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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.

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 Banks Total Assets as of December 31, 2022 (Figures in USD)[3]
Balboa Thrift and Loan Association 363,166
Beal Bank USA 25,971,989
BMW Bank of North America 11,886,358
Celtic Bank 2,136,835
Comenity Capital Bank 14,890,468
Community Commerce Bank 330,991
Eaglemark Savings 422,101
Finance Factors, Ltd 596,976
First Electronic Bank 191,215
Hatch Bank 177,865
LCA Bank Corporation 220,200
Medallion Bank 1,954,652
Merrick Bank 5,904,023
Minnesota First Credit and Savings 25,199
Nelnet Bank 918,716
Optum Bank, Inc 15,675,667
Pitney Bowes Bank, Inc. 789,920
Sallie Mae Bank 28,714,313
Square Financial Services 463,875
Toyota Financial Savings Bank 6,590,970
UBS Bank USA 120,987,397
USAA Savings Bank 2,287,497
WebBank 1,961,456
WEX Bank 5,302,687
Transportation Alliance Bank (TAB) 972,204

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.[dubious ] 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