WASHINGTON — A Federal Reserve proposal aimed at addressing concerns over “debanking” has generated an unexpected response from thousands of commenters, many of whom are not the conservative individuals and organizations that helped inspire President Donald Trump’s push against the practice, according to Bloomberg.
Instead, Bloomberg reported that the more than 12,000 public comments submitted on the Fed’s proposal have come largely from adult-content creators, artists, LGBTQ advocates, gamers, firearms supporters and others who say they have faced difficulties accessing financial services despite engaging in legal activities.
The proposal would remove references to “reputation risk” from the Fed’s supervisory framework, limiting the ability of regulators to pressure banks to sever relationships with customers engaged in lawful activities that could nevertheless generate controversy. NCUA has issued similar rules around reputation risk.
The initiative grew out of Trump’s criticism of debanking during his presidential campaign and was later reinforced through an executive order directing regulators to eliminate reputation-risk policies and what the administration called unlawful debanking.
High Number of Comments
According to Bloomberg, the volume of comments far exceeds participation in most Federal Reserve rulemakings. The news organization reported that the Fed’s proposal has drawn more than 12,000 responses, compared with only a few dozen or several hundred comments typically received on major banking regulations.
Among Bloomberg’s findings:
- More than 1,200 commenters specifically referenced pornography, erotic artwork, literature or games.
- Thousands of comments came from people involved in online creative communities, LGBTQ groups, gaming communities and other subcultures.
- Many commenters said banks, payment processors or online marketplaces had restricted their access to financial services or threatened their ability to earn a living despite their activities being legal.
- Some religious organizations and Second Amendment advocates also supported the proposal, arguing banks should not make decisions based on ideology or political viewpoints.
Bloomberg reported that social media campaigns helped fuel the surge in comments. An erotic-art advocacy group alerted followers to the proposal, and messages quickly spread through online forums, gaming communities and social-media platforms. More than 9,200 comments were submitted over just a two-day period in March, according to the report.
A Sample of Comments
Among the comments that have been filed:
- One anonymous commenter wrote that several people had “lost their livelihoods because a bank decided that what they provided was ‘obscene.'”
- Another commenter complained that financial institutions should not be able to review transactions and determine that a customer who purchases adult content is “unfit to have a bank account.”
- One commenter argued that decisions over purchases ranging from recreational marijuana and firearms to “MAGA hats” should not rest with bank executives.
- Artists and content creators said reputation-risk policies have made it more difficult to earn a living. One anonymous artist wrote that the policies had made expressing themselves “significantly harder” and that their freedom of expression was being “choked.”
- LGBTQ commenters also weighed in. One anonymous commenter described the debanking of queer individuals as “life-destroying,” while another writer argued that content deemed “immoral” by payment providers was increasingly being removed from online platforms and marketplaces.
- Bloomberg reported that some commenters came from so-called “furry” communities, with one writer objecting to financial firms restricting access to adult-themed artwork and stating, “Who are you guys to tell me if I can buy furry porn or not?”
Criticism from Democrats
The proposal has attracted criticism from some Democrats, including Elizabeth Warren, who argued in a comment letter that reducing scrutiny of reputation risk could make it harder for examiners to identify potentially problematic banking relationships. Warren and other senators cited cases involving convicted sex offender Jeffrey Epstein as examples of why banks should maintain strong oversight of high-risk clients.
Bloomberg noted that while Trump’s anti-debanking campaign was largely framed around allegations that conservatives and conservative organizations had been denied banking services, the public response to the Fed proposal has come from a much broader coalition.
Some Misunderstandings
Many commenters argued that reputation-risk standards can be applied subjectively and have been used to restrict access to banking and payment services for lawful but controversial activities. Others expressed concern that financial institutions could effectively determine what types of speech, art, commerce or political activity are acceptable by deciding who can access financial services.
Bloomberg also found that some commenters misunderstood the proposal, with a number mistakenly believing the Trump administration was seeking to expand rather than limit debanking authority. Despite that confusion, the overwhelming majority of comments reviewed by Bloomberg supported the Fed’s effort to curtail the use of reputation-risk considerations in bank supervision.
