Chris Willis, Lori Sommerfield, and James Stevens delve into the implications of President Trump's Executive Order 14331, "Guaranteeing Fair Banking for All Americans."
In this episode of The Consumer Finance Podcast, Chris Willis is joined by Lori Sommerfield and James Stevens to delve into the implications of President Trump's Executive Order 14331, "Guaranteeing Fair Banking for All Americans." This order aims to eliminate politicized or unlawful de-banking practices by prohibiting financial institutions from denying access to banking services based on political, religious, or ideological beliefs. The trio discusses the historical context of de-banking, tracing its roots back to the Obama-era Operation Choke Point, and explores the current regulatory landscape shaped by the executive order. They analyze the directives issued to federal agencies, including the Small Business Administration and the Office of the Comptroller of the Currency, and the potential risks and challenges facing financial institutions. Tune in to understand how this regulatory push will likely impact the banking industry and what steps institutions can take now to mitigate risks.
The Consumer Finance Podcast – Executive Order 14331: Navigating the New Era of Fair Banking
Host: Chris Willis
Guests: Lori Sommerfield and James Stevens
Aired: October 16, 2025
Chris Willis (00:05):
Welcome to the Consumer Finance Podcast. I'm Chris Willis, the co-leader of Troutman Pepper Locke's consumer financial services regulatory practice, and today we're going to be talking about what may be becoming the fair lending issue of the current presidential administration, which is debanking. But before we jump into that topic, let me remind you to visit and subscribe to our blogs, TroutmanFinancialServices.com and ConsumerFinancialServicesLawMonitor.com. And don't forget about all of our other podcasts, the FCRA Focus, Payments Pros, The Crypto Exchange, Unauthorized Access and Moving the Metal. All of those are available on all popular podcast platforms. And speaking of those platforms, if you like this podcast, let us know. Leave us a review on your platform of choice and let us know how we're doing. Now, as I said, today we're going to be talking about the current regulatory push among federal regulators to root out so-called debanking practices. And joining me to talk about that are two of my partners, Lori Sommerfield and James Stevens, both of whom are frequent guests on the podcast. So Lori, James, welcome back to talk about this. Thank you.
Lori Sommerfield (01:11):
Thanks, Chris. Great to be with you again.
Chris Willis (01:13):
Thanks for being here. And so let's wind the clock back a bit, James, and take a short stroll through memory lane together, because a lot of what the current administration seems to be complaining of was stuff that was motivated by the behavior of the federal regulators under past presidential administrations. Can you give the listeners a brief history of some of the initiatives that occurred going back a few presidential administrations that sort of gave birth to this whole issue?
James Stevens (01:41):
Many people say the de-banking initiative began back in 2013 under the Obama administration. And in that administration, there was a now well-known program that was being conducted by the Department of Justice called Operation Choke Point, where the DOJ and the prudential banking regulators used the banking system to choke off what they perceived as some of the bad actors that were conducting legally legal but disfavored industries. And so, what they would do is they would go to a bank that was banking someone like say a payday lender or a gun dealer, and they would either cite that there was a concern with that bank banking those industries because of the reputational risks that they might expose the bank to. Or what I saw more prevalent was what I call the death by a thousand cuts, which is just make it really, really, really difficult to bank the people in those industries by citing compliance failures, the risks, and a variety of other things that caused essentially the banks to have to function almost as a deputized police force over these industries for the DOJ. That practice was largely stopped during the first Trump administration. And then some people say that it came back maybe as choke point number two when the Biden administration cracked down on the crypto industry.
Chris Willis (03:18):
Thanks for that background, James. And of course, the tying of it to reputational risk sort of ties into something that was a precursor to the whole debanking thing under the present administration, which was the federal banking regulators eliminating reputational risk as sort of a subject of examination. That was sort of the preview of what was to come next. But the big enchilada here was an executive order, executive order 14331. So, Lori, would you mind telling the audience about that executive order because that's the face that launched these thousand ships we're about to talk about?
Lori Sommerfield (03:48):
So true, Chris, on August 7th, President Trump issued this executive order, which is called Guaranteeing Fair Banking for all Americans, and it's intended to address this administration's concerns about debanking, and it does so through a series of directives to federal agencies. Specifically, the administration claims that certain financial institutions allegedly restricted access to banking products and services either to individuals or businesses based on their political, religious, or ideological beliefs during prior democratic administrations, as you and James just discussed. The order broadly targets politicized or unlawful debanking activities defines those as basically actions by financial service providers that adversely restrict access to banking products and services, again based on political or religious beliefs or lawful business activities. So, U.S. banking policy now explicitly prohibits denying access to financial services based on beliefs, affiliations, or political views. Banking decisions now have to be grounded in either objective and/or risk-based analysis, and it includes things like digital assets and cryptocurrency, just as you mentioned in our brief history here about debanking.
So, as I mentioned, the order does this by issuing a series of directives to federal agencies and there's basically five key directives. First of all, federal regulators are required to eliminate the use of reputational risk, just as you mentioned Chris. And that can't be used as a factor in making any banking decisions or in examining banks, and that has to be done within 180 days. We've already seen evidence of the federal banking agencies following through on that directive. The second command, if you will, is that within 60 days, the Small Business Administration is required to send notices to financial institutions that are engaged in small business lending, requiring them to identify, notify and reinstate customers or potential customers that were denied financial services or payment processing services or other types of products or services due to debanking practices. And that's required to be sent by December 5th of this year.
