NCRC Comment in Opposition to PayPal Holdings Inc. Application for Federal Deposit Insurance

January 20, 2026

Utah Department of Financial Institutions
324 South State Street, Suite 201
Salt Lake City, Utah 84111
Via email: dfi@utah.gov

Re: NCRC Comment in Opposition to PayPal Holdings Inc. Application for Federal Deposit Insurance

The National Community Reinvestment Coalition (NCRC) appreciates the opportunity to comment on PayPal Holdings Inc.’s (PayPal) application for deposit insurance, which is being submitted in conjunction with PayPal’s application to the Utah Department of Financial Institutions for an industrial bank charter (also known as an industrial loan corporation or “ILC”) to establish PayPal Bank. Because the FDIC’s review of the deposit insurance application is a critical component of the overall ILC chartering process, we urge the FDIC to reject this application.

NCRC is a network of more than 700 community-based organizations dedicated to creating a nation that not only promises but delivers opportunities for all Americans to build wealth and attain a high quality of life. We work with community leaders and policymakers to advance solutions and build the will to solve America’s persistent racial and socio-economic wealth, income, and opportunity divides, and to make a Just Economy a national priority and a local reality.

NCRC detailed its opposition to the ILC charter in its September 18, 2025 letter to the FDIC (the “NCRC Letter Opposing ILC Charters”), citing significant safety and soundness risks, inadequate Community Reinvestment Act expectations, and untested fair lending models that allow evasion of consumer protection laws.[1]

While these concerns apply broadly to all ILC charters, this letter focuses on how the first two risks—safety and soundness vulnerabilities and inadequate CRA obligations—would be particularly acute for PayPal Bank as a Utah chartered industrial bank. The size of PayPal’s parent company and its extensive national footprint elevate safety and soundness risks and pose potential threats to the stability of the FDIC deposit insurance fund. At the same time, PayPal Bank’s community reinvestment obligations would be insufficient and misaligned with its nationwide service area. PayPal’s proposed strategic plan does not adequately mitigate these risks. Therefore, we provide recommendations below aimed at substantially strengthening PayPal’s community reinvestment commitments should the FDIC decide to continue evaluating the application.

I.  Safety and Soundness Risks Inherent in the ILC Framework

The Bank Holding Company Act embodies the long-standing principle of separation of banking and commerce—a principle established to prevent conflicts of interest, limit concentration of economic power, and protect the deposit insurance fund from commercial risk. This separation exists because commercial enterprises can engage in riskier activities than banks and allowing commercial companies to own banks creates the potential for unsafe affiliations, preferential lending to affiliates, and the potential for reputational contagion that could threaten depositor funds. Traditional bank holding companies face consolidated supervision by the Federal Reserve, including capital requirements, stress testing, and oversight of affiliate transactions. This comprehensive framework ensures regulators have visibility into the entire corporate structure and can assess risks that might threaten the insured institution.

If the ILC charter is granted to PayPal, the company will not be required to register as a bank holding company with the Federal Reserve Board and therefore will not be subject to Federal Reserve regulation and supervision. The FDIC supervises only the ILC subsidiary itself, not the commercial parent or the web of affiliated entities that may pose risks to the insured institution.

PayPal’s proposed ILC charter would perpetuate these structural weaknesses. Without consolidated Federal Reserve supervision, regulators would lack complete insight into how PayPal’s commercial operations, payment processing business, international activities, and various financial product offerings might affect the safety and soundness of the insured bank subsidiary. The potential for affiliate transactions, shared operational infrastructure, reputational risk transmission, and capital migration between the commercial parent and the bank creates supervisory challenges that the current ILC framework is ill-equipped to address. The absence of a federal regulator with visibility into the entire corporate structure leaves blind spots that can threaten both individual institutions and systemic stability.

PayPal’s scale makes the safety?and?soundness risks of having it as the parent of an ILC uniquely large: the company held roughly $79.8 billion in assets as of Q3 2025 and serves over 434 million active customer accounts across more than 200 global markets—a level of size, reach, and interconnectedness far beyond what the ILC framework was designed to supervise.[2]

II.  PayPal’s ILC Charter Would Result in Community Reinvestment Commitments Inadequate for Its National Service Area.

ILCs face minimal requirements under the CRA, a key law designed to prevent redlining and ensure that banks are meeting the credit needs of all communities within its footprint. Like other recent ILC charter applicants,[3] PayPal’s application to charter a Utah industrial bank exploits the CRA’s conventional designation of assessment areas around physical branches, that is not adequate for non-traditional banks that lack a branch network but operate nationwide.

