On Monday, January 4, comments are due on a proposed rule issued by the U.S. Office of the Comptroller of the Currency (OCC) that would “ensure” that the nation’s banks and savings associations “provide fair access to financial services.” The proposed rule would not allow banks to determine whether to lend to companies based on the category of business the company engages in. Such a rule will make it more difficult for banks to deny services to any company involved in the guns and ammunition industry.
Called the Fair Access to Financial Services rule, the OCC argues that just as the Dodd-Frank legislation required the agency to ensure that the nation’s banks treat individuals fairly, it also “implies a right of individual bank customers, whether natural persons or organizations, to have access to financial services based on their individual characteristics and not on their membership in a particular category of customers.”
The proposed rule would only apply to U.S. banks with more than $100 billion in total assets. According to the Federal Reserve, just 27 banks and three credit card issuers meet that definition. These include big banks like JPMorgan Chase, Bank of America, Wells Fargo and Citigroup. The OCC is also seeking comment on a lower asset threshold and a provision to add a national market share threshold for covered banks.
The OCC states its rationale this way:
Organizations involved in politically controversial but lawful businesses – whether family planning organizations, energy companies, or otherwise – are entitled to fair access to financial services under the law. … [A] bank’s decision not to serve a particular customer must be based on an individual risk management decision about that individual customer, not on the fact that the customer operates in an industry subject to a broad categorical exclusion created by the bank.
Gunmakers are not the only businesses that would benefit from the proposed rule. Fossil fuel and mining companies, private prison operators and payday lenders also would be covered by the rule. Over the past year, JPMorgan, Goldman Sachs, TD Bank and Deutsche Bank have announced that the banks will no longer finance new oil and gas drilling projects in the Arctic. In June, Alaska’s congressional delegation complained to the OCC about the unfairness of the banks’ decisions to restrict lending to the oil and gas industry, noting that they believed the banks’ rationale “was political in nature [and] the banks had ostensibly relied on claims of reputational risk to justify their decisions.”
The National Rifle Association’s (NRA’s) Institute for Legal Action accused “political activists” of trying to “weaponize the financial services industry” against gun makers based on the Obama administration’s 2011 Operation Choke Point that identified the gun industry as a high-risk business. By 2015, the administration had backed off, according to the NRA.
Adam Levitin, a professor of law at Georgetown, told gun violence website The Trace, “Even if the bank doesn’t have any problem with guns, it’s responding to the tastes of its customer base. They may be worried they’ll lose long-standing clients, that depositors will pull their money, that they’ll have trouble, that their share price will collapse.”
Professional groups representing the country’s biggest banks in late November wrote to Brian Brooks, acting comptroller of the OCC, requesting a minimum 30-day extension to the commenting deadline of January 4 and seeking data the OCC used to determine the financial impact of the proposed rule. However, the OCC expects to finalize the rule by January 20, the current president’s last day in office.