Congresswoman Maxine Waters (D-CA) has urged the FDIC to hold a public hearing regarding SoFi's bank charter application. 

On August 25th, Congresswoman Maxine Waters (D-CA) penned a letter to the Federal Deposit Insurance Corporation (FDIC) in which she urged the corporation to hold at least one public hearing regarding SoFi’s application for a bank charter.

In June, Social Finance, Inc. formally applied to establish an Industry Loan Company (ILC) with the FDIC. If approved, the banking charter would help SoFi establish a presence in the banking industry by enabling the fin-tech company to offer customers an FDIC-insured NOW account, in addition to a credit card product.

The application has yet to be approved, and Congresswoman Waters wrote the letter to FDIC Chairman Martin Gruenberg in the hopes of clarifying what an FDIC-backed SoFi would mean for the industry as a whole. According to Waters, recent changes in the financial regulation industry call for a public hearing to evaluate the legal implications of granting federal deposit insurance to industrial loan companies.

The California Congresswoman also wants to specifically address what risks are associated with granting federal deposit insurance to a fin-tech company such as SoFi.

In her letter, Congressman Waters wrote the following: “Granting SoFi’s application would set a precedent that a wide variety of other fintech companies may choose to follow even though concerns related to financial inclusion, consumer benefits, supervision, and regulation of such entities are still unresolved.”

She went on to stress that the FDIC “should carefully consider these concerns when reviewing SoFi’s application, and in doing so, hold a public hearing to allow for a fuller vetting of the advantages and disadvantages of extending an outdated regulatory framework for ILCs to fintech companies, and the potential implications for the broader financial system.”

It remains to be seen if the FDIC will approve SoFi’s application for a banking charter. It is worth mentioning that a new ILC charter has not been approved in nearly a decade.

In her conclusion, Congressman Waters reinforces the idea that any company in the U.S. is free to offer any number of products and services based on the sphere of their market. However, such companies must still abide by the law and should not be allowed to reap the benefits of federal deposit insurance when they do not provide their services to the less privileged consumers in the U.S.

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Within her letter, Water makes multiple mentions of SoFi’s lending practices. The Congresswoman goes on to say that SoFi usually only lends to consumers with high incomes, solid credit history, and those who have a strong chance of repayment. Additionally, Waters believes that SoFi has setup their business so as to exclude working class households and to not lend to low-to-moderate income communities.

The banking charter application is just another story in what has been a very hectic summer for SoFi. In early July, The Student Loan Report covered the announcement regarding SoFi’s shutting down of Zenbanx. Six months after acquiring the online banking provider Zenbanx, SoFi emailed Zenbanx customers informing them that all accounts would be closed in the coming month. Many believe that SoFi acquired Zenbanx to help establish their banking presence because of the acquired company’s tech stack, banking infrastructure, and experienced personnel.

In July, SoFi confirmed that their Chief Revenue Officer Michael Tannenbaum was stepping down from the company to pursue other ambitions. Tannenbaum joined CFO Nino Fanlo, co-founder Dan Macklin, and Chief Information Security Officer Yassir Abousselham as senior executives that have left the fin-tech company in recent months.

Finally, in August, The Student Loan Report wrote a story regarding a letter obtained by The Wall Street Journal that indicated SoFi may be gearing up for an initial public offering (IPO). SoFi’s IPO has long been speculated, but it appears that it may finally be getting closer to reality as co-founder Mike Cagney wrote that he was seeking a CFO that could “guide the company to an IPO.”

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