Oklahoma Bankers Association We make bankers better!
On Aug. 7, President Trump issued the executive order, “Guaranteeing Fair Banking For All Americans.”
In Section 1, the president clearly lays out what his thinking is and why this order is necessary.
Purpose — Financial institutions have engaged in unacceptable practices to restrict law-abiding individuals’ and businesses’ access to financial services on the basis of political or religious beliefs or lawful business activities. Some financial institutions participated in Government-directed surveillance programs targeting persons participating in activities and causes commonly associated with conservatism and the political right following the events that occurred at or near the United States Capitol on January 6, 2021. The Federal Government suggested that such institutions flag individuals who made transactions related to companies like “Cabela’s” and “Bass Pro Shop” or who made peer-to-peer payments that involved terms like “Trump” or “MAGA,” even though there was no specific evidence tying those individuals to criminal conduct.
Bank regulators have used supervisory scrutiny and other influence over regulated banks to direct or otherwise encourage politicized or unlawful debanking activities. “Operation Chokepoint,” for example, was a well-documented and systemic means by which Federal regulators pushed banks to minimize their involvement with individuals and companies engaged in lawful activities and industries disfavored by regulators based on factors other than individualized, objective, risk-based standards.
As a result, individuals, their businesses and their families have been subjected to debanking on the basis of their political affiliations, religious beliefs or lawful business activities, and have suffered frozen payrolls, debt and crushing interest, and other significant harms to their livelihoods, reputations, and financial well-being. Such practices are incompatible with a free society and the principle that the provision of banking services should be based on material, measurable, and justifiable risks. Such practices, when wielded to discriminate against customers and businesses in credit transactions due to their religion, are also unlawful under the Equal Credit Opportunity Act (15 U.S.C. 1691 et seq.). They further undermine public trust in banking institutions and their regulators, discriminate against political beliefs and free expression of those beliefs, and weaponize a politicized regulatory state.
I would strongly encourage you to go read the entire executive order as it provides additional detail, the most troubling section of which is Section 4, Removing Reputation Risk and Politicized or Unlawful Debanking.
While we have been expecting something from the president regarding this issue, we weren’t expecting the depth and aggressiveness that came from this order. Section 4 of the EO lays out the expectations of the order:
Elimination of Politically Motivated Debanking: This section directs federal banking regulators to eliminate guidance that might encourage the practice of denying banking services based on an individual’s or businesses political or religious beliefs.
Reinstatement of Denied Claims: The Small Business Administration is instructed to ensure that financial institutions under it’s purview make efforts to reinstate clients who were previously denied services due to unlawful banking practices.
Development of Comprehensive Strategy: The Secretary of the Treasury must work with the Assistant to the President for Economic Policy to create strategic plan aimed at combating these unlawful debanking activities. This could include new legislative or regulatory measures.
Review of Financial Institutions Policies: Financial regulators are tasked with reviewing the policies of financial institutions to identify that encourage politicized or unlawful debanking. This could lead to enforcement actions, such as fines or consent decrees against non-compliant institutions.
Data Review for Unlawful Practices: The section also mandates federal banking regulators to examine supervisory and complaint data for instances of unlawful debanking based on religion and to escalate relevant cases to the Attorney General for further action.
A couple of weeks ago the SBA’s Office of General Counsel sent a letter to about 5,000 lenders reviewing the president’s executive order and also laying out what is expected of financial institutions to comply with the order.
Below are the required actions that you must take, according to the SBA’s letter, pursuant to the Fair Banking Executive Order:
By December 5, 2025, your institution must identify any past or current formal or informal policies or practices that require, encourage, or otherwise influence your institution to engage in politicized or unlawful debanking as specified by the Fair Banking Executive Order.
By December 5, 2025, your institution must make reasonable efforts to identify and reinstate any previous clients of your institution or any subsidiaries denied service through a politicized or unlawful debanking actions in violation of a statutory or regulatory requirement under section 7(a) of the Small Business Act or any requirement in a Standard Operating Procedures Manual or Policy Notice, and send notice of the reinstatement to the injured party.
By December 5, 2025, your institution must identify all potential clients denied access to financial services provided by your institution or any subsidiaries through a politicized or unlawful debanking action in violation of a statutory or regulatory requirement under section 7(a) of the Small Business Act or any requirement in a Standard Operating Procedures Manual or Policy Notice, and provide notice to each otherwise qualified client advising of the denied access and the renewed option to engage in such services previously denied.
By December 5, 2025, your institution must identify all potential clients denied access to payment processing services provided by your institution or any subsidiaries through a politicized or unlawful debanking action in violation of a statuory or regulatory requirement under section 7(a) of the Small Business Act or any requirement in a Standard Operating Procedures Manual or Policy Notice, and provide notice to each victim advising of the denied access and the renewed option to engage in such services previously denied.
I could do another article just on all the questions the OBA has, as well as those questions asked by bankers. These expected actions are incredibly vague and can be interpreted from so many different perspectives.
We just received an email late last week the SBA is working on FAQs regarding this issue. If you would like have a specific question submitted to the SBA please send it to me ASAP.
We will hopefully have a lot more information for you regarding this issue next month. We will be in Washington in just a couple weeks with almost 100 Oklahoma bankers, as part of our Annual Washington Visit, and I can promise you this issue will be addressed with the SBA.
We’ll also have other highlights from the Washington Visit in October’s issue of the Oklahoma Banker.