Nelnet, a student loan servicing company, has withdrawn its application to become a Utah-chartered industrial bank.
The Lincoln, Neb., company had filed an application with the Federal Deposit Insurance Corp. and the Utah Department of Financial Institutions in late June to form Nelnet Bank. Nelnet was pursuing an industrial loan charter.
The withdrawal is a “temporary step back” in what Nelnet knew could be a long process, Tim Tewes, the company's president, said in a press release.
"We appreciate the constructive dialogue we have had with the FDIC and UDFI regarding our application," Tewes said. "The need for more financially secure, borrower-focused, and FDIC-insured lenders in the private student loan marketplace is increasing; we believe Nelnet is an ideal candidate to be such an institution with our financial strength, customer focus, and experience."
Nonbanks have struggled to get ILC applications approved.
Square, which pulled
Industrial banks, which can make loans and take deposits but are exempt from the 1956 Bank Holding Company Act, remain controversial.
The Independent Community Bankers of America has publicly opposed such charters, asserting that they create an uneven regulatory playing field and threaten the financial system.
“ICBA opposed Nelnet’s deposit-insurance application to establish an industrial loan corporation and supports an end to the ILC loophole,” said Rebeca Romero Rainey, the ICBA's president and CEO. “Like the since-withdrawn applications of SoFi Bank and Square, Nelnet’s was designed to avoid the legal restrictions and regulatory supervision that apply to other bank holding companies.
Nelnet said diversified sources of funding, such as deposits and securitizations, would allow its bank to act as a reliable source of funding for creditworthy, education-seeking consumers.
Varo Money, a fintech firm that has applied to become a national bank, recently received preliminary and
