Fintechs try old bank charters as 'everything old is new again' - Roll Call

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Waters said she and other lawmakers have “concerns with regulatory oversight of ILCs generally,” citing the need for strong consumer protection and reinvestment, and the importance of preserving the separation of banking and commerce.

Also in March, the Independent Community Bankers of America, an industry group, said it was extremely concerned about the FDIC’s proposed rule-making on industrial charters and its approval of Square and Nelnet. The organization last year distributed a policy paper around Washington calling for an immediate moratorium on such approvals.

Regulation legislation

In response to Rakuten’s application, Sen. John Kennedy, R-La., introduced legislation last year that would require the Fed to regulate ILCs and demand industrial loan companies to “comply with specified reporting, examination, and ownership requirements.”

“It’s just a bad idea for commerce and banking to mix,” Kennedy said in November. “Not only is it unfair to community banks who have to play by different rules, it’s bad for consumers.” The ICBA supports Kennedy’s bill, which has been referred to the Senate Banking Committee.

Still, Prat Vallabhaneni, a former FDIC attorney and currently a partner at White & Case LLP’s banking and fintech practices, told CQ Roll Call he doubts that Kennedy’s proposed legislation will gain much traction.

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Fintechs try old bank charters as 'everything old is new again' - Roll Call
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