Banks face push for public debanking reports

Bloomberg

A trade group for companies offering loans online is asking the Office of the Comptroller of the Currency to require public reporting of customer account terminations.

In the letter, the Online Lenders Alliance applauded the president's August executive order requiring banks to end "debanking," a term for what critics characterize as a regulatory initiative under former President Biden that pressured banks to deny right-leaning organizations banking access. Former Biden regulators have denied that any such initiative existed.

"While reporting to Congress requires a mandate from Congress, the OCC, by regulation, can and should require national banks and federal savings associations to report to the OCC information about all deposit account terminations, including the reason(s) for such terminations," Andrew Duke, CEO of the Online Lenders Alliance, wrote. "Based on these reports and as set forth in the regulation, the OCC annually should compile and issue a public report of such deposit account termination data for each reporting bank and savings association along with aggregate statistics on deposit account terminations."

The push to stop "debanking" — the denial of financial services to a particular entity, often with nebulous reasons — gained momentum in Washington last year. Fueled by GOP animus  over an Obama-era policy that discouraged banks from working with disfavored industries like arms dealers, the second Trump administration's financial regulators have moved to rein in bank supervisors' oversight of whom banks are doing business with and have removed reputational risk as a factor in bank examinations.

The OLA's letter goes further than the executive order, urging the OCC to impose a bank-level reporting mandate and to make those records public annually, with only narrow carve-outs for account closures tied to national security, illicit finance or sanctions compliance. The group frames this as a way to "shine a light" on account terminations and prevent banks from using opaque justifications to cut off clients in politically sensitive industries.

"A public reporting requirement for deposit account terminations would shine a light on, and thus serve to prevent, politicized or unlawful de-banking, now and in the future," Duke wrote. "Such a regulation would be consistent with the goals outlined in the Executive Order and with your statement committing the OCC to take 'additional steps to ensure politicized or unlawful debanking is never repeated.'"

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Skeptics of the debanking narrative argue banks have always had a variety of apolitical business-related reasons for being selective about who they do business with, including anti-money-laundering or consumer compliance.

The Small Business Administration this week ordered more than 5,000 lenders in its network to immediately end what it calls "politicized or unlawful banking practices," following President Trump's executive order requiring banks to end debanking.

However, even proponents of the Trump administration's financial deregulatory efforts have characterized the EO as a mixed bag. Nicholas Anthony, a policy analyst with the libertarian Cato Institute, applauded the order for ending supervision of a subjective metric like reputational risk and probing whether banks or regulators' policies caused political or religious discrimination. However, while the broad stance against denying service based on customers' political or religious views is admirable, the order sets a vague definition of what constitutes politicized or unlawful debanking.

"This order is strange on many levels," Anthony wrote in an analyst note. "Accusing businesses of wrongful discrimination and then ordering them to reestablish relationships borders on ordering self-incrimination. Establishing a new policy for the United States and requiring the 'rebanking' of customers opens many questions."