THE TRACE.ORG December 14, 2020 – In recent years, some banks have balked at lending to the gun industry. Now, in its waning days, the Trump administration is advancing a rule through a little-known agency that would make it much harder for banks to deny services to gun makers, sellers, and distributors. Experts and banking industry groups say the rule is unprecedented.
In a notice published in the federal register in late November, officials from the Office of the Comptroller of the Currency, which is part of the Treasury Department, laid out a new rule that purports to ensure “fair access” to banking and financial services. The rule, if adopted, would require banks to evaluate companies solely on quantitative and financial metrics, not on political considerations, the bank’s opinion of an industry, or broader societal consequences.
“Organizations involved in politically controversial but lawful businesses — whether family planning organizations, energy companies, or otherwise — are entitled to fair access to financial services under the law,” the OCC wrote in the proposal, which specifically cites several cases in which banks have refused services to gunmakers and sellers.
Experts say it will have consequences not just for how banks do business with the gun and ammunition manufacturers, but with companies in fossil fuels and mining, private prisons, and payday lenders.
“I’m hard pressed to think of a previous time where OCC did rulemaking that had such an obvious political bent to it,” said Adam Levitin, a professor at Georgetown Law and an expert on the banking industry and financial regulation.
The rule change comes after numerous banks have cut ties with gunmakers over reputational, brand, and values concerns. In the last two years, Bank of America, JP Morgan Chase, and other institutions have pulled financial support from the firearms and ammunition industries. Others, like Citibank, have placed restrictions on their partners — like age requirements or banning the sale of high-capacity magazines. The measures come partially as a result of advocacy campaigns on the part of gun violence prevention groups, like Guns Down America and Everytown for Gun Safety.
“After Parkland, hundreds of thousands of young people came out to the streets and became involved in gun reform in a real way,” said Igor Volsky, the executive director of Guns Down America. “You saw a lot of businesses breaking ties with the NRA, ending special arrangements they had with the gun industry because they understood on some level that their future customers expected them to do better, and that there could be some growth implications from continuing to do that kind of business.”
“Debanking” — as conservatives and gun rights groups often call it — can involve refusing loans, placing restrictions on partners, or cutting off access to payment services. The practice has drawn the ire of GOP lawmakers, who wrote to the Treasury Department earlier this year urging its agencies to step in and stop the practice. In a separate letter, members of Alaska’s congressional delegation also asked the OCC and the Federal Reserve to intervene over concerns that the nation’s largest banks were refusing to finance new oil and gas projects in the Arctic.
If the rule is finalized, banks with $100 billion or more in assets — the 22 largest banks in the country — would have a harder time ending existing relationships with gun manufacturers and denying them access to new financial services. While the rule attempts to limit such decisions to assessments based just on financial metrics, the reality is that financial institutions have been cutting ties in large part because of financial concerns. [view source]