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Mortgage

Lenders join together against SoFi banking move

Urge Federal Deposit Insurance Corp. to reject application

A group of banks joined together against SoFi, one of the largest online lenders, urging the Federal Deposit Insurance Corp. to reject its application to launch a banking unit.

Recently, SoFi took a major step toward becoming a bank, filing an application for a special banking charter known as an industrial loan company (ILC).

However, Chris Cole, senior regulatory counsel at the Independent Community Bankers of America, said the move should be resisted, according to an article by Ben McLannahan for the Financial Times. He explained SoFi is trying to take advantage of a loophole which would give access to the federal safety net without having to comply with laws that regular banks have to follow.

From the article:

Mr Cole, who is planning to write a letter to the FDIC before the comment period ends early next month, noted that the ICBA and other groups joined forces a decade ago to thwart a similar move by Walmart to launch in Utah, where many ILCs are based.

“You don’t have any regulation of the parent company under the Bank Holding Act; that is almost always the reason why companies are setting these [structures] up,” he said.

SoFi declined to comment on the ILC application, according to the article. If granted, it would be the first in eight years.

From the article:

Another lobbyist, Richard Hunt of the Consumer Bankers Association, said the CBA would take its time to review SoFi’s application, but argued that the company had so far been “loosey-goosey” with respect to laws governing banks with regular charters.

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