Brown, Democratic Senators Introduce Legislation on Industrial Loan Companies
Earlier this month, Senator Sherrod Brown (D-Ohio), Chair of the Senate Committee on Banking, Housing, and Urban Affairs was joined by two of his Senate colleagues in introducing the Close the Shadow Banking Loophole Act, which would require companies that own an industrial loan company (ILC) to be subject to the same consumer protections as traditional banks. In addition to Brown, the legislation is cosponsored by Sens. Bob Casey (D-Pa.) and Chris Van Hollen (D-Md.).
“Letting Big Tech and commercial companies operate banks without proper oversight will only open doors for predatory lending, invasions of consumer privacy, and broader financial instability,” said Brown. “To protect consumers’ pocketbooks and ensure a strong banking system for Main Street, we need to ensure all banking institutions play by the same rules.”
As state-regulated banking institutions, ILCs are currently not subject to consolidated supervision under the Federal Reserve (Fed) because of a loophole in the Bank Holding Company Act. Due to this loophole, ILCs owned by tech companies have an advantage over traditional banks with regulatory safeguards. Brown first introduced legislation to close the loophole in 2007.
Along with requiring companies that own ILCs to be subject to Fed supervision under the Bank Holding Company Act, the new bill provides a carve-out for existing ILCs.
“Our bill will make sure loan companies are treated the same way as traditional banks and prevent them from evading the rules that protect consumers and low-income communities,” said Senator Bob Casey (D-Pa.).