AFSA Opposes Anti-Innovation Bill
AFSA opposes the recently introduced Close the Shadow Banking Loophole Act, which targets the ability of industrial loan companies (ILCs) to exist in the financial service marketplace. Led by Senate Banking Committee Chairman Sherrod Brown (D-OH), this Democratic anti-ILC bill will hinder financial innovation that provides unique solutions for many niche types of businesses in the banking system, including major automobile manufacturers and other diversified companies.
Industrial banks are heavily regulated, subject to the same banking laws, and regulated in the same manner as other depository institutions. They are supervised and examined by the states that charter them (Utah, California, Colorado, Nevada, Hawaii, Indiana, or Minnesota) and by the Federal Deposit Insurance Corporation (FDIC). They are subject to the same safety and soundness, consumer protection, deposit insurance, Community Reinvestment Act, and other requirements as other FDIC-insured depository institutions. In addition, these FDIC-insured industrial banks have consistently been the best-capitalized and financially strongest group of banks insured by the FDIC.
The “Close the Shadow Banking Loophole Act” is a companion bill of legislation introduced in the House of Representatives H.R. 5912 – the Close the ILC Loophole Act. Both bills seek to eliminate decades-long ILC charters and unnecessarily prohibit future businesses from seeking an ILC charter. As the House Financial Service Committee debated the bill, a significant portion of the American auto industry, including vehicle finance companies, voiced their opposition in a letter.
The AFSA team will update you if the Close the Shadow Banking Loophole Act moves through the legislative process.
December 6th, 2022
