Companies Brush Off Plans for Industrial Banks 

The financial services sector is bracing for the potential of more companies being approved for industrial bank charters.

In the United States, there is a strict separation of commerce and banking activities. Industrial loan companies, or ILCs, are one exception to this. This type of charter allows a commercial company to own a bank whose deposits are insured by the Federal Deposit Insurance Corp.

Currently, there are three applications pending, all from car manufacturers, for an ILC charter. Two of them were filed since Donald Trump was elected. If these charters are approved, then it’s likely that other companies, including fintechs, could seek out one of these charters, industry experts predict.

“There will be more of them, more applications and more approvals,” says Matthew Bisanz, a partner at the law firm Mayer Brown who advises banks on regulatory issues. “The first Trump administration was supportive of it. … The second Trump administration has also been enthusiastic about novel bank charters.”

There are currently 26 ILCs clustered in a handful of states, including Utah and Nevada, that allow for these charters, according to Michele Alt, a partner at advisory and investment firm Klaros Group. Thrivent Financial for Lutherans was the last entity to receive an ILC charter in June 2024, Alt says. Before that, Nelnet, a student loan servicer, and Block, a fintech payments firm formerly known as Square, both received an ILC charter in 2020, during President Donald Trump’s first term.

Companies may seek out this type of charter for a number of reasons, including the ability to gather deposits, usually a cheaper funding source, to support lending activities. These deposits are typically brokered or intermediated deposits.

The ability to do certain banking services in house is also attractive. ILCs can issue credit cards, for instance, making this charter appealing to certain retailers who might be interested in issuing credit cards directly for consumers to purchase their products. That eliminates the need for the company to work with a bank.

But these charters also have some restrictions, namely that ILCs can’t accept demand deposits. Companies also face additional costs needed to meet any regulatory scrutiny they may face with an industrial bank charter.

“ILCs are the holy grail for nonbanks,” Alt says. “That’s because ILCs are exempt from the Bank Holding Company Act, aren’t subject to consolidated supervision, and the parent company isn’t subject to supervision by the Federal Reserve. That’s a huge burden.”

In terms of the current pending applications, Ford Credit Bank submitted its application in July 2022. GM Financial Bank and Stellantis Bank USA, which is affiliated with the owner of Dodge, Chrysler and Jeep, both filed theirs this year.

ILC charters are appealing to car manufacturers in particular because they can use the bank to provide financing to consumers looking to buy vehicles or to its dealerships needing capital to purchase inventory. There is also a history of car manufacturers getting charters. BMW and Toyota already have ILCs. Ally Bank started out as the banking unit of General Motors before it changed its name from GMAC Bank and was spun off in the aftermath of the financial crisis.

Ford Credit and Stellantis both declined to comment for this story. GM Financial declined to comment beyond a January 2025 press release, which said that the company would use the bank, if approved, to expand “financing options to retail auto consumers, responsible extension of credit across a geographically and economically diverse consumer base, excellent customer service and strong support to dealers and consumers in all economic cycles.”

GM previously applied for an ILC in December 2020 but withdrew its application in June 2024, after receiving conditional approval for the charter from Utah banking regulators, to “address feedback provided by the FDIC,” the company’s press release said.

Amber Hay, a partner who advises financial institutions and nonbank companies at the law firm Arnold & Porter, noted that companies interested in providing more banking services likely believe they will have a better chance of getting approved for an ILC charter after the leadership change at the FDIC.

The White House appointed Travis Hill acting chairman of the FDIC in January 2025, and he vowed that the agency would take a more “open-minded approach to innovation,” complete “a wholesale review of regulations” and “withdraw problematic proposals.”

Last year, as vice chair of the FDIC, Hill voted against a proposed policy that would require the agency to determine whether an ILC could meet the lending needs of its community and that would require an ILC to operate separately from its parent company.

That’s in contrast to Hill’s predecessor, Martin Gruenberg, who served as FDIC chairman under President Joe Biden. Gruenberg was widely seen as opposed to ILCs and less likely to approve these charters.

The FDIC declined to comment for this story, noting that it could not comment on pending applications.

“I do think approval of any application would indicate the FDIC is open to commercial firms getting a charter and could lead to a wave of new applications,” says Jonathan Pompan, chair of the consumer financial services practice at the law firm Venable who was not speaking about any specific company. “We are already seeing fintechs, big box retailers and others with embedded finance operations considering accelerating their plans or dusting off old ILC plans, and we are only a few weeks into this administration.”

Beyond auto manufacturers, it’s likely that midsize fintechs that already do some lending, embedded finance or are involved with banking as a service efforts could see value in having an ILC charter and apply for one, says Hay, who spoke generally and not about any specific company. That could be especially true for a fintech that serves the underbanked or that target smaller loans.

“That could be the sweet spot,” Hay adds. “Because of the cost and the structure, banks don’t do as much in terms of small-dollar loans, but if you have a fintech that can provide those types of loans, it may make sense for them.”

Regardless of where the next wave of applications come from, it’s likely that the banking industry will push back. Historically, banks have been opposed to new ILCs. Concerns center around consumer protection and ensuring a level playing field in terms of regulation, says Susan Sullivan Kinney, Independent Community Bankers of America’s senior vice president of congressional relations. Separating commerce and banking is essential to ensure that consumers aren’t pushed toward products that benefit the nonbank parent company as opposed to the customer, she adds.

During the last Congress, the ICBA worked on bipartisan legislation that would have required nonbank companies with an ILC to be subject to the same supervision as other bank holding companies.

“We have been happy to see bipartisan support,” Kinney adds. “I think members on both sides have concerns about mixing banking and commerce.”