Industrial loan company

An industrial loan company (ILC) or industrial bank is a financial institution in the United States that lends money, and may be owned by non-financial institutions. They provide niche financial services nationwide. ILCs offer FDIC-insured deposits and are subject to FDIC and state regulator oversight. All "FDIC-insured entities are subject to Sections 23A and 23B of the Federal Reserve Act, which limits bank transactions with affiliates, including the non-bank parent company."[1] ILCs are permitted to have branches in multiple states (which is permitted by many states on a reciprocal basis). They are regulated and supervised by state-charters and insured by the Federal Deposit Insurance Corporation. They are authorized to make consumer and commercial loans and accept federally insured deposits. Banks may not accept demand deposits if the bank has total assets greater than $100 million. ILCs are exempted from the Bank Holding Company Act.

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    ILCs assist numerous charities and provide millions of dollars annually in grants, low interest loans, and service through the Community Reinvestment Act (CRA). Currently, only seven states offer an ILC bank charter. Most ILCs have been chartered by the Utah Department of Financial Institutions.[2] Other states permitting ILCs include California, Colorado, Minnesota, Indiana, Hawaii, and Nevada.

    U.S. Industrial BanksTotal Assets as of September 30, 2021 (Figures in Millions)[3]
    Balboa Thrift and Loan Association320,343
    Beal Bank USA5,752,953
    BMW Bank of North America11,647,749
    Celtic Bank2,712,631
    Comenity Capital Bank9,469,582
    Community Commerce Bank324,319
    Eaglemark Savings388,708
    Finance Factors, Ltd551,608
    First Electronic Bank63,900
    Hatch Bank 466,319
    LCA Bank Corporation180,341
    Medallion Bank1,480,084
    Merrick Bank4,357,924
    Minnesota First Credit and Savings25,161
    Nelnet Bank 413,155
    Optum Bank, Inc14,624,612
    Pitney Bowes Bank, Inc.796,185
    Sallie Mae Bank28,740,416
    Square Financial Services 163,933
    Toyota Financial Savings Bank3,597,650
    The Morris Plan Company of Terre Haute123,361
    UBS Bank USA103,662,107
    USAA Savings Bank1,966,330
    WebBank1,441,759
    WEX Bank3,287,721

    Origins of the concept

    In 1910, attorney Arthur J. Morris (1881–1973) opened the Fidelity Savings and Trust Company in Norfolk, Virginia, which made small loans to working people under a concept he called the "Morris Plan". Under this lending approach, would-be borrowers had to submit references from two people of like character and earning-power to prove the borrower's creditworthiness, and agreed to repay the loan through the purchase of Installment Thrift Certificates in weekly installments equal to the face value of the loan, less origination and investigative fees. Morris Plan Banks expanded to more than 100 locations in the United States.

    Morris Plan banks pioneered the use of automotive financing (through arrangements between the Morris Plan Company of America, essentially a holding company for Morris Plan banks, and the Studebaker Corporation), and, through the subsidiary Morris Plan Insurance Society, credit life insurance (which provided for the loan to be repaid in case the borrower died during the term of the loan, with any residue going to the borrower's estate).

    References
    1. "FDIC Law, Regulations, Related Acts - FRB Regulations".
    2. "Industrial Banks | Utah Department of Financial Institutions". dfi.utah.gov.
    3. Federal Financial Institutions Examination Council Central Data Repository's Public Data Distribution, Call Reports
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