Leach Asks GAO to Study ILCs
Saying the original charter granted to industrial loan companies (ILCs) in a handful of states has "expanded beyond its original scope and purpose," Rep. Jim Leach (R-IA) has called on the U.S. General Accounting Office to study ILCs. Leach asked GAO to review their impact on safety and soundness and whether competitive inequities have been created in the financial marketplace. He also questioned the adequacy of the current regulatory structure of ILCs, since they operate outside of the supervisory framework established by the Bank Holding Company Act and may be owned by any commercial company.
Legislation is pending in Congress that would place ILCs on par with full service banks by allowing them to de novo branch across state lines and offer business NOW accounts. Leach requested a specific determination on whether the legislation "has the effect of so empowering the ILC charter that the competitive framework of the marketplace is skewed to the disadvantage of financial institutions with traditional charters." ICBA has rigorously maintained that it does.
Legislation that passed the full House in April 2003 gives ILCs authority to offer business NOW accounts. H.R. 1375, which grants de novo interstate branching authority to ILCs, may see a House vote this month. Neither bill has been taken up by the Senate Banking Committee.