Nissan applies for industrial loan company charter

Nissan Motor Acceptance Corp. has applied for an industrial loan company charter from the Federal Deposit Insurance Corp. and the Utah Department of Financial Institutions, a signal that companies see better prospects for gaining a bank charter under the Trump administration.

Nissan Motor Acceptance, based in Franklin, Tenn., joins other carmakers, including General Motors Financial and Ford Motor Co., in applying for an industrial bank charter, or ILC. The application is still subject to regulatory approval by the FDIC. 

Although auto company ILCs aren’t unheard of — Toyota and BMW already have industrial banks — the application raises concerns for the larger banking industry that another big company such as Walmart or Amazon would seek to enter the banking market. 

In February, GM resubmitted its application for an ILC after withdrawing an application last year. Ford Motor, which is already a Utah-chartered ILC owned by the Detroit automaker, resubmitted an application for deposit insurance with the FDIC in 2022 after withdrawing an application in 2008. 

Kevin Cullum, president of Nissan Motor Acceptance, said a bank charter would allow dealers to create more flexible and cost-effective financing options for car buyers. The carmaker did not specify what types of financing it would offer. Consumer auto loans will continue to be offered directly by Nissan Motor.

“Forming Nissan Bank U.S. gives us greater flexibility to serve dealers more efficiently and competitively — so they can better serve their customers,” Cullum said in a press release. “This bank will help dealers access the tools they need to grow — while reinforcing our long-term investment in the U.S. market.”

Nissan said the proposed bank charter will support commercial financing for independent, locally owned auto dealerships in the U.S. The proposed bank would enhance the services currently provided by parent company Nissan North America, which operates more than 1,200 dealerships nationwide. Nissan said it was advised on its application by consulting firm Klaros Group and the law firm Covington and Burling. 

In April, the FDIC’s acting Chairman Travis Hill said ILCs could boost the creation of new banks. Hill said the FDIC is reevaluating how it processes deposit insurance applications, particularly for banks with new or innovative business models such as industrial loan companies.

The FDIC plans to issue a request for information on industrial loan company applications, even though the quasi-bank charters have been opposed by traditional banks. The Independent Community Bankers of America, a trade group for community banks, has argued that industrial loan companies pose risks to the FDIC’s Deposit Insurance Fund and potentially could create instability in the event of an economic downturn. 

“I recognize that a wide range of stakeholders across the financial services industry have expressed strong opinions on this issue over the years, and I encourage interested parties to provide input once the RFI is released,” Hill said in a speech in April.

ILCs are a unique state banking charter, regulated and insured at the federal level by the FDIC. Like traditional banks, ILCs offer various loan types and deposit accounts. But unlike traditional bank holding companies, the parents of ILCs are exempt from the Bank Holding Company Act, provided they technically abstain from offering nominally demand deposit accounts.

In the early 2000s, big U.S. retailers like Walmart and The Home Depot attempted to acquire ILC charters, which elicited backlash, as banks expressed concern that their entry into the banking sector would quash competition. The FDIC paused ILC charter approvals from 2006 to 2008, and again from 2010 to 2013 as a result of a provision in the Dodd-Frank Act.