Consumer groups call on FDIC to deny Ford Credit’s ILC charter application – InsuranceNewsNet

WASHINGTON, August 26 (TNSgov) — The National Coalition for Community Reinvestmentan organization that works to uphold fair housing, fair lending, and consumer protection laws, issued the following press release:

Ford Motor Company should be denied deposit insurance for his new project Ford Charter of the Industrial Credit Company (SLI), the National Coalition for Community Reinvestment (NRC), the National Consumer Law Center (on behalf of its low-income customers), Americans for Financial Reform Education Fundand the responsible credit center wrote to Federal Deposit Insurance Corporation (FDIC) Wednesday.

The ILC charter is a loophole that allows a business enterprise to enjoy the privileges of bank ownership without requiring it to submit to the consolidated supervision of the Federal Reserve. ILC is an exception to a longstanding policy of separating banking and commerce that dates back to the Great Depression.

The letter calls the FDIC recognize the risks this application could create to the safety and soundness of the financial system, emphasizes that the proposed community reinvestment plan is far too small for a financial institution of this size, and highlights the unique threats posed by the integration of a bank within a company that can track consumer behavior through electric vehicle (EV) technology.

“A bank charter is a privilege, not a resource for improving a manufacturer’s bottom line,” said Jesse VanTol, CEO of the NRC. “Whereas Ford would benefit, the application lacks adequate community reinvestment commitments and would give Ford Credit too much information about the driving habits of electric vehicle owners. We are convinced that the FDIC will do the right thing by rejecting FordRequirement.”

“Time and time again we have seen the catastrophe that ensues when companies behave like banks but are not regulated as such,” said Renita Marcellin, senior policy analyst at Americans for Financial Reform. “Commitments to create more green vehicles, while noble, are not reason enough to circumvent our banking laws which are meant to protect consumers and taxpayers.”

NCRC, Americans for Financial Reform and responsible credit center recently collaborated in a joint effort with multiple banking and credit union businesses to support the successful markup of HR 5912, the Close the ILC Loophole Act, and to push for its consideration in the Senate.

Ongoing legislation to close the ILC loophole reflects growing fears that a Big Tech company or mega-retailer could receive a charter, injecting new worries into an already struggling business model.

ILCs have a poor record of financial stability. Many CALs have either failed or encountered difficulties requiring intervention. During the financial crisis, GMAC, the ILC owned by General Motorsencountered difficulties which eventually required $17 billion with funding from the Troubled Asset Relief Program. Thirteen ILCs failed in the 1980s and two more in 1999 and 2003. In addition to the existing 25 ILCs, GM Financial and 3 other companies currently have pending ILC applications. The FDICwhich suspended new approvals in 2006 in response to walmartapproved 2 ILC deposit insurance applications in March 2020.

To read the letter:

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Original text here:

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