CU Trades, Consumer Groups Ask Congress to Regulate Fintech Competition

NAFCU and CUNA were among 11 banking and consumer groups that sent a letter to Congress to close a loophole that allows some companies to evade regulation the groups said is necessary to protect consumers and the financial system.

They are attacking an arcane artifact of the early 1900s called “industrial loan companies” (ILCs) that originally were formed to provide loans to industrial workers who usually would not otherwise have access to credit. These non-depository institutions were allowed to have FDIC insurance without FDIC regulation after the agency was created in the 1930s.

Now companies are using these legal shells to contain companies that do many of the things banks and credit unions do, but without the regulation.

In a three-page letter sent Tuesday to the House Financial Services Committee, the groups urged the committee to close the ILC loophole in current law by passing “The Close the ILC Loophole Act” (H.R. 5912).