Industrial loan company
Encyclopedia
An industrial loan company (ILC) or industrial bank is a financial institution
in the United States
that lends money, and may be owned by non-financial institutions. Though such banks offer FDIC
-insured deposits and are subject to FDIC and state regulator oversight, a debate exists to allow parent companies such as Wal-Mart
to remain unregulated by the financial regulators. "FDIC-insured entities are subject to Sections 23A and 23B of the Federal Reserve Act
, which limits bank transactions with affiliates, including the parent company." (FDIC.gov) The ILC is permitted to have branches in multiple states (which is permitted by many states on a reciprocal basis). They are state-chartered, and insured by the Federal Deposit Insurance Corporation
. They are currently chartered by seven states, with most chartered by Utah
. Other states permitting them include California
, Colorado
, Minnesota
, Indiana
, Hawaii
, and Nevada
.
Companies that have set up industrial banks include UBS, General Electric Co., General Motors, Merrill Lynch & Co. Inc., Morgan Stanley, American Express Co. Target Corp, Nordstrom, Harley-Davidson, First Data, UnitedHealth Group, BMW, and Sallie Mae. In May 2005, Warren Buffett's Berkshire Hathaway
, Inc. announced plans to operate a Utah industrial bank to handle consumer loans for its R. C. Willey Home Furnishings
stores. The Blue Cross and Blue Shield Association, Ford Motor Co., Ceridian Corp. and Home Depot await approval.
Top Ten FDIC-Insured Industrial Banks by Assets, 2005 ($ millions).
Source: Federal Deposit Insurance Corporation. As of 2009, some of these banks are no longer extant.
However, the assets held by an ILC tend to paint an incomplete picture. The actual loan book amount can be considered more important. In this view, for example, UBS would replace Merrill Lynch as number 1.
, which made small loans to working people under a concept he called "Morris Plan."
Under this lending approach, would-be borrowers had to submit references from two people of like character and earnings power to guarantee the borrower's creditworthiness, and agreed to repay the loan through the purchase of Installment Thrift Certificates in weekly installments equal to the face value of the loan, less origination and investigative fees.
Morris Plan pioneered the use of automotive financing (through arrangements between the Morris Plan Company of America, essentially a holding company for Morris Plan banks, and the Studebaker Corporation) and, through the subsidiary Morris Plan Insurance Society, credit life insurance (as allowed for the loan to be repaid in case the borrower died during the term of the loan, with any residue going to the estate).
Financial institution
In financial economics, a financial institution is an institution that provides financial services for its clients or members. Probably the most important financial service provided by financial institutions is acting as financial intermediaries...
in the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
that lends money, and may be owned by non-financial institutions. Though such banks offer FDIC
Federal Deposit Insurance Corporation
The Federal Deposit Insurance Corporation is a United States government corporation created by the Glass–Steagall Act of 1933. It provides deposit insurance, which guarantees the safety of deposits in member banks, currently up to $250,000 per depositor per bank. , the FDIC insures deposits at...
-insured deposits and are subject to FDIC and state regulator oversight, a debate exists to allow parent companies such as Wal-Mart
Wal-Mart
Wal-Mart Stores, Inc. , branded as Walmart since 2008 and Wal-Mart before then, is an American public multinational corporation that runs chains of large discount department stores and warehouse stores. The company is the world's 18th largest public corporation, according to the Forbes Global 2000...
to remain unregulated by the financial regulators. "FDIC-insured entities are subject to Sections 23A and 23B of the Federal Reserve Act
Federal Reserve Act
The Federal Reserve Act is an Act of Congress that created and set up the Federal Reserve System, the central banking system of the United States of America, and granted it the legal authority to issue Federal Reserve Notes and Federal Reserve Bank Notes as legal tender...
, which limits bank transactions with affiliates, including the parent company." (FDIC.gov) The ILC is permitted to have branches in multiple states (which is permitted by many states on a reciprocal basis). They are state-chartered, and insured by the Federal Deposit Insurance Corporation
Federal Deposit Insurance Corporation
The Federal Deposit Insurance Corporation is a United States government corporation created by the Glass–Steagall Act of 1933. It provides deposit insurance, which guarantees the safety of deposits in member banks, currently up to $250,000 per depositor per bank. , the FDIC insures deposits at...
. They are currently chartered by seven states, with most chartered by Utah
Utah
Utah is a state in the Western United States. It was the 45th state to join the Union, on January 4, 1896. Approximately 80% of Utah's 2,763,885 people live along the Wasatch Front, centering on Salt Lake City. This leaves vast expanses of the state nearly uninhabited, making the population the...
. Other states permitting them include California
California
California is a state located on the West Coast of the United States. It is by far the most populous U.S. state, and the third-largest by land area...
