance Corporation (FDIC), said Tuesday (Jan. 23) that she would investigate the “hold-up” regarding the issuance of lending licenses if granted the position.
According to news from Reuters, if the FDIC removes the barriers for special lending licenses, FinTech firms and even stores like Walmart would be able to enter the banking market. Citing testimony McWilliams made before the Senate Banking Committee, Reuters stated that McWilliams thinks the licenses do not pose any threat to the banking industry, and that if she were named the next head of the FDIC, she would make sure the government agency “swiftly” reviews those loan license applications.
“If it meets the ILC standards as currently set up by the FDIC, I believe there should be no obstacles in the application program,” she said, according to Reuters. Granting lending licenses to non-banks has been a point of contention ever since the FDIC rejected Walmart’s bid back in 2005. In the 2010 Dodd-Frank financial reform law, the issuance of ILC (industrial loan company) licenses was restricted, but in 2013 that limitation expired. The FDIC has yet to issue an ILC license.
Last year, FinTech Square applied for an ILC license. At the time, community banks pushed back, arguing that giving Square the license would harm the financial system. In the summer of 2017, according to reports in The Washington Street Journal, Square CEO and Co-Founder Jack Dorsey had begun quietly circulating word among the company’s small business (SMB) customers that the firm was willing to provide credit to their customer base. The consumer lending pivot was built off Square’s recent prepaid debit release and would have moved the company into more direct competition with the likes of PayPal, Affirm and Synchrony Financial.
“Our application reflects Square’s ability to build a bridge between the financial system and the underserved, addressing the needs of small businesses that few community banks even reach. We believe each and every ILC application should be considered on its individual merits, not ICBA’s inaccurate view of ILCs. We trust the FDIC, who has direct oversight and regulation of all ILCs, to effectively assess our application’s safety, soundness and compliance with applicable laws before granting a charter,” a Square spokesperson said in a statement last October.