Rent fintech Flex seeks industrial bank charter

Rent fintech firm Flex has formally applied with the Federal Deposit Insurance Corp and the Utah Department of Financial Institutions for an industrial loan company charter to become a regulated bank. The application was announced on Friday by the company, which intends to establish its operations in the Salt Lake City area while serving customers nationally through digital channels.

Shragie Lichtenstein, CEO and co-founder of Flex, stated that obtaining a bank charter would allow the firm to build upon federal deposit insurance and full regulatory oversight from both state and federal authorities. He argued that this permanent foundation strengthens products already relied upon by millions of renters. According to his comments, rent represents one of the largest expenses for most households yet remains poorly adapted to modern payment methods. Lichtenstein described the new charter as a means to permanently close the gap between how people earn money and how they pay their rent.

Jeff Berkson is proposed to serve as CEO once the charter is granted. Until May, he held the position of chief risk officer at WebBank according to his LinkedIn profile. The bank plans to issue its core credit products directly to customers through this new structure. These offerings include Flex Rent, a flexible payment solution currently used by the firm.

Since 2019, Flex has processed more than $40 billion in rent payments for over 3.2 million users. During that period, the company claims it helped clients avoid late fees exceeding $780 million. The lender notes that its current model does not compound interest or permit the stacking of loans.

Regulatory attention to new charter applications has increased significantly since President Donald Trump returned to the White House. FDIC Chair Travis Hill previously highlighted the industrial loan company charter as a key method for encouraging the establishment of new banks. This month, buy now pay later giant Klarna also applied for an ILC charter. In May, car manufacturer Stellantis received approval to launch such an entity, while automotive giants Ford and General Motors secured green lights in January.

Some lawmakers supported by banking industry groups argue that an industrial loan company charter exempts companies from the definition of a bank under the Bank Holding Company Act. They contend that as long as these entities do not offer demand deposit accounts, they can bypass oversight by the Federal Reserve. In response to concerns regarding what critics call a shadow banking loophole, Senators John Kennedy and Andy Kim introduced legislation in January aimed at closing this gap.

The Independent Community Bankers of America warned in May that excluding the Fed from ILC supervision leaves dangerous gaps in safety and soundness oversight while introducing unnecessary systemic risk into the financial system. Earlier last year, Senator Elizabeth Warren joined Senator Kim in proposing a moratorium on commercially owned industrial loan company charters until such entities are explicitly defined as banks under the relevant act.

Flex currently partners with Lead Bank and Column Bank to operate its services. An approved ILC charter would render these sponsorship partnerships unnecessary. The agency handling new bank applications is managing an influx of requests by rotating supervisory talent into one- or two-year roles within the Office of the Comptroller of the Currency’s chartering arm.

Other fintechs including Upstart, Mercury and Valt Bank have also opted to pursue full bank charters rather than relying on sponsor banks. Meanwhile, national trust charters remain popular among cryptocurrency firms seeking regulatory clarity under the current administration.