Title: Close the ILC Loophole Act
Policy area: Finance and Financial Sector

Summary:
Close the ILC Loophole Act
This bill limits the exemption from certain banking regulations applicable to industrial loan companies to those companies approved to receive Federal Deposit Insurance Corporation insurance before September 23, 2021, or companies with an application pending as of September 23, 2021. Industrial loan companies are state chartered institutions that provide several services similar to banks, such as originating loans and processing payments.
Parent companies of such industrial loan companies are subject to the supervision of the Board of Governors of the Federal Reserve System.
The bill also sets forth procedures regarding a change in control of an industrial loan company.
The Government Accountability Office must report on the effects of industrial loan companies, industrial banks, and other similar institutions on the economy, including the effect on competitiveness, market structure, and different industries.

[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5912 Introduced in House (IH)]

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117th CONGRESS
  1st Session
                                H. R. 5912

To reform the regulation of industrial loan companies and their parent 
                   companies, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            November 9, 2021

    Mr. Garcia of Illinois introduced the following bill; which was 
            referred to the Committee on Financial Services

_______________________________________________________________________

                                 A BILL


 
To reform the regulation of industrial loan companies and their parent 
                   companies, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Close the ILC Loophole Act''.

SEC. 2. NEW INDUSTRIAL LOAN COMPANIES NOT ELIGIBLE FOR THE EXEMPTION 
              FROM THE DEFINITION OF A BANK.

    (a) In General.--Section 2(c)(2)(H) of the Bank Holding Company Act 
of 1956 (12 U.S.C. 1841(c)(2)(H)) is amended by inserting after 
``similar institution'' the following: ``which has been approved to 
receive deposit insurance from the Federal Deposit Insurance 
Corporation on or before September 23, 2021 (or has an application to 
receive deposit insurance pending before the Federal Deposit Insurance 
Corporation where such application was made on or before September 23, 
2021, or has had such an application approved), and''.
    (b) Treatment of Deposit Insurance Applications Pending on 
September 23, 2021.--
            (1) In general.--With respect to an industrial loan 
        company, industrial bank, or other similar institution that, on 
        the date of enactment of this Act, has an application to 
        receive deposit insurance pending before the Federal Deposit 
        Insurance Corporation that was submitted on or before September 
        23, 2021, the Federal Deposit Insurance Corporation--
                    (A) shall provide for a 90-day public comment 
                period and a public hearing with respect to such 
                application; and
                    (B) may only approve such application by a \2/3\ 
                vote of the members of the Board of Directors of the 
                Federal Deposit Insurance Corporation.
            (2) 2-year deadline for approving application.--If the 
        Federal Deposit Insurance Corporation does not approve an 
        application described under paragraph (1) before September 23, 
        2023, such application shall be deemed to have been denied.
    (c) Authority With Respect to Deposit Insurance Applications 
Granted After September 23, 2021.--
            (1) In general.--With respect to a company that has control 
        over a covered industrial loan company which has been approved 
        to receive deposit insurance from the Federal Deposit Insurance 
        Corporation after September 23, 2021 (the ``parent company''), 
        the primary financial regulatory agency of such parent company 
        may--
                    (A) conduct such examinations of, and obtain 
                reports from, the parent company or any subsidiary of 
                the parent company (other than a bank) as the agency 
                determines necessary or appropriate to assess the 
                parent company's or subsidiaries'--
                            (i) financial condition;
                            (ii) systems for maintaining and 
                        controlling financial and operating risks; and
                            (iii) transactions with depository 
                        institution subsidiaries of the parent company; 
                        and
                    (B) impose any conditions or restrictions on the 
                parent company or any subsidiary of the parent company 
                (other than a bank), including restricting or 
                prohibiting transactions between the parent company or 
                subsidiary and any depository institution subsidiary of 
                the parent company, if such conditions or restrictions 
                would promote the safety and soundness of the parent 
                company or any of its depository institution 
                subsidiaries.
            (2) Definitions.--In this subsection:
                    (A) Covered industrial loan company.--The term 
                ``covered industrial loan company'' means an industrial 
                loan company, industrial bank, or other similar 
                institution that--
                            (i) on the date of the enactment of this 
                        Act, is described under section 2(c)(2)(H) of 
                        the Bank Holding Company Act of 1956; and
                            (ii) has an application to receive deposit 
                        insurance from the Federal Deposit Insurance 
                        Corporation approved after September 23, 2021, 
                        and before the date of enactment of this Act.
                    (B) Primary financial regulatory agency.--With 
                respect to a company, the term ``primary financial 
                regulatory agency''--
                            (i) has the meaning given that term under 
                        section 2 of the Dodd-Frank Wall Street Reform 
                        and Consumer Protection Act; and
                            (ii) with respect to a company that does 
                        not have a primary financial regulatory agency 
                        under clause (i), means the Board of Governors 
                        of the Federal Reserve System.
                    (C) Other definitions.--The terms ``bank'' and 
                ``depository institution'' have the meaning given those 
                terms, respectively, under section 2 of the Bank 
                Holding Company Act of 1956.

