Dear Director Worthing,
The Bank Policy Institute[1] (“BPI”) and the Independent Community Bankers of America (“ICBA”)[2] write regarding Affirm Holdings, Inc.’s (“Affirm”) application on behalf of its proposed Nevada industrial bank, Affirm Bank, for Federal Deposit Insurance Corporation (“FDIC”) insurance. Affirm is a nonbank fintech company that offers buy now, pay later payment plans for online and in-store purchases at hundreds of thousands of merchants. If approved, Affirm asserts that Affirm Bank “would complement Affirm’s current business and bank partnership models, including by providing greater flexibility and diversification, to help advance responsible innovation in financial services. If approved, it would also spur opportunities to introduce new products and services over time.”[3]
Industrial banks, also referred to as industrial loan companies (“ILCs”), offer banking products and services functionally indistinguishable from those that banks provide. However, the parent companies of ILCs are exempt from the requirements of the Bank Holding Company Act (“BHCA”).[4] Therefore, they can avoid regulation and supervision by the Board of Governors of the Federal Reserve System and need not confine their activities to those “closely related to banking.”[5] Thus, the ILC exemption effectively serves as a loophole through which firms, such as commercial and tech firms, can own insured banks but not be subject to the federally mandated regulatory and supervisory framework intended to promote a safe, sound and stable U.S. banking system. Therefore, as we have long advocated, and for the reasons discussed herein, Congress should close this loophole—and, until such time, the FDIC should not issue deposit insurance to any ILC applicant, including Affirm Bank.
The ILC loophole violates the longstanding U.S. policy that banking and commerce should remain separate. For example, the BHCA limits the affiliation of banks and non-banking businesses by generally prohibiting bank holding companies from owning more than five percent of the voting stock of non-financial companies, with limited exceptions.[6] This prohibition addresses several potential problems that could lead to consumer harm and financial stability risk, including:
- A concentration of economic power;
- Less stringent credit standards for and higher risk exposures to affiliates;
- Less attractive credit terms to unaffiliated non-financial businesses; and
- Other similar conflicts of interest.
Under the BHCA, the activities of affiliates of a bank are subject to “consolidated supervision.”
Furthermore, the ILC exemption was not intended to provide an avenue for commercial, retail, or tech firms to enter into banking. ILCs were first established in the early 1900s to make small loans to industrial workers and, until recently, were not generally permitted to accept deposits or obtain deposit insurance. Moreover, the ILC industry has changed dramatically since 1987 when this statutory exemption was created as part of the Competitive Equality in Banking Act (“CEBA”). At that time, the size, nature, and powers of ILCs were limited.[7]
However, the loophole allows large national and international financial and commercial firms to acquire an ILC, which is an FDIC-insured depository institution, and gain access to the federal safety net available to insured depository institutions. Indeed, ILCs are a particularly attractive avenue for firms to gain access to the federal safety net without being subject to the activity restrictions and prudential framework that Congress established for the corporate owners of other full-service commercial banks.
In the relatively recent past, commercial firms and tech companies like Wal-Mart, Home Depot, Rakuten, and PayPal have sought to access the benefits offered through FDIC insurance and access to the federal safety net by the establishment or acquisition of an ILC. These firms are subject to market and other incentives that are distinct from, and may conflict with, serving as a source of financial strength for a subsidiary bank.
If approved, Affirm Bank would have a large and complex parent, not subject to consolidated supervision. Because of Affirm’s large scale and existing customer base, it has the potential to quickly grow if it is granted deposit insurance. Indeed, as of December 31, 2025, Affirm had 25.8 million customers and 478 thousand active merchants.[8] The disparate regulatory and supervisory treatment of Affirm Bank could pose a disproportionate risk of loss to the Deposit Insurance Fund (“DIF”) and create unnecessary systemic risk. Furthermore, its substantial size could amplify losses to the DIF in the event of failure.
In addition to these risks, Affirm Bank could leverage its parent company’s relationships with consumers and merchants to gain an unfair competitive advantage to attract customers. Banks support innovation and welcome competition provided that those competitors are subject to the same prudential supervisory framework and activity restrictions that Congress has established for the corporate owners of full-service insured banks. Unfair competition from a less regulated and rapidly growing financial institution like Affirm Bank could attract deposits from fully-regulated banking organizations and thereby could pose risks to those banks and to the financial system more broadly.
