Dive Brief:

• A community bank trade group and four consumer groups are urging the Federal Deposit Insurance Corp. (FDIC) to reject Ford Motor Company’s request for an industrial loan company (ILC) charter.
• The car manufacturer, which submitted applications to the FDIC and the Utah Department of Financial Institutions last month, said it intends to launch Ford Credit Bank to focus on auto-related lending and help it promote adoption of electric vehicles in the U.S.
• The four consumer groups — the National Community Reinvestment Coalition, the National Consumer Law Center, Americans for Financial Reform Education Fund and the Center for Responsible Lending — called the company’s bid to use the charter to promote the electrification of its car fleet disingenuous, while the Independent Community Bankers of America (ICBA) said the ILC charter exploits a regulatory loophole.

Dive Insight:

With Ford Credit Bank, Ford aims to create “innovative and simplified banking solutions that enable electric vehicles to be accessible to all Americans,” the car company wrote in the application it submitted in July.

Ford said the bank will offer auto lending through indirect retail installment and lease contracts originated by auto dealers to finance electric vehicles. Ford Credit Bank will also have the capability to offer direct financing to consumers, the company said.

“The Bank will initially offer automotive financing of conventional vehicles for personal or commercial use,” Ford disclosed in its application. “Other products will include deposits accounts, loans to auto dealers and loans to help consumers and businesses finance automotive-related parts and accessories, including EV charging stations, over-the-air updates and EV infrastructure.”

But for opponents, Ford’s effort to establish a bank represents what they consider a “dangerous mix of commerce and banking.”

Granting deposit insurance to a Ford subsidiary would exacerbate the “ILC loophole,” according to the ICBA.

That loophole, the group argued, allows commercial and tech companies to own or acquire ILCs without being subject to the same federal supervision as traditional banks.

“While ICBA and community bankers continue calling on Congress to close the industrial loan company loophole, Ford’s application to form a new ILC that lacks consolidated oversight would only put the Deposit Insurance Fund and consumers at greater risk,” ICBA CEO Rebeca Romero Rainey said in a statement. "Any company that wishes to own a full-service bank should be subject to the same restrictions and supervision that apply to any other bank holding company." 

In a joint letter to the FDIC, consumer groups said Ford is already committed to the electrification of its car fleet, and argued a car company with a bank charter poses certain privacy risks to consumers. 

“Ford Motor EVs are connected devices that can download and upload data,” the groups wrote. “Consumer data is shared between Ford Motor and Ford Credit. Information is sold to third parties. Incursions on consumer privacy match the standard practices of Big Tech firms.”

The groups also took issue with Ford’s community reinvestment plan, calling the proposal “wholly inadequate given its size and under the definition of a limited-purpose bank whose model guidelines it does not meet.”