Banking and Finance Law Daily Wrap Up, DEPOSIT INSURANCE—BPI, ICBA urge FDIC to pause Flex Bank ILC deposit insurance application, (Sep 1, 2026)

By Colleen M. Svelnis, J.D.

The FDIC is currently developing an Industrial Loan Company rule and supervisory framework.

The Bank Policy Institute (BPI) and Independent Community Bankers of America (ICBA) have asked the Federal Deposit Insurance Corporation to deny deposit insurance to Flex Bank or pause its application while the agency develops an industrial loan company (ILC) rule and supervisory framework. Flexible Finance applied on behalf of the proposed Utah industrial bank. In the Aug. 28, 2026, letter to FDIC New York Regional Director Mary Barry, the associations sought a halt to all pending ILC applications until the agency sets standards for evaluating Deposit Insurance Fund (DIF), safety-and-soundness, and financial-stability risks and strengthens requirements for ILCs and their holding companies.

Flexible Finance has more than 3.2 million customers and has processed over $40 billion in on-time payments, figures the associations cited in arguing that Flex Bank could grow quickly.

The groups said an ILC parent can avoid Federal Reserve consolidated regulation and supervision, as well as the Act’s activity limits. BPI and ICBA urged Congress to close the ILC exemption from the Bank Holding Company Act and asked the FDIC, until then, not to insure any ILC applicant, including Flex Bank.

Requested FDIC framework. The groups wrote that the FDIC had not provided further public insight into its review of request-for-information comments or its policy approach to ILC filings. They asked the agency to issue a rule, or at least guidance, describing how it would assess the risks and benefits of new applications. In their view, published standards would improve transparency and allow more meaningful public comment. Beyond applying the Federal Deposit Insurance Act’s seven statutory factors, the requested rulemaking would address DIF, safety-and-soundness, and financial-stability risks and impose stronger requirements on ILCs and their holding companies.

They also called for a comprehensive review and supervision framework covering ILCs, parents, and affiliates before the FDIC acts on applications, coupled with a study of how the agency would maintain enough trained examiners for commercial- and technology-company parents. The letter quoted the FDIC’s 2024 proposed rule as saying experience during the 2008–2009 financial crisis showed that an institution “inextricably tied to and reliant on” its parent creates “significant challenges and risks to the DIF,” particularly if the parent is financially stressed or bankrupt.

Specific concerns. According to the application, Flex Bank’s main credit product would be Flex Rent, an open-end line that lets renters divide monthly rent into payments aligned with their income schedules. The proposed bank would fund operations through consumer and commercial savings accounts, brokered deposits, listing-service deposits, and affiliate deposits. It would offer digital deposit services without physical branches. The application describes the bank as a way to reduce Flexible Finance’s reliance on partner banks and create a uniform regulatory framework, among other goals.

BPI and ICBA argued that Flexible Finance’s scale could permit fast growth and, together with its different regulatory treatment, expose the DIF and financial system to disproportionate risks. They said the FDIC does not impose entity-level or consolidated capital or liquidity requirements on ILC parents. In their view, the absence of consolidated requirements and supervision could hinder assessment of Flexible Finance’s ability to support the bank; they also questioned whether the FDIC has sufficient supervisory resources and expertise. The associations further said the intercompany agreements governing parent services and related arrangements were not publicly available.

The groups asked the FDIC not to approve Flex Bank until questions about compliance with affiliate-transaction laws are fully resolved, including through business-model changes if needed. Their broader request included pausing all pending ILC applications until the agency completes the requested rulemaking.

Companies: Flexible Finance, Inc.; Flex Bank; Bank Policy Institute; Independent Community Bankers of America

RegulatoryActivity: BankHolding BankingOperations DepositInsurance FinancialIntermediaries FinancialStability FinTech UtahNews