Despite BPI and ICBA’s repeated calls to close the ILC loophole, the creation of new ILCs remains permitted by statute. Should the FDIC proceed with considering applications for deposit insurance from ILCs, such as Affirm Bank, we respectfully request that the FDIC pause such consideration until it has issued rules or otherwise provided greater transparency regarding the “FDIC’s policy approach to industrial bank filings” as the FDIC has represented it would do, as described further below.
In addition, the FDIC should not proceed with approving deposit insurance applications by any such entities without first studying and reporting publicly on whether it has an adequate number of sufficiently trained and qualified examiners to identify and address these supervisory risks and if not, how it proposes to hire and train such examiners. ILCs with commercial or tech parent companies can present risks that are far more varied and complex than those associated with traditional banks, and the bank regulators generally and FDIC examiners specifically do not have extensive experience assessing how these risks may affect the DIF and financial stability. Questions about the FDIC’s ability to examine these ILCs effectively are even more pressing in light of the FDIC’s increasing focus on smaller, less complex banking institutions.[9]
Finally, should the FDIC proceed with reviewing Affirm Bank’s application for insurance despite the reasons articulated above, the agency must consider several statutory factors.[10] Below, we describe concerns regarding Affirm Bank’s application in light of certain of those factors.
To read the full comment letter, please click here, or click on the download button below.
[1] The Bank Policy Institute is a nonpartisan public policy, research, and advocacy group that represents universal banks, regional banks, and the major foreign banks doing business in the United States. The Institute produces academic research and analysis on regulatory and monetary policy topics, analyzes and comments on proposed regulations, and represents the financial services industry with respect to cybersecurity, fraud, and other information security issues.
[2] The Independent Community Bankers of America® has one mission: to create and promote an environment where community banks flourish. We power the potential of the nation’s community banks through effective advocacy, education, and innovation. As local and trusted sources of credit, America’s community banks leverage their relationship-based business model and innovative offerings to channel deposits into the neighborhoods they serve, creating jobs, fostering economic prosperity, and fueling their customers’ financial goals and dreams. For more information, visit ICBA’s website at icba.org.
[3] See Affirm Press Release, “Affirm submits applications to establish industrial loan company” (January 23, 2026) (link).
[4] 12 U.S.C. § 1841(c)(2)(H) (“The term “bank” does not include […] [a]n industrial loan company, industrial bank, or other similar institution[.]”).
[5] 12 U.S.C. § 1843(k)(4)(F). We have long recognized that parents of ILCs that are subject to consolidated supervision by the Federal Reserve do not pose additional risks to the system and need not be included in any limitation on ILC parent companies. These include both bank holding companies and foreign banking organizations with operations in the United States that are already regulated as bank holding companies under the International Banking Act.
[6] 12 U.S.C. § 1843(a)(2) and (c)(6).
[7] At the time of CEBA’s enactment, most ILCs were small, locally owned institutions that had only limited deposit-taking and lending powers under state law. At the end of 1987, the largest ILC had assets of only approximately $410 million, and the average asset size of all ILCs was less than $45 million. The relevant states also were not actively chartering new ILCs. At the time CEBA was enacted, for example, Utah had only 11 state-chartered ILCs and had a moratorium on the chartering of new ILCs. Moreover, interstate banking restrictions and technological limitations made it difficult for institutions chartered in a grandfathered state to operate a retail banking business regionally or nationally; these factors do not inhibit regional or national expansion today.
[8] See Affirm Second Fiscal Quarter 2026 Shareholder Letter (Feb. 6, 2026) at 5 (link). The Shareholder Letter provides that Affirm “defines an active merchant as a merchant which has a relationship with Affirm, or a platform or wallet partner, and engages in at least one Affirm transaction during the twelve months prior to the measurement date.” Id. at 16.
[9] Only two of the top 40 U.S. banks are primarily supervised by the FDIC (link).
[10] 12 U.S.C. § 1816.
