{"id":40,"date":"2019-08-12T17:24:05","date_gmt":"2019-08-12T17:24:05","guid":{"rendered":"https:\/\/avalaunchsites.com\/bma\/2019-8-12-getting-to-know-ilc-banking\/"},"modified":"2020-06-17T14:03:54","modified_gmt":"2020-06-17T20:03:54","slug":"getting-to-know-ilc-banking","status":"publish","type":"post","link":"https:\/\/avalaunchsites.com\/bma\/2019\/08\/getting-to-know-ilc-banking\/","title":{"rendered":"Getting to Know ILC Banking"},"content":{"rendered":"

What Is ILC Banking?<\/strong><\/h2>\n

An industrial loan company (ILC) is a financial institution within the United States that lends money, typically to consumers and small businesses. A fixed institution since 1910, the distinctive feature about ILC\u2019s is that they may be owned by non-financial institutions, such as a commercially-run company, and provide specialized lending that traditional banks typically don\u2019t. They are, however, still federally insured and subject to both Federal Deposit Insurance Corporation (FDIC) regulations and state-chartered supervision.<\/p>\n

Though they can be owned by commercial firms, ILC\u2019s are exempt from technically being defined as a \u201cbank\u201d as the term pertains to the Bank Holding Company Act (BHCA), but are generally held to the same laws, mandates, and regulations as other types of banks. In addition, ILC\u2019s are subject to Sections 23A and 23B of the Federal Reserve Act, which regulate transactions made between industrial banks, their affiliates, and parent companies. For example, ILC\u2019s are strictly prohibited from issuing credit to their consumers to be used to purchase products or services offered by an ILC\u2019s parent company.<\/p>\n

Unlike commercial banks and lenders, ILC\u2019s do not offer checking accounts and do not accept demand deposits (they can, however, accept federally insured deposits). Their primary services include offering loans, issuing credit cards, and providing credit financing as well as financial planning. The goal of industrial lending institutions is to provide banking and credit services to a diverse range of customer factions across the country, particularly underserved groups (more on that later).<\/p>\n

Currently, there are seven states that offer ILC\u2019s: Utah, Nevada, Hawaii, California, Colorado, Minnesota, and Indiana. Interestingly, most ILC\u2019s have been chartered by the Utah Department of Financial Institutions, so consider the Utah as the capital of industrial banking. Many corporations have established industrial banks.<\/p>\n

\"WhatWhat Are the Benefits of Industrial Banks?<\/strong><\/h2>\n

Though they\u2019re not the conventional bank, the good news is that ILC\u2019s still possess many of the same properties and functions of one. They still have the ability to join major card associations, such as Visa and Mastercard, and issue cards to consumers. The cost of funding for these banks is also reduced, thanks to a discount window provided by the Federal Reserve, and marketing costs are low as the selection of loan applicants is broad (applications come from across the country). Industrial loan corporations are only subject to supervision by select institutions depending on the state they are chartered in. ILC\u2019s are also exempt from both state licensing and money service business (MSB) laws.<\/p>\n

Beyond convenience and cost efficiency, the ILC structure is particularly sound. Though sparse when compared to the number of banks as defined under the BHCA, ILC\u2019s have withstood the test of time, surviving through the better part of a century; not to mention multiple economic crises and financial collapses. According to a banking law specialist and university professor Mehrsa Baradaran, \u201c[t]he ILC structure is currently the only place where the stabilizing relationship between commerce and banking takes place and, as demonstrated, the small industry has remained sound through a systematic financial collapse largely due to its commercial relationships.\u201d<\/p>\n

ILC\u2019s can also provide a more streamlined and informed approach to lending. For example, industrial lending corporations owned by General Motors and BMW will have significantly more knowledge and expertise when it comes to processing and issuing car loans than will General Electric.<\/p>\n

\"BenefitsFor Whom Are ILC\u2019s A Good Option?<\/strong><\/h2>\n

As an ILC\u2019s primarily function is as a lending institution, it would follow that their main clientele are specialized consumer and retail customer groups found across the country seeking loans or lines of credit. Since the original goal of ILC\u2019s was to provide lending to industrial workers who could not secure funds elsewhere, industrial banks cater their business toward what is known as \u201cunderserved\u201d markets. ILC\u2019s cater to consumers and businesses that might find it hard to secure loans or funding from traditional banks, credit unions, and financial institutions. These individuals often find it difficult to even gain access to common banking services.<\/p>\n

Underserved groups typically include consumers recovering from financial problems, those with low income, clients with poor credit (or no established credit to speak of), companies that do not qualify to be bank-holding, hourly workers, and consumers with low, moderate, or inconsistent income.<\/p>\n

What BMA Can Do for ILC\u2019s<\/strong><\/h2>\n

Advancements in technology are constantly changing the landscape of banking. As is the case for typical banking, industrial lending companies need core processing technology that can keep up with their sophisticated structure. BMA Core Technology provides innovative software that is designed to perform powerful and dynamic core processing, while maintaining maximum efficiency and ease for its clients.<\/p>\n

BMA processing services software includes:<\/p>\n