At Issue: Retailers Purchasing Industrial Loan Companies (ILCs)

Wednesday, May 2, 2007

In general, commercial firms are not permitted to own banks.  However, they are permitted to own industrial loan companies (ILCs), which are institutions that closely resemble banks and are permitted in a handful of states, primarily Utah.  Traditionally, these ILCs have been used only for very limited purposes, such as providing financing for consumer customers of the parent firm.  In the past several years more and more commercial firms, including large retail companies, have begun trying to start or purchase industrial loan companies, raising concern that they will offer a wide variety of banking services and eroding the separation between banking and commerce.  Chairman Barney Frank joined Rep. Paul Gillmor in submitting bipartisan legislation to close a loophole in the nation's banking laws that allow retailers and other commercial firms to own industrial loan companies (ILCs), also known as industrial banks.

H.R. 698, the "Industrial Bank Holding Company Act of 2007," will enhance regulation of the parent companies of industrial banks, restore the traditional separation between banking and commerce, prevent branch banking by some commercially-owned ILCs, prohibit the FDIC from granting new charters to commercial companies seeking to start or acquire ILCs, and bolster the examination and enforcement authorities of the FDIC as an ILC regulator. H.R. 698 is similar to HR 5746, which Frank and Gillmor introduced in the 109th Congress. ILCs are authorized in fewer than seven states, with most established in Utah.  Due to a loophole in the Bank Holding Company Act, they are eligible for federal deposit insurance from the FDIC, but can be owned by commercial firms, unlike other banks.  Commercial firms are defined as those who derive at least 15 percent of their revenue from activities that are commercial.  In addition, the parent companies are not subject to supervision by the Federal Reserve as are bank holding companies, although they are subject to some supervision by the FDIC.

Click here for a copy of H.R. 698, the "Industrial Bank Holding Company Act of 2007."

The "Industrial Bank Holding Company Act of 2007" was marked up in committee on May 2, 2007 and it was voted favorably out of the Financial Services Committee by a voice vote. Click here for documents related to the committee markup of this bill.

On May 21, 2007 the House of Representatives passed the "Industrial Bank Holding Company Act of 2007" by a vote of 371-16. Click here to see how Members of the House voted.  Click here for version of bill adopted by the House.
 

3/16/2007
Statements of Reps. Gillmor and Frank Regarding Wal-Mart ILC Announcement
Washington, DC - Congressmen Paul Gillmor (R-OH), the Ranking Member of the Financial Institutions Subcommittee and House Financial Services Committee Chairman Barney Frank (D-MA), the sponsors of the Industrial Bank Holding Company Act of 2007, made the following statements on today’s decision by Wal-Mart to, after 20 months, withdraw its application for an Industrial Loan Companies (ILC) charter: Read full story.

1/31/2007
Reps. Gillmor and Frank Commend FDIC for Prudent Extension of the Moratorium
Washington, DC - Congressmen Paul Gillmor (R-OH), the Ranking Member of the Financial Institutions Subcommittee and House Financial Services Committee Chairman Barney Frank (D-MA), the sponsors of the Industrial Bank Holding Company Act of 2007, made the following statements on today's decision by the Federal Deposit Insurance Corporation (FDIC) to set a one year moratorium on the chartering or acquisition of commercially-owned Industrial Loan Companies (ILC): Read full story.

1/29/2007
Gillmor and Frank Re-Introduce Bipartisan Legislation to Curb ILCs
WASHINGTON, DC- Congressmen Paul Gillmor (R-OH) and Financial Services Committee Chairman Barney Frank (D-MA) today introduced bipartisan legislation to close one of the remaining exceptions in banking law that allow retailers and other commercial firms to engage in banking. The legislation is an outgrowth of Gillmor/Frank amendments which passed the House of Representatives in the 108th and 109th Congresses to prohibit newly formed commercially-owned ILCs from gaining additional powers, including opening branches nationwide. Read full story.

