Letter to Jelena McWilliams, Chairman of the Federal Deposit Insurance Corporation - Waters Urges FDIC Not to Grant ILC Charters Until Agency Finalizes Upcoming Rule
Letter
Chairman McWilliams,
I am writing regarding the Federal Deposit Insurance Corporation's (FDIC) recent notice that it will be meeting on Tuesday, March 17, at 2:00 p.m., and one of the agenda items for discussion is a "Notice of Proposed Rulemaking, Parent Companies of Industrial Banks and Industrial Loan Companies."[1] As I and other Financial Services Committee Members wrote you the other day,[2] this meeting comes at a critical time for our country as we confront the global spread of the coronavirus disease 2019 (COVID-19), including at least 1,629 confirmed cases and 41 deaths in the United States.[3] To date, the coronavirus has spread across 46 states and the District of Columbia.[4] I look forward to your response to our letter regarding this urgent crisis.
Regarding your potential meeting, I previously wrote the FDIC requesting a public hearing on a previous application by one company to obtain federal insurance for a state-chartered industrial loan company (ILC).[5] The company later withdrew its application, but the issues identified in my letter also apply to pending ILC applications before the FDIC, including concerns with regulatory oversight of ILCs generally, the need for strong consumer protection and reinvestment, and the importance of preserving the separation of banking and commerce.[6] Furthermore, it has been more than a decade since the FDIC approved federal insurance for an ILC application, so it is imperative that the FDIC proceed cautiously before setting a new precedent that may be difficult to reverse. Additionally, there is bipartisan interest and proposals from several Members in Congress to address some of the shortcomings in the current ILC regulatory framework that may be addressed in part by your agency's new regulatory proposal.[7]
Therefore, to the extent the FDIC issues a proposal for public comment that will change the rules for ILCs and their parent companies as soon as next week, I would encourage the FDIC not to approve any new ILC application until after the agency receives and considers feedback on the new regulatory proposal from experts, stakeholders, and Congress and finalizes any new rules.
Thank you for considering this request as well as the concerns and perspectives that a wide range of stakeholders have provided to your agency on the ILC applications pending before the agency. I look forward to your response.
Sincerely,
MAXINE WATERS
Chairwoman
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