Senate committee Explores Responsibility for Account Closings Due to De-banking
In the financial world, the practice of de-banking - banks closing customer accounts due to perceived legal, financial, or reputational risks - has been a contentious issue, particularly in recent times[1]. This practice, often carried out by banks, has been influenced by regulatory frameworks and supervisory approaches[1].
Historically, banks have closed accounts without explanation, leading to allegations of unfairness and suppression of free speech[1][4]. The focus on reputational risk in bank supervision has been a subject of debate, with critics arguing that it encouraged banks to cut off customers seen as reputational risks[4].
In an attempt to address these concerns, the main federal banking regulators in the U.S., including the FDIC, announced in 2025 that they would no longer treat reputational risk as a standalone supervisory concern[4]. This change aims to reduce banks’ incentives to engage in de-banking based solely on reputational concerns.
Regulatory actions to combat de-banking include:
- The Financial Integrity and Regulation Management (FIRM) Act prohibits the use of reputational risk as a factor in supervisory decisions for banks[2].
- The Consumer Financial Protection Bureau (CFPB), under former Director Rohit Chopra, proposed a rule to ban financial companies from debanking consumers based on their comments, reviews, or political or religious views, but this proposal was withdrawn by the acting director in 2025[2].
- The CFPB also introduced rules to supervise large digital payment platforms to prevent unlawful debanking or freezing of accounts, though some regulation efforts have faced rollback from Congress[2].
While banks execute the act of de-banking, regulatory frameworks and supervisory focus have historically contributed to the practice. New regulations and supervisory changes aim to curb it by reducing reliance on reputational risk and protecting consumer rights.
During a hearing, experts Nathan McCauley and Stephen Gannon pointed the finger at regulators, not banks, for the problem of de-banking[3]. In the past three years, nearly 12,000 de-banking related complaints have been filed by consumers, with more than half of those complaints made against the four biggest U.S. banks[3].
The issue of de-banking is not limited to traditional banking. For instance, Stephen McCauley's company, a federally chartered cryptocurrency bank, was de-banked in 2023[3]. Former Consumer Financial Protection Bureau Director Rohit Chopra has called for regulatory action to confront de-banking[2].
Sen. Elizabeth Warren has warned that the decision by Treasury Secretary and Acting CFPB Director Scott Bessent to halt activity at the CFPB will impede efforts to stop de-banking[3]. Sen. Thom Tillis has stated that there is a lot of regulator-initiated de-banking going on with the concept of reputational risk[5].
In summary, while banks carry out the act of de-banking, regulatory frameworks and supervisory focus have historically contributed to the practice. New regulations and supervisory changes aim to curb it by reducing reliance on reputational risk and protecting consumer rights. Coordinated regulatory reform and bank policy changes are underway to address the problem.
[1] Source: [Article Link] [2] Source: [Article Link] [3] Source: [Article Link] [4] Source: [Article Link] [5] Source: [Article Link]
The practice of de-banking, a contentious issue in the realm of finance and business, has been influenced by political decisions and regulatory frameworks, particularly in relation to reputational risk [1]. Regulators, such as the Consumer Financial Protection Bureau (CFPB), have taken action to combat de-banking through legislation like the Financial Integrity and Regulation Management (FIRM) Act and rules aimed at preventing unlawful debanking or account freezing [2]. Despite these efforts, de-banking remains a problem that extends beyond traditional banking, as seen with the de-banking of a federally chartered cryptocurrency bank [3].
