An industrial loan company (ILC) or industrial bank is a

financial institution Financial institutions, sometimes called banking institutions, are business entities that provide services as intermediaries for different types of financial monetary transactions. Broadly speaking, there are three major types of financial inst ...

in the

United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country Continental United States, primarily located in North America. It consists of 50 U.S. state, states, a Washington, D.C., ...

that lends money, and may be owned by non-financial institutions. They provide niche financial services nationwide. ILCs offer

FDIC The Federal Deposit Insurance Corporation (FDIC) is one of two agencies that supply deposit insurance to depositors in American depository institutions, the other being the National Credit Union Administration, which regulates and insures credi ...

-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 The Federal Reserve Act was passed by the 63rd United States Congress and signed into law by President Woodrow Wilson on December 23, 1913. The law created the Federal Reserve System, the central banking system of the United States. The Pani ...

, which limits bank transactions with affiliates, including the non-bank parent company." 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 The Federal Deposit Insurance Corporation (FDIC) is one of two agencies that supply deposit insurance to depositors in American depository institutions, the other being the National Credit Union Administration, which regulates and insures cr ...

. 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 The Bank Holding Company Act of 1956 (, ''et seq.'') is a United States Act of Congress that regulates the actions of bank holding companies. The original law (subsequently amended), specified that the Federal Reserve Board of Governors must appro ...

. 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. Other states permitting ILCs include

California California is a state in the Western United States, located along the Pacific Coast. With nearly 39.2million residents across a total area of approximately , it is the most populous U.S. state and the 3rd largest by area. It is also the m ...

Colorado Colorado (, other variants) is a state in the Mountain West subregion of the Western United States. It encompasses most of the Southern Rocky Mountains, as well as the northeastern portion of the Colorado Plateau and the western edge of the ...

Minnesota Minnesota () is a state in the upper midwestern region of the United States. It is the 12th largest U.S. state in area and the 22nd most populous, with over 5.75 million residents. Minnesota is home to western prairies, now given over t ...

Indiana Indiana () is a U.S. state in the Midwestern United States. It is the 38th-largest by area and the 17th-most populous of the 50 States. Its capital and largest city is Indianapolis. Indiana was admitted to the United States as the 19th ...

Hawaii Hawaii ( ; haw, Hawaii or ) is a state in the Western United States, located in the Pacific Ocean about from the U.S. mainland. It is the only U.S. state outside North America, the only state that is an archipelago, and the only stat ...

, and

Nevada Nevada ( ; ) is a U.S. state, state in the Western United States, Western region of the United States. It is bordered by Oregon to the northwest, Idaho to the northeast, California to the west, Arizona to the southeast, and Utah to the east. N ...

Origins of the concept

In 1910, attorney Arthur J. Morris (1881–1973) opened the Fidelity Savings and Trust Company in

Norfolk, Virginia Norfolk ( ) is an independent city in the Commonwealth of Virginia in the United States. Incorporated in 1705, it had a population of 238,005 at the 2020 census, making it the third-most populous city in Virginia after neighboring Virginia B ...

, 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 Bank Morris Plan Banks were part of a historic banking system in the United States created to assist the middle class in obtaining loans that were often difficult to obtain at traditional banks. They were established by Arthur J. Morris (1881–1973), ...

s 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 Studebaker was an American wagon and automobile manufacturer based in South Bend, Indiana, with a building at 1600 Broadway, Times Square, Midtown Manhattan, New York City. Founded in 1852 and incorporated in 1868 as the Studebaker Brothers Ma ...

), and, through the subsidiary Morris Plan Insurance Society,

credit life insurance Payment protection insurance (PPI), also known as credit insurance, credit protection insurance, or loan repayment insurance, is an insurance product that enables consumers to ensure repayment of credit if the borrower dies, becomes ill or disabl ...

(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

{{Reflist
Citing Risks, U.S. Seeks New Rules for Niche Banks ''New York Times'' September 16, 2009

Bank On It - Thanks to luck and a loophole, Utah is an unlikely hub for the nation's industrial banks ''Salt Lake City Weekly'' April 22, 2015

External links

Financial Reports of Industrial Loan Companies. iBanknet.com
- List of largest Industrial loan companies

* ttp://www.fdic.gov/regulations/examinations/supervisory/insights/sisum04/industrial_loans.html The FDIC's Supervision of Industrial Loan Companies: A Historical Perspective. June 25, 2004
Industrial Loan Companies Come Out of the Shadows. Federal Reserve Bank of St. Louis July 2007

INDUSTRIAL LOAN CORPORATIONS: Recent Asset Growth and Commercial Interest Highlight Differences in Regulatory Authority. United States Government Accountability Office (GAO).
Financial services in the United States Loans