WASHINGTON–The president’s recent executive order banning “debanking” should not affect credit unions that turn away certain members or businesses based on identifiable risks, according to one person.
But America’s Credit Unions will still be asking NCUA to clarify its guidance relative to the executive order in order to ensure there isn’t any uncertainty.
As the CU Daily reported, President Trump issued the new executive order he said is aimed at ending alleged politically motivated or religion-based financial discrimination. The president said his business was turned away by several big banks in the wake of the January 6 riots, and his family has filed suit against Capital One making similar allegations.
The order, officially known as the “Guaranteeing Free and Fair Banking for All Americans,” directs federal financial regulators to investigate whether these types of alleged account closures violate laws, such as the Equal Credit Opportunity Act or other consumer protection rules. Financial institutions found in violation could face fines, consent orders, or other enforcement actions.
The Risk Standpoint
America’s Credit Unions and the Defense Credit Union Council both issued statements in support of the debanking order, as the CU Daily reported here.
Carrie Hunt, chief advocacy officer with America’s Credit Unions, said the new order will not affect any decision to serve a certain member or business (assuming there are no field of membership issues) if the credit union sees potential risk.
“Looking at risk from the standpoint of the financial institution credit unions have had challenges in recent years relative to whether or not to bank marijuana businesses,” said Hunt. “Clearly, marijuana is a controlled substance under federal law. Certain states have legalized marijuana in various forms, so credit unions have had to make decisions based on legal risk. That would be a valid reason as to whether or not to bank an individual that has nothing to do with the individual themselves.
“Credit unions need continued flexibility and…the executive order doesn’t prevent that,” Hunt continued. “What it does do is it requires agencies, including NCUA, to look at their rules and guidance to see if there are classes of individuals that have been wholesale deemed risky.
Review Being Urged
In response to a question from the CU Daily, Hunt said she expects the agency will be reviewing all of its guidance following the new executive order.
“We are not overly concerned relative to there being any sort of dramatic changes in regulatory practice,” Hunt said. “That being said, we certainly are not supportive of additional regulatory burdens and that’s why we wanted to reach out to the NCUA to make sure that as they look at this issue there aren’t any unintended consequences.”
Hunt said she and America’s Credit Unions are not aware of any suggestion or claims of debanking taking place in credit unions.
One Response
Seems lke an opportunity to expand service as well as avoid risk–something we’re all too good at as a group.