- Key insight: Credit card provider Mission Lane has been conditionally approved for the first CEBA credit card bank charter in two decades, according to advisor Klaros Group.
- Expert quote: "For a business built entirely around credit cards with established non-deposit funding sources, the core benefits of the charter outweigh funding constraints." FS Vector's Evey Guo
- Forward look: The company is still awaiting FDIC approval for insuring the large deposits (>$100,000) that CEBA banks can accept.
Credit card issuer Mission Lane has been conditionally approved for a credit card bank charter.
The Office of the Comptroller of the Currency issued a decision letter announcing the approval on Friday for a limited-purpose credit card bank charter under the 1987 Competitive Equality Banking Act, or CEBA. The decision was issued five months after Mission Lane
The approval is the first of this type of limited-purpose bank charter in two decades, according to Klaros Group partner Michele Alt.
Alt told American Banker that the firm, which advised Mission Lane on its application, compiled a list of currently active CEBA credit card banks. The last CEBA bank that Klaros found was Department Stores National Bank, Alt said, which was approved in 2005 and later merged into Citibank in 2022.
"The charter will enhance Mission Lane's ability to serve credit-marginalized consumers through reasonably priced, transparent credit cards," Alt said. "The conditional approval should dispel any concerns about the OCC's receptivity to chartering banks that focus on the needs of underserved consumers."
The bank, referred to as Mission Lane Bank, N.A. in the decision letter, will continue to focus on subprime credit card lending. The company currently offers both secured and unsecured credit card products and various credit-building tools.
The bank will have its main office in Richmond, Virginia, and will not have any physical branches. During the first three years of the bank's operations, according to the OCC letter, "Mission Lane will transition its existing credit card program to the bank, and the bank will become the sole issuer of Mission Lane-branded credit cards."
Currently, Mission Lane partners with Transportation Alliance Bank (also known as TAB Bank) and WebBank as its sponsor banks and with Visa as its card issuer.
"Our preparation, compliance infrastructure and operating discipline were foundational in obtaining the conditional approval – a significant milestone that validates the company's readiness to operate as a national bank," a
In the future, according to the statement, Mission Lane seeks to use its CEBA credit card bank charter to expand beyond its current 45-state regulatory footprint.
"Our existing almost 3 million customers will see no disruption to their accounts, credit lines or app experience during the remaining process or any transition that follows," the statement continued. "We continue to have deep, collaborative relationships with our current bank partners, TAB Bank and WebBank, and remain committed to a seamless transition with their full support."
TAB Bank and WebBank did not immediately respond to a request for comment.
A national CEBA credit card bank charter would give Mission Lane three things, FS Vector Principal Evey Guo told American Banker: "Direct card issuance without relying on bank partners, full national bank preemption with rate exportation authority that isn't subject to state opt-out and no bank holding company status for its parent."
The key trade-off in comparison to a full-service bank charter, according to Guo, is limited deposit powers. CEBA banks may not accept "demand deposits" (money that could be withdrawn "on demand" by consumers) or any savings or time deposits of less than $100,000 unless they are used as collateral for secured credit card loans. They also may not engage in the business of making commercial loans other than credit card loans made to small businesses.
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"The cheap deposit funding that a full-service bank charter would offer isn't available," Guo said. "But for a business built entirely around credit cards with established non-deposit funding sources, that's a rational trade. The core benefits of the charter outweigh those funding constraints."
Mission Lane said in an
"The business plan we submitted to the OCC contemplated several capital sources for the bank, including taking large deposits directly from customers," Mission Lane Chief Marketing Officer Sarah Gravitt-Baese told American Banker in a statement. "That decision depends on FDIC approval, which is still pending. We look forward to working with both the FDIC and OCC as we proceed with the work required to formally open the bank."
