Industrial Loan Companies Explained: The Bank Charter Fintechs Actually Want.

The Federal Deposit Insurance Corporation has approved four new industrial loan company charters since January 2026, more than in the previous fifteen years combined. Ford Credit Bank and GM Financial Bank were approved on 22 January, Edward Jones Bank followed on 27 February, and Stellantis Bank USA was approved on 13 May. All four are Utah-chartered industrial banks, and all four exist because their parent companies wanted a bank charter without becoming a bank holding company.

What an industrial loan company is

An industrial loan company, often shortened to ILC or called an industrial bank, is a state-chartered, FDIC-insured lender that a non-bank company can own outright without triggering the Bank Holding Company Act. A normal bank’s parent falls under Federal Reserve consolidated supervision and the Act’s limits on what else the parent can do. An ILC’s parent generally does not, provided the ILC meets a narrow exemption: it must be chartered in a state that had an ILC-enabling statute in place, or under legislative consideration, on 5 March 1987, and it must either hold no more than $100 million in assets or not accept demand deposits. Utah, California, Colorado and Nevada are the states that qualify, and Utah has chartered most of the recent applicants.

Because an ILC is still an FDIC-insured depository institution, it can fund itself with savings deposits and certificates of deposit, export interest rates across state lines under the Federal Deposit Insurance Act, and sidestep most state money transmission licensing that would otherwise apply to a non-bank lender. For a company that wants to fund lending with retail deposits rather than warehouse credit lines, that combination is difficult to replicate through any other structure.

Why the charter fell out of favour, then came back

The industrial bank charter is decades old and was long used quietly by manufacturers running captive finance arms. Walmart’s 2005 application to charter an ILC changed that. Banking trade groups and competitors argued a retailer with an insured bank would have an unfair edge, and the FDIC responded by freezing new applications from commercial parents. The agency approved no new ILC deposit insurance application between 2008 and 2020, and several filed during that period were withdrawn rather than pressed to a decision.

The freeze thawed in 2020, when the FDIC approved ILC applications from the fintech lenders Nelnet and Square, now part of Block. Those approvals came with a new rule, 12 C.F.R. Part 354, that set out what an ILC’s parent must agree to: consolidated reporting to the FDIC, a limit on how much of the ILC’s board the parent can control, a requirement to keep the ILC adequately capitalised, and a Dodd-Frank obligation to serve as a source of financial strength if the ILC runs into trouble. The FDIC approved one more application, from Thrivent, in June 2024. The four approvals since January 2026 cover two captive auto lenders and a wealth manager rather than pure-play fintechs, which is the clearest sign yet that the FDIC is willing to use the charter for companies well beyond Utah’s traditional industrial-bank base.

What the 2026 approvals require

None of the four approvals is unconditional. Ford Credit Bank and GM Financial Bank must each hold a minimum tier 1 leverage ratio of 15%, roughly double what a well-capitalised bank typically carries, and Ford Motor Company and General Motors Company must both agree to support their bank’s capital and liquidity positions if needed, according to the FDIC’s own announcement of the approvals. The FDIC’s approval order expires if a bank is not established within 12 months unless the agency grants an extension. Edward Jones Bank, conditionally approved alongside the Utah Department of Financial Institutions, plans to open in early 2027 and will fold the firm’s existing reserve line of credit portfolio into a deposit-funded structure available in all 50 states, the company said in its own announcement.

GM Financial’s own record shows how slow this route can be even when it succeeds. The company first filed for an ILC charter in December 2020, withdrew that application in June 2024 to address FDIC feedback, refiled in January 2025, and was not approved until January 2026, six years after it started.

The alternative it replaces: renting a sponsor bank

Most fintechs never charter anything. They operate through a sponsor bank under a banking-as-a-service arrangement, using that bank’s charter to issue cards or hold deposits while the fintech runs the product. That structure, covered in Fintechly’s guide to how fintechs build banking products through BaaS, is faster to set up than a charter application but leaves the fintech dependent on a partner bank’s risk appetite, pricing and regulatory standing. An ILC removes that dependency. The trade-off is control now against years of FDIC review, a source-of-strength obligation to the bank, and Volcker Rule status as a banking entity for the parent, unless the parent qualifies for the community bank exemption under the Economic Growth, Regulatory Relief, and Consumer Protection Act.

Why community banking groups still call it a loophole

The Independent Community Bankers of America has continued to argue that the ILC charter lets commercial and financial companies run an insured bank while avoiding the consolidated Federal Reserve oversight that applies to every bank holding company, and it has urged the FDIC to reject applications it considers a risk to the Deposit Insurance Fund or that fail to serve community needs. The FDIC has not proposed closing the exemption. Instead, in July 2025 it opened a formal request for information on how it evaluates industrial bank and ILC applications, seeking comment on the range of companies now applying for the charter. That review was still open when the four 2026 approvals were issued, and applications for additional ILC charters remain pending before the agency.

How this differs from the OCC’s fintech charter

The ILC is not the only route regulators have offered fintechs into banking. The Office of the Comptroller of the Currency proposed a special purpose national bank charter for fintech companies in 2016, one that would not require deposit insurance or deposit-taking and would, in theory, let a nationally chartered fintech avoid state-by-state licensing. State regulators disputed the OCC’s authority to issue it. The New York Department of Financial Services and the Conference of State Bank Supervisors both sued, and by early 2021 the litigation and a string of withdrawn applications had left the OCC’s fintech charter effectively dormant. The OCC has since directed fintech and crypto interest toward a separate limited-purpose national trust bank charter, which does not permit deposit-taking either. Unlike either OCC route, an ILC is a deposit-taking, FDIC-insured bank from the outset, which is why it appeals to companies that want to fund lending with retail deposits rather than borrowed money.

A fuller list of the banks, lenders and infrastructure providers active in this space is on Fintechly’s infrastructure sector directory.

Frequently asked questions

Does owning an ILC put a company under Federal Reserve holding company supervision?

Not if the ILC meets the Bank Holding Company Act exemption: chartered in an eligible state, and either under $100 million in assets or not accepting demand deposits. A company that owns a qualifying ILC is not automatically a bank holding company and is not subject to the Federal Reserve’s consolidated supervision the way a traditional bank’s parent is.

Can an ILC’s parent walk away if the bank needs more capital?

No. Under a Dodd-Frank requirement carried into the FDIC’s Part 354 rule, a company that controls an ILC must serve as a source of financial strength for it, meaning the FDIC can call on the parent for capital support even when the parent would rather not provide it.

Why did GM Financial’s charter take six years to win approval?

GM Financial filed its first application in December 2020, during the same period several other ILC filings were withdrawn rather than decided. It pulled the application in June 2024 to address FDIC feedback, refiled in January 2025, and received approval in January 2026. Each stage required both FDIC and Utah Department of Financial Institutions sign-off.

Does an ILC charter exempt a lender from state money transmitter licensing everywhere it operates?

For money transmission, yes: as an FDIC-insured depository institution, an ILC is generally exempt from state money transmitter licensing regimes. Consumer lending laws are a separate question, and an ILC’s home-state usury and consumer protection rules typically govern the rates it exports nationally under interest rate exportation.