07/28/2006
Frank and Gillmor Commend FDIC For Six Month Moratorium on ILCs
Washington, DC- U.S. Representatives Barney Frank and Paul E. Gillmor made the following statements on today's decision by the Federal Deposit Insurance Corporation (FDIC) to set a six-month moratorium on the chartering or acquisition of Industrial Loan Companies (ILC).  Read full story.

07/28/2006
Frank and Gillmor Commend FDIC For Six Month Moratorium on ILCs
Washington, DC- U.S. Representatives Barney Frank and Paul E. Gillmor made the following statements on today's decision by the Federal Deposit Insurance Corporation (FDIC) to set a six-month moratorium on the chartering or acquisition of Industrial Loan Companies (ILC).  Read full story.

07/10/2006
Gillmor and Frank Introduce Bipartisan Legislation to Curb Retailers from Buying ILCs
Washington, DC- Congressmen Paul E. Gillmor (R-OH) and Barney Frank (D-MA) today introduced bipartisan legislation to close a loophole in the nation's banking laws that allow retailers and other commercial firms to own industrial loan companies (ILCs), also known as industrial banks.  Read full story.

06/08/2006
98 Members of Congress Call for Moratorium on ILC Applications
Washington, DC- Today, 98 Members of Congress led by Congressman Paul Gillmor (R-OH) and Financial Services Committee Ranking Member Barney Frank (D-MA) wrote to Federal Deposit Insurance Corporation (FDIC) Acting-Chairman Martin Gruenberg asking that the FDIC impose a moratorium on all commercial industrial loan company (ILC) applications for federal deposit insurance until Congress has acted on the issue.   Read full story.

Click here for Wal-Mart's May 25, 2006 letter responding to Rep. Frank's inquiry into their in-store bank branch leases.

Click here for Rep. Frank's May 3, 2006 letter to Wal-Mart requesting information on their in-store bank branch leases.

04/20/2006
Rep. Frank Comments on Wal-Mart's ILC Application
Washington, DC- The following is a letter Rep. Frank wrote to the FDIC commenting on Wal-Mart's ILC application.  Read full story.

02/23/2006
Reps Gillmor and Frank Comment on FDIC's Decision to Hold Wal-Mart Bank Hearings
Washington, DC- Congressman Paul Gillmor (R-OH) and Ranking Member Barney Frank (D-MA) released the following statements regarding the decision by the Federal Deposit Insurance Corporation to hold four days of hearings on the Wal-Mart application for an Industrial Loan Company (ILC) charter in the State of Utah.  Read full story.

01/20/2006
Congressman Barney Frank and Congressman Paul Gillmor React to the FDIC Letter on Wal-Mart's Application for Deposit Insurance
Washington, DC- Congressman Barney Frank, the Ranking Democratic Member of the House Financial Services Committee and Congressman Paul E. Gillmor (R-OH), also a senior member of the House Financial Services Committee, today made the following statements in response to a letter from the FDIC regarding Wal-Mart's application for deposit insurance.  Read full story.

12/16/2005
25 Financial Services Committee Members Urge FDIC to Wait on Wal-Mart Application
Washington, DC- Today, Congressman Paul Gillmor (R-OH) and Ranking Member Barney Frank (D-MA) joined with 23 other members of the House Committee on Financial Services in sending a letter to Federal Deposit Insurance Corporation (FDIC) Acting-Chairman Martin Gruenberg asking that the FDIC delay any further action on the Wal-Mart application for deposit insurance until the vacancy on the FDIC Board of Directors is filled. Read full story.

11/07/2005
Frank and Gillmor Weigh in on Wal-Mart's Deposit Insurance Application
Washington, DC-Congressmen Barney Frank (D-MA), the Ranking Democratic Member on the House Financial Services Committee and Paul E. Gillmor (R-OH), also a senior member of the Financial Services Committee, today wrote to the FDIC urging that Wal-Mart be required to adhere to their promises not to engage in branch banking as part of their application for deposit insurance. Read text of letter here.