SEC. 3. SUPERVISION OF PARENT COMPANIES OF INDUSTRIAL LOAN COMPANIES.

    The Bank Holding Company Act of 1956 (12 U.S.C. 1841 et seq.) is 
amended by inserting after section 5 the following:

``SEC. 6. SUPERVISION OF PARENT COMPANIES OF INDUSTRIAL LOAN COMPANIES.

    ``(a) In General.--The Board shall have the same authority to 
require a parent company of an industrial loan company to make reports 
and submit to examinations as the Board has with respect to a bank 
holding company.
    ``(b) Parent Company of an Industrial Loan Company Defined.--In 
this section, the term `parent company of an industrial loan company' 
means a company that has control over an entity that--
            ``(1) is an industrial loan company, industrial bank, or 
        other similar institution; and
            ``(2) is not a bank.''.

SEC. 4. CHANGE OF CONTROL.

    (a) In General.--Except as provided in subsection (b), the 
appropriate Federal banking agency shall disapprove a change in 
control, as provided in section 7(j) of the Federal Deposit Insurance 
Act (12 U.S.C. 1817(j)), of an industrial loan company.
    (b) Exceptions.--Subsection (a) shall not apply to a change in 
control of an industrial loan company--
            (1) that--
                    (A) is in danger of default, as determined by the 
                appropriate Federal banking agency;
                    (B) is the result of the acquisition of control of 
                the industrial loan company by a company that was an 
                affiliate of the industrial loan company on September 
                23, 2021, through an internal corporate reorganization 
                of a company that directly or indirectly controlled the 
                industrial loan company on that date;
                    (C) results from an acquisition of voting shares of 
                a publicly traded company that controls an industrial 
                loan company if, after the acquisition, the acquiring 
                shareholder (or group of shareholders acting in 
                concert) holds less than 25 percent of any class of the 
                voting shares of the company; or
                    (D) will be controlled, directly or indirectly, by 
                a firm subject to consolidated supervision by the Board 
                of Governors of the Federal Reserve System as a--
                            (i) bank holding company;
                            (ii) savings and loan holding company; or
                            (iii) foreign bank treated as of July 1, 
                        2020, as a bank holding company under the 
                        International Banking Act of 1978 (12 U.S.C. 
                        3101 et seq.); and
            (2) that has obtained all regulatory approvals otherwise 
        required for such change of control under any applicable 
        Federal or State law, including section 7(j) of the Federal 
        Deposit Insurance Act (12 U.S.C. 1817(j)).
    (c) Definitions.--In this section:
            (1) Appropriate federal banking agency.--The term 
        ``appropriate Federal banking agency'' has the meaning given 
        that term under section 3 of the Federal Deposit Insurance Act 
        (12 U.S.C. 1813).
            (2) Industrial loan company.--The term ``industrial loan 
        company'' means an industrial loan company, industrial bank, or 
        other similar institution.

SEC. 5. GAO STUDY.

    (a) Study.--The Comptroller General of the United States shall 
carry out a study on the effects of industrial loan companies, 
industrial banks, and other similar institutions on the U.S. economy, 
including the effect on competitiveness, market structure, and 
different industries.
    (b) Report.--Not later than the end of the 1-year period beginning 
on the date of enactment of this Act, the Comptroller General shall 
issue a report to the Congress containing all findings and 
determinations made in carrying out the study under subsection (a).
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