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Last month, when President Donald Trump signed an executive order “guarantees a fair bank for all Americans,” he provided a notice of upcoming federal crackdown.
“Banks that have denied customers access to accounts, loans or credit cards based on political or religious beliefs or legal business activities have said they feel the full power of government regulators. Violators can find themselves faced with fines, agreements or “other disciplinary action” to boost “politicization or illegal desertion.”
The president’s cause hit near the president, whose family business sued Capital 1 earlier this year, claiming that hundreds of accounts were shut down in the summer of 2021 “as a result of political discrimination.”
Still, the administration may find it difficult to enforce the president’s orders for one simple reason. Seven months of aggressive cost reductions and government shrinking have left the Consumer Financial Protection Bureau, one of the key regulators tasked with Trump to implement his banking directive, the agent’s shell.
In fact, the CFPB leader appointed by the president is awaiting final court approval to fire most of the remaining staff of the bureau. Since February, most staff have received suspension work orders that have effectively stopped most of the probes.
Among them is research into JPMorgan Chase, Citibank Freeze and Close Bank accounts, according to people familiar with the issue. It has also been suspended for inquiries about whether two lesser known companies that banks use to screen future customers mistakenly flagged them as too dangerous to serve, said those who spoke on condition of anonymity because they were not authorized to discuss the issue of anonymity.
According to court records, one of these companies, Regulatory Data Corp, provides reports on customers to Capital One. (A spokesman for the capital declined to comment, but the bank disputed the Trump business’s claim of political discrimination and moved to dismiss the lawsuit. The bank wrote that it was “false” to close Trump’s accounts because it disagreed with the president’s views.)
In dismantling the CFPB, the Trump administration portrays the institution as an adversary of the industry and as an example of government overreach. But Luke Heliné, a consumer law expert at the University of Alabama School of Law, said Trump officials were rushing to reduce the federal bureaucracy, “we didn’t really think about whether there were some aspects of the CFPB that could help the project, and what they had to do to present them.”
In fact, days before he was fired from the Trump administration, then-CFPB head Rohit Chopra told a conservative federalist association that the government needs to do more to the rights of clients to a fair process, as well as defending a more “realistic, clear line ban” about what information banks can use to freeze or freeze close accounts.
The White House did not respond to requests for comment.
Certainly, Trump’s executive order has directed many regulators to take action, with some such as the Federal Deposit Insurance Corporation and the Office of the Money Secretary, beginning to change the bank review process to address the president’s concerns. However, the CFPB is the only thing that is specifically charged for protecting consumers each month by hundreds of consumers who claim to have been denied access to the financial system.
A CFPB spokesman did not respond to emails and did not call for comment. However, recent decisions by the agency have shed some light on how department officials interpret Trump’s orders.
Last month, the CFPB cited the order as it offered a Biden-era investigation to a company that offers loans to customers buying firearms and pets, saying the investigation was politically motivated. The service was sold to conservatives, and Donald Trump Jr. was a board member of the company’s parent company. The company previously dealt with regulatory authorities and lending practices in California and Massachusetts, but the CFPB chief justice officer wrote in a recent letter that the case “represents exactly the type of targeting that is unconstitutional.”
Banks make decisions about who they will serve based on many factors, including the financial and reputational risks of doing business. You must also follow laws and regulations requiring you to know your customers and prevent money laundering.
However, leaders of both parties agree that credit or accounts that Americans have been unfairly rejected by large financial institutions are sometimes denied. The issue became the celebrity of the Republican world after former President Barack Obama’s Justice Department launched a crackdown on uncruel payday lenders and other high-risk businesses. Parts have become part by urging payment processors and banks to make access to those companies more diligent in search of signs of fraud and to make access to the financial system.
The former president of the American Bankers Association argued that the program “forces banks to refuse to serve unpopular but completely legal industries by threatening penalties,” a message amplified by the Republicans as an example of Obama-era government. Their argument got steam when the firearms industry discovered retailers were listed as high-risk merchants in the ambiguous FDIC newsletter, according to Dru Stevenson, a professor at the University of South Texas Law Houston, he writes that the whole “taking on symbolic and mythological proportions in partisan competition.”
Many conservative activists and leaders of party leaders now claim that some Republicans are being rejected as clients because of politics and even at the request of government regulators. No evidence has arisen to support this claim. In fact, as recently reported by Reuters, 35 of the 8,361 detailed complaints filed with the CFPB about closed bank accounts since 2012 included conditions such as “politics,” “conservatives,” and “Christians.”
Discrimination complaints are increasingly levelled by cryptocurrency entrepreneurs, many of whom support Trump’s presidential campaign. Their story gained traction in 2023 when regulators warned banks about risks associated with digital assets.
Getting a sense of the scope of removing it was part of what the CFPB was exploring in its enquiries when Trump took office in January, people familiar with them said. For example, they said that at JPMorgan, accounts for around 1 million customers are frozen each year, but it is a variety of things that do so, and often in response to fraud.
The CFPB investigation of Regulatory Data Corp and another screening company, LSEG World-check, was partially considering whether a customer had been denied an account or whether they saw an account being closed after the company accidentally flagged it as problematic.
The CFPB was issuing subpoenas with inquiries that were still in the early stages, people familiar with the probe said.
A spokesman for the World-Check company said, “I don’t understand that every institution is reviewing global checks due to potential denials.” A Moody’s spokesman, who obtained the regulatory data coop in 2020, did not return calls or emails.
A JPMorgan spokesman said the bank was not aware of “the CFPB investigating what is known as politicized and deserted as discussed in recent executive orders,” and Citibank declined to comment. In a statement released after Trump issued the executive order, the coalition of banking industry groups said the directive “makes fair treatment for all consumers and businesses and ensures goals shared by national banks with the administration,” but “is not intrusive by a maze of regulatory overreach, supervisory discretion and an obscure rule.”
Part of the problem is that financial institutions are subject to a constellation of regulations and laws, including laws known as bank secret laws, so the entire process of dropping is encased in secret. It can be frustrating for customers who are not informed of why they are being cut off – and it provides an opportunity for outsiders to provide their own conclusions, experts said.
Furthermore, international best practices are advice to give to people called “political exposed people” along with their close relatives and colleagues to those in high-profile positions, as they are considered vulnerable to bribery and corruption.
Exploring the 2023 New York Times series Banking documented various cases that described how banks were fearful that what turned out to be a rare transaction would lead to financial institutions not following the various rules that do not prevent them from promoting money laundering, terrorism, or fraud.
Banks have expressed their desire to be more clear from regulators about when customers need to launch customers and whether they can provide more information on the reasons behind their decisions.
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Currently, banks tell their affected customers that there is little. In that vacuum, Republicans often call political bias motives without providing concrete evidence to back it up, said defiling expert Stevenson.
Ironically, when the Trump administration abandoned the lawsuit earlier this year, it cancelled out efforts that could shed more light on removing it.
Under former President Joe Biden, the CFPB was trying to amend the examination manual to give bank examiners more room to scrutinise financial institutions for discriminatory practices, court records said. The Chamber of Commerce and other industry groups sued, and the district court blocked the agency from doing so, claiming that the department exceeded its authority. The Biden-era CFPB appealed the ruling, but the Trump administration dropped the lawsuit before it was decided.
