An industrial loan company (ILC), also called an industrial bank, is a type of state-chartered depository institution in the United States. It can take insured deposits, make loans and issue payment cards much like a commercial bank, but it falls outside the legal definition of a bank used in the Bank Holding Company Act. As a result, the company that owns it is not supervised by the Federal Reserve as a bank holding company and is not bound by that law's limits on commercial activities.
This feature makes the ILC the only widely available bank charter that a manufacturer, retailer or technology company can own directly. Car makers, card companies, securities firms and, more recently, fintech companies have used it to bring lending and deposit-taking in house. The charter is available in only a handful of states, and most ILC assets are held by institutions chartered in Utah.
History
Industrial loan companies appeared in the early twentieth century to lend small sums to industrial workers, who were poorly served by commercial banks of the time. They were often known as Morris Plan banks after an early chain of such lenders. For decades they were small, state-regulated finance companies that funded themselves with investment certificates and were not eligible for federal deposit insurance.
That changed in the 1980s. Federal law made ILCs eligible for, and in practice required them to obtain, FDIC insurance, and the Competitive Equality Banking Act of 1987 wrote an exception for them into the Bank Holding Company Act. The exception applied to institutions chartered in states that already had ILC laws at the time, which froze the list of eligible states. Large commercial and financial groups then began to charter or buy ILCs, and the sector's assets grew many times over in the 1990s and 2000s.
Powers and limits
An ILC can offer most banking products. It can make consumer and commercial loans, issue a credit card or debit card as a member of the card networks, take savings and time deposits, and export its home state's interest rates to borrowers in other states, as other insured banks can. It has direct access to payment systems through a Federal Reserve master account.
To keep the exemption, an ILC must meet conditions set in the 1987 law. In broad terms, a larger ILC may not offer demand deposits that the customer can withdraw by check or similar means for payment to third parties. Many ILCs therefore fund themselves with savings accounts, certificates of deposit and brokered deposits instead of ordinary checking accounts.
Supervision
An ILC is supervised by its state banking regulator, most often the Utah Department of Financial Institutions, and by the Federal Deposit Insurance Corporation as its primary federal regulator. The bank itself is subject to the same capital, liquidity, consumer protection and anti-money laundering rules as other state banks, and to limits on transactions with its affiliates.
The difference lies at the parent level. The Federal Reserve has no consolidated supervisory authority over an ILC's corporate owner. The FDIC has filled part of this gap through written agreements: under a rule it adopted in 2020, a parent company that is not otherwise under federal consolidated supervision must commit to provide capital and liquidity support to the ILC, submit to examination and reporting, and limit its representation on the bank's board.
The debate over commercial ownership
The charter has long been controversial because it allows the mixing of banking and commerce, which United States law otherwise restricts. Critics, including community bank groups and at times Federal Reserve officials, argue that a commercial parent could steer the bank's credit to its own customers or suppliers, that problems at the parent could spread to the insured bank, and that a regulator without authority over the whole group cannot see those risks. Supporters reply that ILCs have a sound record, that the FDIC's powers over the bank and its affiliates are sufficient, and that the charter brings competition and capital into banking.
The argument came to a head in 2005, when Walmart applied for deposit insurance for a Utah ILC. The application drew heavy opposition and was withdrawn in 2007. The FDIC imposed a moratorium on new ILC applications from commercial firms in 2006, and the Dodd-Frank Act of 2010 added a three-year statutory moratorium, which expired in 2013.
ILCs and fintech companies
Interest in the charter revived in the late 2010s as financial technology companies looked for an alternative to relying on a sponsor bank. In 2020 the FDIC approved deposit insurance for ILCs owned by Square, the payments company now called Block, and by the student loan servicer Nelnet. Other applicants have included car manufacturers, payment companies and online lenders. Several applications were withdrawn after long reviews, but in January 2026 the FDIC approved deposit insurance for ILCs owned by Ford and General Motors.
For a fintech firm the ILC offers what a bank-fintech partnership or banking as a service arrangement cannot: its own balance sheet, its own insured deposits and direct membership of the card networks, without turning the parent into a regulated bank holding company. The alternatives each have trade-offs. A national bank charter from the Office of the Comptroller of the Currency brings Federal Reserve oversight of the parent, the proposed special purpose national bank charter has faced legal challenge, and a trust company cannot take ordinary deposits.