, Colorado
Colorado
Colorado is a U.S. state that encompasses much of the Rocky Mountains as well as the northeastern portion of the Colorado Plateau and the western edge of the Great Plains...
, Minnesota
Minnesota
Minnesota is a U.S. state located in the Midwestern United States. The twelfth largest state of the U.S., it is the twenty-first most populous, with 5.3 million residents. Minnesota was carved out of the eastern half of the Minnesota Territory and admitted to the Union as the thirty-second state...
, Indiana
Indiana
Indiana is a US state, admitted to the United States as the 19th on December 11, 1816. It is located in the Midwestern United States and Great Lakes Region. With 6,483,802 residents, the state is ranked 15th in population and 16th in population density. Indiana is ranked 38th in land area and is...
, Hawaii
Hawaii
Hawaii is the newest of the 50 U.S. states , and is the only U.S. state made up entirely of islands. It is the northernmost island group in Polynesia, occupying most of an archipelago in the central Pacific Ocean, southwest of the continental United States, southeast of Japan, and northeast of...
, and Nevada
Nevada
Nevada is a state in the western, mountain west, and southwestern regions of the United States. With an area of and a population of about 2.7 million, it is the 7th-largest and 35th-most populous state. Over two-thirds of Nevada's people live in the Las Vegas metropolitan area, which contains its...
.
Companies that have set up industrial banks include UBS, General Electric Co., General Motors, Merrill Lynch & Co. Inc., Morgan Stanley, American Express Co. Target Corp, Nordstrom, Harley-Davidson, First Data, UnitedHealth Group, BMW, and Sallie Mae. In May 2005, Warren Buffett's Berkshire Hathaway
Berkshire Hathaway
Berkshire Hathaway Inc. is an American multinational conglomerate holding company headquartered in Omaha, Nebraska, United States, that oversees and manages a number of subsidiary companies. The company averaged an annual growth in book value of 20.3% to its shareholders for the last 44 years,...
, Inc. announced plans to operate a Utah industrial bank to handle consumer loans for its R. C. Willey Home Furnishings
RC Willey Home Furnishings
RC Willey Home Furnishings is a home furnishings company with stores in Utah, Idaho, Nevada and California. It was founded by Rufus Calle Willey in 1932 when he started selling Hotpoint Brand appliances door-to-door in Syracuse, Utah...
stores. The Blue Cross and Blue Shield Association, Ford Motor Co., Ceridian Corp. and Home Depot await approval.
Top Ten FDIC-Insured Industrial Banks by Assets, 2005 ($ millions).
| Rank | Bank | State | assets |
|---|---|---|---|
| 1 | Merrill Lynch Bank USA | UT | $60,367.7 |
| 2 | UBS Bank USA | UT | $18,585.8 |
| 3 | American Express Centurion Bank | UT | $15,933.0 |
| 4 | Fremont Investment & Loan | CA | $11,316.4 |
| 5 | Morgan Stanley Bank | UT | $8,674.9 |
| 6 | USAA Savings Bank | NV | $7,099.6 |
| 7 | GMAC Commercial Mortgage Bank | UT | $4,872.5 |
| 8 | GMAC Automotive Bank | UT | $2,429.5 |
| 9 | Beal Savings Bank | NV | $2,420.2 |
| 10 | Lehman Brothers Commercial Bank | UT | $2,127.2 |
Source: Federal Deposit Insurance Corporation. As of 2009, some of these banks are no longer extant.
However, the assets held by an ILC tend to paint an incomplete picture. The actual loan book amount can be considered more important. In this view, for example, UBS would replace Merrill Lynch as number 1.
Origins of the concept
In 1910, attorney Arthur J. Morris (1881-1973) opened the Fidelity Savings and Trust Company in Norfolk, VirginiaNorfolk, Virginia
Norfolk is an independent city in the Commonwealth of Virginia in the United States. With a population of 242,803 as of the 2010 Census, it is Virginia's second-largest city behind neighboring Virginia Beach....
, which made small loans to working people under a concept he called "Morris Plan."
Under this lending approach, would-be borrowers had to submit references from two people of like character and earnings power to guarantee the borrower's creditworthiness, and agreed to repay the loan through the purchase of Installment Thrift Certificates in weekly installments equal to the face value of the loan, less origination and investigative fees.
Morris Plan pioneered the use of automotive financing (through arrangements between the Morris Plan Company of America, essentially a holding company for Morris Plan banks, and the Studebaker Corporation) and, through the subsidiary Morris Plan Insurance Society, credit life insurance (as allowed for the loan to be repaid in case the borrower died during the term of the loan, with any residue going to the estate).