Industrial Loan Companies

Summary

This practice note provides an overview of industrial loan companies (ILCs) and their regulatory framework. ILCs and industrial banks are state-chartered entities originally formed to lend to industrial workers who were unable to obtain credit from traditional depository institutions. ILCs and industrial banks have many of the same powers of traditional banks. However, unlike traditional institutions, ILCs and industrial banks can be owned by commercial firms that are not subject to the Bank Holding Company Act of 1956, as amended (12 U.S.C. § 1841 et seq.) (BHC Act). This distinct ownership structure enables ILCs and their parent commercial firms to avoid regulatory restrictions applicable to most depository institutions, and it has prompted several nonbank firms, including Fintechs and investment companies, to apply for ILC charters.