WASHINGTON – On Thursday, the House Committee on Financial Services advanced Congressman Lance Gooden’s (R-Texas) legislation to close the Industrial Loan Corporation Loophole (ILC) and protect community banks from Big Tech overreach. The bill passed the committee by a vote of 28 - 25.
Rep. Gooden said, “Congress must prevent Big Tech companies from exploiting loopholes in our financial system to gather Americans’ personal financial information and crush smaller financial institutions. The ILC loophole allows these companies to avoid traditional banking regulations, providing them with a significant competitive advantage, and I am proud of the Financial Services Committee members who worked with me to close that loophole and ensure community banks are protected.”
“The nation’s community banks, with nearly 50,000 locations across the nation, sincerely thank Rep. Lance Gooden for his leadership in cosponsoring and voting in favor of H.R. 5912, the Close the ILC Loophole Act,” said Rebeca Romero Rainey, president and CEO of the Independent Community Bankers of America. “H.R. 5912 addresses the significant risks created by ILCs by amending the Bank Holding Company Act to permanently close the ILC loophole. Again, we sincerely thank Rep. Gooden for protecting consumers in Texas and nationwide and for preventing further exploitation of this loophole by large commercial companies by voting to close the ILC loophole.”
“The financial services landscape continues to evolve quickly, and while technology has resulted in numerous enhancements to convenience and access for consumers and businesses, the separation of banking and commerce is a fundamental tenet of the economic vitality and viability of this country. Privacy of sensitive financial information, concentration and consolidation of the industry, limited consumer choices and access to local sources of capital are all significant concerns that H.R. 5912 makes great strides to address. The Independent Bankers Association of Texas (IBAT) applauds and appreciates Congressman Lance Gooden for his bold leadership on this important issue and urges prompt passage.”?
Background: ILCs are state-charted financial institutions that offer financial services equivalent to banks, including accepting deposits and offering loans. However, these institutions are not required to comply with most federal financial regulations or standards. Due to a loophole in the law, Big Tech companies are permitted to establish an ILC, which would result in a complete takeover of the financial services industry by the tech industry.