Upgrade Applies for Industrial Loan Company Charter
Fintech firm Upgrade has filed an application for an industrial loan company charter with the FDIC and Nevada regulators, aiming to reduce reliance on partner banks and better fund its credit products amid a wider surge in ILC applications.
Upgrade has applied for an industrial loan company charter with the Federal Deposit Insurance Corp. and the Nevada Financial Institutions Division. The application, announced on Monday, marks the latest move by a nonbank firm to seek a specialized banking license.
Leadership and board composition
The proposed bank would be led by Virginia Varela, named CEO of Upgrade Bank. Varela brings over 40 years of banking experience, including more than two decades with the Office of the Comptroller of the Currency and a stint as a senior Federal Reserve examiner. She later specialized in bank turnarounds after the 2007-08 financial crisis, serving as CEO of Golden Pacific Bank before its acquisition by SoFi. Varela left SoFi in July 2025 to head banking strategy at Upgrade.
The initial board of directors would include Varela, Upgrade co-founder Jeffrey Bogan, and independent directors Raymond Specht, Daniel Quan, and Dalibor Snyder. Specht is the former CEO of Toyota Financial Savings Bank.
Strategic rationale for the ILC charter
Upgrade states the ILC charter would complement its established relationships with partner banks. The company currently relies on Cross River and Celtic Bank for loans, credit lines, and banking services. An ILC charter would make Upgrade less dependent on these partners. It would also allow the company to better fund its credit products. The fintech bills itself as providing affordable and responsible credit to the general public.
Virginia Varela said: "We are excited at the prospect of establishing a new bank that will advance Upgrade’s mission of bringing responsible and affordable credit to consumers."
Broader regulatory and industry context
The application arrives amid a sharp increase in ILC charter requests. Trump-era regulators have seen a surge in new applications. FDIC Chair Travis Hill last year touted the ILC charter as a way to boost new bank establishment. Recent activity includes approvals for Stellantis in May and Ford in January, while rent fintech Flex applied in July. Edward Jones also sought an ILC charter in February.
This trend has sparked debate. Some lawmakers, backed by the banking industry, argue ILC charters exempt companies from the Bank Holding Company Act definition of a 'bank'. They contend ILCs can bypass Federal Reserve oversight if they do not offer demand deposit accounts. The Independent Community Bankers of America warned in May that excluding the Fed from ILC supervision leaves a dangerous gap in safety oversight and introduces systemic risk. Senators Elizabeth Warren and Andy Kim last year proposed a moratorium on commercially owned ILC charters until such entities are defined as 'banks' under the Act.
ILCs are FDIC-insured and pay fees to the Deposit Insurance Fund, unlike national trust companies. Their parent companies are exempt from the Bank Holding Company Act if they do not offer nominally demand deposit accounts.
Upgrade’s background and scale
Founded roughly a decade ago as a credit-card startup, Upgrade has expanded into a neobank. Its product suite now includes personal loans, mobile banking, auto financing, and buy now, pay later offerings. The San Francisco-based company states it has provided more than $53 billion in credit to roughly 8.5 million customers since its 2016 founding.
If approved, Upgrade Bank would operate as a wholly owned, Nevada-chartered, FDIC-insured subsidiary of Upgrade, Inc. with independent governance and internal controls.
