SALT LAKE CITY– Japanese e-commerce giant Rakuten has filed an application for an industrial loan company charter in Utah. The company operates numerous businesses, including the U.S. rewards brand Ebates.
The filing for an ILC charter was met with pushback from the banking industry trade groups. After stating it is a strong proponent of charter choice and generally does not comment on individual charter applications, the American Bankers Association said it has serious concerns about the implications of a large technology company obtaining a banking charter.
“As Japan’s largest e-commerce site, Rakuten is a major technology firm engaged primarily in non-financial activities,” said ABA President and CEO Rob Nichols in a statement. “Allowing Rakuten to participate in banking activities would raise important questions about the free flow of credit, consumer privacy and possible conflicts of interest— questions not raised by current ILC charter holders.”
Need for ‘Rigorous Review’
Nichols called on the FDIC “to rigorously review every aspect of the application to see if it meets the relevant requirements for this charter, including community need, keeping in mind the broad commercial rather than financial nature of Rakuten’s business and the significant questions that raises.”
Separately, Independent Community Bankers of America President and CEO Rebeca Romero Rainey issued the following statement on Rakuten's application for an industrial loan company charter.
"ICBA and the nation's community banks oppose Rakuten's application to become an industrial loan company because the ILC charter is a loophole that should be closed by policymakers. There is nothing innovative about large tech firms attempting to exploit the lax ILC regulatory regime.
"As ICBA said in a comprehensive white paper earlier this year, the ILC loophole allows certain financial institutions and their parent companies to skirt regulatory oversight—endangering consumers, threatening the financial system and creating an uneven regulatory playing field. ICBA continues urging the Federal Deposit Insurance Corp. to impose an immediate moratorium on approving deposit insurance for these companies and Congress to close the ILC loophole permanently.
"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. FDIC approval of new ILC deposit insurance applications would put the federal safety net, and ultimately the American taxpayer, at risk. ICBA will continue working with policymakers to address this loophole and maintain the separation of banking and commerce."