What Is an Industrial Loan Company

What Is an Industrial Loan Company?

An industrial loan company is a bank chartered by a US state. It takes deposits, and the FDIC insures them. People also call it an ILC or an industrial bank. The model is American, and other countries have no direct copy of it.

Industrial loan company meaning

The idea dates from the early 1900s. Small lenders gave workers modest loans that regular banks refused. An industrial loan of that kind was small and often unsecured. The name stayed, but the business grew far beyond those roots.

Industrial loan company vs industrial bank

What is an industrial bank? It is the same thing under a newer name. Utah changed its law in 2004 and began to use “industrial bank.” Many people still say ILC or industrial loan company. Federal rules cover both names.

How Industrial Loan Companies Work

Industrial loan companies fund lending with deposits. The bank follows rules close to those of other insured banks. The main differences sit with the owner.

ILC banking and financial services

ILC banking looks familiar to a customer. The bank offers savings accounts and time deposits, then lends the money out. Many ILCs focus on one product. Ford Credit Bank, for example, plans nationwide auto financing. It will raise funds through online savings accounts and time deposits.

How industrial lending works

Early industrial lending relied on investors. Most state laws did not allow deposits, so lenders sold thrift certificates. That changed in 1982. The Garn-St Germain Act made all ILCs eligible for deposit insurance. In Utah today, an industrial bank can hold deposits only with FDIC insurance.

What Is an ILC Charter?

An ILC charter is a licence to run an industrial bank. A state grants it, and the FDIC must approve deposit insurance. Two regulators are involved from the start.

How an ILC charter works

The state issues the charter under its own banking law. Utah is the best-known example.

The FDIC then checks the application against seven factors. It looks at the bank’s capital, its future earnings, and its managers. It also weighs the risk to the Deposit Insurance Fund.

Who can establish an ILC bank?

Almost any company can own an ILC bank, but only some states can charter one. Only states that had this charter before March 5, 1987 can grant it. Congress chose to let commercial firms own these banks. In 2026 the FDIC approved applications from Ford, General Motors, and Edward Jones.

ILC Banks vs Traditional Banks

Bank-level rules are similar. The gap lies in how the law treats the owner.

Key regulatory differences

The parent of a commercial bank is a bank holding company. It answers to the Federal Reserve and faces limits on its activities. The parent of an ILC bank does not have to register as a bank holding company. Congress created this exemption in 1987.

Ownership and business model differences

The exemption changes who can own a bank. A carmaker can fund customer loans through its own bank. A broker can offer securities-backed loans. A traditional bank usually sells a wide mix of products. An ILC bank often builds its model around one business line.

ILCs Outside the US

The EU and the UK have no ILC. In both, only licensed banks can take deposits. A company that wants a bank must get a full banking licence. Anyone who buys a large stake or control of a bank also needs approval first. In the US, the parent of an ILC bank does not become a bank holding company.

How Industrial Banks Are Regulated

Industrial banks answer to the state and the FDIC. Parent companies face a third layer of rules.

Federal and state oversight

In Utah, the state department and the FDIC supervise industrial banks together. The FDIC oversees industrial banks like any other state nonmember bank. A new industrial bankʼs parent must also sign a written agreement with the FDIC. The rule for this is 12 CFR Part 354.

Deposit insurance and compliance requirements

Industrial banks follow all consumer compliance laws and the Community Reinvestment Act.

The FDIC can also add conditions. Ford Credit Bank and GM Financial Bank must keep a tier 1 leverage ratio of at least 15 percent. Their parents must support capital and liquidity.

These conditions fit those two cases, not every ILC.

Benefits and Risks of the ILC Model

The ILC model has clear advantages. It also raises questions that regulators still debate.

Why companies use ILC charters

A company can fund its lending with insured deposits. It keeps control of its own bank. It does not have to become a bank holding company. Fintech firms and commercial brands find this attractive. Ford says an industrial bank lets it accept insured deposits to fund its operations.

Regulatory concerns and limitations

Critics point to the parent company. The Federal Reserve does not supervise it, so regulators see a gap in oversight. Some industrial banks also came under stress in 2008–09. Supporters answer that Congress made this choice on purpose. The FDIC asked the public for feedback in a 2025 request for information, so the debate goes on.

Final Thoughts

An industrial loan company is a US state-chartered bank with a special ownership rule. It takes insured deposits, follows bank-level rules, and can belong to a non-bank parent. Other systems allow non-bank owners also, but they review the owner more closely.

Founders who plan a banking structure often need to think about company incorporation at the same time. The team at Icon.Partners can help you compare options across jurisdictions.

For the corporate side of the project, see our company incorporation services.