Debanking in America

In August President Donald Trump signed an executive order for federal banking regulators to eliminate what Trump called "politicized" or "unlawful" debanking. According to the executive order federal regulators are required to find ways to reinstate debanked customers. Debanking is the practice of financial institutions, such as banks, closing or denying access to accounts and other financial services for individuals, businesses, or organizations. This action can happen without a clear explanation and may be due to a range of reasons, from risk concerns and compliance with regulations to political or reputational considerations. The practice has gained increased public attention in recent years due to high-profile cases involving public figures, activists, and controversial organizations, including debanking Trump. Debanking typically includes the closure or denial of checking accounts, savings accounts, credit cards, or other essential banking services. For individuals, this can make it difficult to receive paychecks, pay bills or engage in normal financial activities. For businesses and organizations, debanking can disrupt operations, prevent payroll and damage relationships with clients and suppliers Banks usually have broad discretion to close accounts, often outlined in customer agreements that allow them to do so at any time, sometimes without giving a reason. However, the consequences for those affected can be severe, especially if no alternative financial service provider is willing to take them on. The Trump Organization sued Capital One for closing accounts in the wake of the Jan. 6, 2021, riot. Capital One has denied illegal behaviour. The case is ongoing. Trump claims that conservatives are being debanked. "I think the word might be 'Trump supporters' more than conservatives" said the President. The executive order could result in fines for banks found to have discriminated against conservatives, mimicking the White House's tactics for punishing other industries. In some controversial cases, individuals or groups claim they were debanked due to their political opinions or affiliations. While banks rarely confirm this, such claims have fueled debates around free speech, discrimination, and fairness in financial services. This is was the suspected reason Bank of America and Chase debanked Trump. The risk was related to the Jan.6, 2021 riot. Trump claimed the Biden administration initiated this activity. Banks can cut ties with customers they view as high-risk due to fraud concerns, unusual transactions or perceived links to illegal activities. Financial institutions are under legal obligations to comply with anti-money laundering laws, counter-terrorism financing rules and sanctions. There have been several other high-profile instances where political commentators, advocacy groups or even religious organizations were debanked. In some cases, the closures were reversed following public outcry or legal intervention. Debanking has significant personal, social, and economic consequences. On a personal level, being cut off from banking services can lead to exclusion from modern life. Since most transactions are now digital, not having access to a bank account can prevent someone from renting a home, getting a job or accessing healthcare. On a societal level, debanking raises questions about fairness and transparency. Critics argue that if banks can unilaterally cut off individuals or organizations without clear justification or recourse, it gives them excessive power over public life. Supporters of the practice argue that banks must have the freedom to manage risks and comply with legal and regulatory frameworks. Several Tiffin area bankers did not respond to a request for comment. Debanking is a complex and controversial issue that sits at the intersection of financial regulation, risk management and civil liberties. As cashless transactions become the norm, access to banking is increasingly essential. Ensuring that financial institutions act fairly, transparently, and with accountability is critical to maintaining trust in the financial system. Perry Haan is Professor of Marketing at Tiffin University. He can be reached at haanpc@tiffin.edu.