Industrial Loan Charters Surge as Nonbanks Move Into Financial Services
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Diverging Reports Breakdown
Industrial Loan Charters Surge as Nonbanks Move Into Finance
Nissan North America’s financial services arm, Nissan Motor Acceptance Corp. said it submitted an application with state and federal regulators to form Nissan Bank. The application with the Federal Deposit Insurance Corporation (FDIC) and the Utah Department of Financial Institutions is the latest in a wave of industrial loan company charters (ILCs) As of the middle of last year, there were 23 industrial banks with $232 billion in total assets, according to the Federal Register. Only two ILCs were established in the aftermath of the financial crisis (Walmart withdrew its own ILC application in 2007, for example) until the current decade, as Nelnet and Block (then known as Square) applied for and gained approval for industrial banks. There are in fact only seven states where I LCs can be established. Those states include California, Colorado, Hawaii, Indiana, Minnesota, Nevada and Utah. The ability to accept demand deposit varies by state. The deposits can be offered if the ILC’s assets are less than $100 million.
From 2008 to the current decade there were only two ILCs granted, including Square Financial Services.
Industrial loan company charters offer nonbanks, including FinTechs, a way to offer financial services without becoming or establishing their own bank holding companies.
On June 20, Nissan North America’s financial services arm, Nissan Motor Acceptance Corp. said it submitted an application with state and federal regulators to form Nissan Bank.
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The application with the Federal Deposit Insurance Corporation (FDIC) and the Utah Department of Financial Institutions is the latest in a wave industrial loan company charters (ILCs) as nonbanks seek to move further into financial services, expanding their own ecosystems in the process.
In Nissan’s case, the bank would open up commercial financing for dealerships that the auto giant has said would “enhance the services” provided by the financing unit, “while enabling greater efficiency, competitive rates, and a deeper ability to serve Nissan, INFINITI, and non-Nissan dealerships across the United States.” The read across is that the broader range of financing options and competitive rates would also reinforce dealer ties to Nissan.
“In addition, the Bank intends to uphold Nissan’s strong legacy of community investment by supporting financial literacy, affordable housing, and economic development initiatives in Utah and beyond,” Nissan said in the announcement, which would conceivably extend the financial services linked to Nissan. Consumer auto loans will continue to be offered directly by NMAC.
The industrial loan company is making a comeback — albeit off a muted base — as FinTechs, automakers and even social media firms mull moves into lending and other activities.
Roots in the 20th Century
Industrial loan companies, also referred to as industrial banks, have their roots in the early 20th century, focused on providing loans to industrial workers. More recently, they’ve been on-ramps for firms to offer deposits and loans without having to tread the same regulatory paths as more traditional banks, as they are exempt from the Bank Holding Company Act’s definition of a “bank.”
There are key distinctions. As detailed by the FDIC, the banks are not authorized in every state; there are in fact only seven states where ILCs can be established. Those states include California, Colorado, Hawaii, Indiana, Minnesota, Nevada and Utah. The ability to accept demand deposit varies by state. The deposits can be offered if the ILC’s assets are less than $100 million. As of the middle of last year, there were 23 industrial banks with $232 billion in total assets, according to the Federal Register.
Only two ILCs were established in the aftermath of the financial crisis (Walmart withdrew its own ILC application in 2007, for example) until the current decade, as Nelnet and Block (then known as Square) applied for and gained approval for industrial banks. Block is a notable example here of a FinTech pushing more fully into finance, having created Square Financial Services through the ILC.
Block’s latest quarterly filing with the Securities and Exchange Commission (SEC) notes that it originates loans through the wholly owned subsidiary bank, and sells the majority of those loans to institutional investors. Earlier this year the company received approval to offer Cash App Borrow (small short-term consumer loans) to customers. Banknet call reports reveal that as of April, Square Financial Services had $430 million in loans and leases held for investment.
The FDIC has said in the Federal Register that it “anticipates potential continued interest in the establishment of industrial banks, particularly with regard to proposed institutions that plan to pursue a specialty or limited purpose business model.”
There are three pending applications, as cited by the FDIC — and while in absolute terms, a low single-digit rate seems small, it’s a marked upswing from the previous several years (we note that the addition of Nissan’s application should bring the total to four). Ford Credit Bank submitted its application in July 2022. GM Financial Bank and Stellantis Bank USA, which is affiliated with the owner of Dodge, Chrysler and Jeep, both filed applications in 2025.
As for the on-ramp toward new bank creation: Acting FDIC Chairman Travis Hill said in an April speech that new bank formation should be re-examined by regulators; the FDIC is formulating a request for information focused on those charters.