The Trump administration tried to give a parting gift to the gun industry on the president’s way out the door, finalizing a rule intended to limit big banks’ ability to refuse to do business with so-called “high-risk” customers such as firearms manufacturers.
The Treasury Department published a final “fair access” rule saying that certain banks with more than $100 billion of assets can’t freeze out entire industries or make business decisions based on reasons other than risk.
The rule, scheduled to take effect April 1, says allowing customers’ specific products or services to drive banks’ decision-making would lead to “prejudices or favoritism” and “would threaten banks’ safety and soundness.”
“Banks should not terminate services to entire categories of customers without conducting individual risk assessments,” said Brian P. Brooks, who stepped down as acting Comptroller of the Currency the same day the agency finalized the rule.
The National Shooting Sports Foundation, the trade group for the gun industry, applauded the move and said it’s looking forward to an end to “politically motivated” discriminatory practices from banks.
“This rule will ensure large financial institutions that are supported by taxpayer-funded resources like insurances must provide fair and equal access to services based on their objective financial creditworthiness, and not based on ‘woke’ political considerations,” said Lawrence Keane, NSSF senior vice president and general counsel.
Sen. John Barrasso, Wyoming Republican, said the rule will put a stop to “left-wing abuses of power and discrimination against lawful businesses.”
“The radical left wants to impose purity tests on bank lending to legal, constitutional activities that employ our friends and neighbors,” Mr. Barrasso said. “That’s wrong, and that’s un-American.”
The banking industry and other critics said the rule will lead to more red tape and will open the floodgates for companies to simply cry political bias if a bank turns them down.
“The rule will lead to more, not less, politicization of the financial sector as businesses from abortion providers to gun manufacturers can harangue Main Street banks for ‘political bias’ in routine lending decisions,” said John Berlau, a senior fellow at the Competitive Enterprise Institute.
During the Obama administration, the Justice Department launched “Operation Choke Point” — an initiative intended to curtail banks’ ability to do business with high-risk or less-than-reputable businesses like payday lenders.
But the NSSF said many of its members ended up getting targeted as a result, encouraging outsiders to strong-arm banks into freezing out gun dealers as customers.
The Trump administration ended Operation Choke Point in 2017, though, as Mr. Keane indicated, banks and executives still face political pressure to discourage or block certain potential customers.
It’s unclear how long the new rule will survive.
President-elect Joseph R. Biden’s team has already said he plans to issue a memo that will take effect after he’s sworn in on Jan. 20 to halt or delay so-called “midnight” regulations that haven’t become operative yet.
The move is standard practice for an incoming administration to try to start with as clean a slate as possible. The new Democratic-controlled Congress could also get a chance to negate the rule.
The Congressional Review Act, first passed in 1996, allows a simple majority in the House and Senate to undo certain rules issued in the final months of an outgoing administration.
The GOP-led House and Senate moved to undo more than a dozen Obama-era regulations during the Trump administration using the CRA, including a rule that could have blocked certain Social Security recipients from buying guns.
Before President Trump took office, the CRA had only been used successfully once, in 2001, when former President George W. Bush signed legislation overturning a rule proposed by the Clinton administration on ergonomic standards.
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