SoFi withdraws bank application in wake of scandal
WASHINGTON – Student loan platform Social Finance has withdrawn its application for deposit insurance, a month after former CEO Mike Cagney retired in the wake of sexual harassment allegations.
SoFi had applied in June for a Utah-based ILC, which also requires approval from the Federal Deposit Insurance Corp. The move immediately sparked backlash from community banks and others concerned about the entrance of fintech firms into traditional banking.
"With SoFi's leadership in transition, we're withdrawing our application with the FDIC for now,” a SoFi spokesperson said in an email.
SoFi was rocked last month after then CEO Mike Cagney was accused in a lawsuit of sending sexually explicit texts to an executive assistant and fostering a toxic culture across the company.
He was replaced by Tom Hutton, the executive chairman of the company’s board of directors, on an interim basis.
SoFi said in its statement that it might still seek out a bank charter in the future.
“A bank charter remains an attractive option when the time is right,” the statement said. ”This decision does not change our plans to make deposit accounts available through partner banks in the near future."
SoFi's application had reignited a debate over the regulation of ILCs, which are not subject to the Bank Holding Company Act and can thus be owned by firms with commercial interests.
Despite SoFi's withdrawal, that debate is likely to continue. Payment processor Square applied for an ILC last month, which has also drawn the ire of community banking groups.