United States: Proposed Rule Addresses "De-Banking" And Politically Driven Lending Practices

Washington, D.C. (December 2, 2020) - On November 20, 2020, the Office of the Comptroller of the Currency (OCC) published a  Notice of Proposed Rulemaking aimed at ensuring fair access to banking services and eliminating  politically-driven, "de-banking" practices used to deny access to financial services to disfavored industry sectors based on ideology rather than quantifiable risk-based factors. In other words, the proposal would require banks to base credit decisions solely on risk assessment of the individual entity without influence from political biases. 

Comments on the proposed rule are due January 4, 2020, in time for publication of a final rule codifying the new policy in banking regulations prior to a change in Presidential administration.  Industries such as large farming operations, forestry, mining, and energy producers that have been the targets of these unfavorable banking practices should actively engage through outreach to the OCC and well-considered comment development to ensure adoption of a final rule that safeguards fair access to financial services.   

The proposal would apply to the largest banks in the country (with a $100 billion asset threshold) and codifies more than a decade of OCC guidance stating that banks should provide access to services, capital, and credit based on risk assessments of individual customers, rather than broad-based decisions affecting whole categories or classes of customers. In the past, under an effort termed Operation Choke Point, leadership of the FDIC and Justice Department encouraged banks to deny credit to politically disfavored entities like payday lenders, gun shop owners, and energy and infrastructure projects deemed climate change contributors even though these entities were legal businesses. The OCC's proposal would ensure that national banks provide credit to all legal, creditworthy borrowers without regard to political biases.

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