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Prior to its markup Tuesday, NAFCU joined with other trade associations Tuesday to write to House Financial Services Committee Chairwoman Maxine Waters, D-Calif., and Ranking Member Patrick McHenry, R-N.C., strongly supporting H.R. 5912, The Close the ILC Loophole Act. In the letter, the groups reiterated that industrial loan companies (ILCs) operate under an exemption in federal law that does not give them the same regulatory oversight as other financial institutions, and therefore “poses risks to the financial system and additional risks for consumers and taxpayers.”

“When this exception was initially created, ILCs were typically small financial institutions, and companies used the charter for the limited purpose of providing small loans to industrial workers who could not otherwise obtain credit,” wrote the groups. “However, since that time, large commercial companies have used the ILC charter to gain access to the U.S. financial system and control entities that have essentially all of the powers of a full-service commercial bank, including the ability to accept deposits, make consumer and commercial loans and effectuate payments.”

“We urge you to support H.R. 5912 in committee to close the ILC loophole and look forward to working to move this legislation forward to be considered by the full House of Representatives,” concluded the groups.

NAFCU has separately encouraged Congress to close the ILC loophole in current law and stop large commercial companies from taking advantage of the ILC charter to gain access to the financial system by passing this necessary legislation. In a recent letter, Vice President of Legislative Affairs Brad Thaler explained this legislation is a "comprehensive solution" to closing the ILC loophole once and for all. "[…] we urge its adoption at markup without additional amendments that seek to water-down the important strides that the legislation is taking," added Thaler.

The House Financial Services Committee began its markup of a number of measures, including this bill, yesterday. This included discussion on H.R. 7022, the NAFCU-opposed “Strengthening Cybersecurity for the Financial Sector Act of 2022,” which could give the National Credit Union Administration (NCUA) authority to examine credit union vendors, but the Committee did not vote on the legislation yet. The Committee is scheduled to resume the markup at 10:00 a.m. eastern today where they are expected to discuss H.R. 5912 and H.R. 7003, the NAFCU-backed “Expanding Financial Access for Underserved Communities Act”, which would allow all credit unions to add underserved areas to their field of membership. Votes on all measures are expected to occur today.

NAFCU will continue to monitor the markup and NAFCU will keep credit unions informed of any developments.