CUNA and other organizations wrote to House Financial Services Committee leadership Tuesday in support of legislation to close the industrial loan company (ILC) loopholes in current law. The bipartisan Close the ILC Loophole Act from Reps. Chuy Garcia, D-Ill., and Lance Gooden, R-Texas would address such concerns.

“ILCs operate under a special exemption in federal law that permits any type of organization — including a large technology company or commercial firm — to control a full-service FDIC-insured bank without being subject to the same oversight and prudential standards or limitations on the mixing of banking and commerce that Congress has established for the U.S. financial system,” the letter reads.

ILCs operate under an exemption in federal law permitting any type of organization to control a full-service Federal Deposit Insurance Corporation-insured bank without being subject to the oversight, prudential standards, or limitations on mixing banking and commerce established by Congress.

“Simply put, this regulatory loophole creates safety and soundness risks for the institution, risks to the financial system and additional risks for consumers and taxpayers,” the letter reads. “Currently, ILCs of any size can collect FDIC-insured savings from retail customers and offer mortgages, credit cards and consumer loans, which enable them to operate as full-service banks. The risks to consumers and the financial system from ILCs are not theoretical.”