If PayPal Bank receives an ILC charter, its CRA obligations would be severely limited despite operating one of the world’s largest digital payments platforms. PayPal Bank’s proposed CRA assessment areas cover only its Salt Lake City headquarters and a few locations in the Southwest—a fraction of its actual operational footprint. PayPal facilitates hundreds of billions of dollars in payment volume annually, provides credit and working capital to small businesses, and serves millions of consumers nationwide. Yet under an ILC charter, PayPal Bank would have no CRA obligations in the vast majority of markets where it conducts business and derives revenue.

PayPal’s approach to peer benchmarking raises additional concerns. PayPal’s strategic plan benchmarks itself against other ILC institutions, such as Square Financial Services, that deliberately structure their operations to minimize CRA obligations by holding assets and delivering financial services outside of their ILC charters. Using peers that have engineered corporate structures specifically to avoid community reinvestment responsibilities ensures that PayPal’s plan perpetuates inadequate standards rather than establishing meaningful commitments proportionate to its national reach.

Granting deposit insurance to PayPal Bank would give it the privileges of federally insured deposits and would facilitate a bank charter while avoiding the comprehensive community reinvestment duties that Congress intended for institutions serving the public at such scale. The combination of the ILC structure’s inherent limitations and PayPal’s inadequate strategic plan would result in community reinvestment obligations wholly disproportionate to PayPal’s size, scope, and national significance.

III.  NCRC’s Recommendations for PayPal’s Strategic Plan

While NCRC maintains its opposition to PayPal’s ILC charter application, should the FDIC move forward with consideration, PayPal’s proposed CRA Strategic Plan requires substantial improvements to meet the statutory requirements of the Community Reinvestment Act. The Plan as currently proposed suffers from the same structural deficiencies common to ILC strategic plans: artificially narrow assessment areas that ignore the institution’s actual service footprint, community development goals based on deflated balance sheets that do not reflect true lending capacity, and inadequate community engagement.

To ensure that PayPal’s community reinvestment commitments are commensurate with its national operations and the privileges of a federal bank charter, NCRC recommends the following modifications to the strategic plan:

• PayPal should establish a Broader Statewide or Regional Area (BSRA) beyond just its Utah headquarters and CA and AZ corporate locations to expand the impact of its CRA commitment to a wider range of communities that truly reflect its service footprint. PayPal Bank should consider establishing branch locations or loan productions offices in several locations throughout the U.S., based on PayPal’s current transaction volume, to broaden the proposed PayPal Bank assessment area.
• PayPal Bank’s CRA goals should be based on the consolidated assets and activities of PayPal Holdings Inc., not just the artificially limited assets held within the ILC subsidiary
• Because PayPal uses an originate-to-distribute business model (like Square), CRA goals based on balance sheet assets alone do not reflect PayPal’s true community reinvestment capacity.
• PayPal should commit to robust, ongoing community engagement throughout its actual service area, not limited to its narrow assessment area. The FDIC should condition any approval of an ILC charter application on the negotiation of Community Benefit Agreements (CBAs). NCRC and our members would gladly work with PayPal on a collaborative process to create CBAs where nonprofit and bank leaders discuss community needs and opportunities for CRA-related financing. CBAs commit banks to increasing CRA activity and directing it to where it is needed most. One would be hard-pressed to think of a more ideal model of CRA implementation.

For a nontraditional bank such as ILCs, the credit needs of the communities to be served must not stop at the headquarters location of the ILC but extend across all the geographical areas in which it makes loans and conducts business. PayPal’s ability to serve needs is not confined to its headquarters location since it has a long-established infrastructure enabling it to serve customers nationwide.

Thank you for the opportunity to offer our input on this important deposit insurance application. If you have any questions, please contact me at jvantol@ncrc.org, or my colleague, Victoria Hausch, at vhausch@ncrc.org.

Thank you for your consideration.

Sincerely,

Jesse Van Tol
President and CEO
NCRC

[1] National Community Reinvestment Coalition, NCRC Comment Opposing Industrial Loan Companies (Sept. 18, 2025), https://ncrc.org/ncrc-comment-opposing-industrial-loan-companies/.
[2] PayPal Holdings, Inc., Company Statistics and Financial Data (Capital One Shopping 2025; Macrotrends 2025), https://capitaloneshopping.com/research/paypal-statistics/; https://www.macrotrends.net/stocks/charts/PYPL/paypal-holdings/total-assets.
[3] Block, Inc. is another large corporation with a nationwide service that recently applied for, and was granted, a Utah industrial bank charter. Block, Inc. is now parent company to Square Financial Services, Inc., which established one assessment area of the Salt Lake-Provo-Orem Utah Combined Statistical Area (CSA), although less than 1 percent of the small business lending activity of Square occurs in that market. See CRA exam of Square Financial Services, Inc., March 2023, p. 9, https://crapes.fdic.gov/publish/2023/59177_230314.PDF.