Then Secretary of Treasury is required to develop a comprehensive strategy for combating debanking practices, and that's designed to be across the entire federal government, and it has to outline both legislative and regulatory options for doing so. And that report is due by February 3rd, 2026. Fourth, the federal banking agencies have to review all the financial institutions under their supervision to identify any past or current debanking practices by December 5th of this year. And regulators are required to take appropriate remedial action if they find any evidence of debanking activities, and that could include things like fines or other disciplinary measures, but in particular, they're looking for violations of federal law like discriminating on the basis of religion under a ECOA or UDAAP violations. And then finally, but perhaps most importantly, I would say, section 5C of the executive order requires that the federal banking agencies review their supervisory and complaint data to identify any institution that's engaged in unlawful debanking on the basis of religion specifically.
If the institution is unable to achieve compliance, then that agency is required to make a referral under ECOA to the attorney general for appropriate action. And as you and I have discussed in the past, Chris, that provision poses significant risk to financial institutions. One of the things I also want to point out before we leave this topic about the executive order is that there's no prescribed lookback period in the executive order. So, it appears to be unlimited in scope, but we do hear about certain periods, four years five years that have been discussed in the media and that basically emanates from the federal agencies actions as they have issued guidance and directives.
Chris Willis (07:50):
Okay, well let's jump into that. So, we've got the executive order, and a number of the federal agencies have sort of jumped to start implementing it. And so, let's go through what some of the actions that have been taken and statements that have been made by the various federal regulators so far with respect to this executive order. So, let's talk first about the small business administration. Lori, what has the SBA done so far?
Lori Sommerfield (08:15):
First, the SBA issued a directive on August 26th to its network of over 5,000 small business lenders. And the letter mandated that small business lenders basically cease any debanking activities and also required lenders to identify and reinstate any qualified customers who may have been wrongfully denied banking products or services based on political, religious, or ideological beliefs. And that has to be done by December 5th, 2025. Lenders also have to provide a notice to potential clients who were previously denied services. Small business lenders are required to submit a report then to the SBA by January 5th, 2026, evidencing their compliance with this directive in order to remain in good standing with the SBA and to avoid any type of punitive measures. Then on September 30th, the SBA came out with a second letter that basically transmitted a form that can be used by small business lenders with assets less than $30 billion that can be used to comply with the SBAs review and reporting requirements. So, it basically represents a simplified approach to make it easier and reduce burden on small business lenders to comply with this debanking directive from the SBA.
Chris Willis (09:28):
Although let's talk about how simplified it really is because that letter, as I recall, requires the financial institutions to do a five-year look back and search their records for any instance of debanking and then fill out what I'm going to call the self-confessional form if they find any instances of doing it to disclose that they've done so to the SBA. So although the SBA has saved them the trouble of creating a form, the real trouble I think is doing a five-year lookback, it seems to me.
Lori Sommerfield (09:58):
That's true, but they're only required to conduct a “reasonable review,” with that five-year lookback, but the problem lies in if they've identified any debanking policies or practices, then they have to go ahead and self-confess them to the SBA as you said, and give a list of remedial actions that they're going to take to try to fix the problem.
Chris Willis (10:19):
Yeah, okay. So, James, the SBA isn't the only regulator though the OCC has gotten in on this as well. So, what can you tell the audience about the OCC’s actions so far?
James Stevens (10:29):
You're correct. On September the 8th, the OCC issued two bulletins to national banks and announced that the bulletins are aimed at eliminating politicized or unlawful debanking practices, ensuring that banks provide access to financial services based on objective risk-based analysis rather than political or religious beliefs. So the two bulletins, one of them is 2025-22, and it seeks to clarify how politicized or unlawful debanking will be assessed in licensing applications like branching, merger approvals, things of that nature, as well as CRA Community Reinvestment Act performance evaluations, which are very important ratings that banks have and downgrades in the CRA rating can have an impact across the operations of banks. And the second one is 2025-23, and that one seeks to remind banks of their legal obligations under the right to financial privacy Act to protect consumer financial records. And specifically, they call out how banks should only produce records to government agencies under very specific limitations that are already embedded in the law.
And I can say this is directed at national banks, but the same concept, the same limitation on the ability of banks to share customer information with governmental authorities exists in all of the different state laws as well. So, they're basically saying, Hey, remember that customers have this right to protection. And so, if a government agency is asking you for the information, you can only share it in limited circumstances. And then the second thing, and I think this probably dovetails a bit with that five-year lookback concept, is the bulletin says that it wants to ensure that banks are using suspicious activity reports and specifically voluntary SARS in the correct way and not as a pretext to improperly disclose financial information or evade customer's right to financial privacy.
Chris Willis (12:41):
That is very interesting. And we're going to talk a little bit more about the OCC in a minute, Lori, the CFPB has gotten in on the action too, haven't they? What have they said?
Lori Sommerfield (12:49):
Yes, they have, but the CFPB is taking a slightly different approach than the other regulators that we've just talked about who issued regulatory guidance. Instead, they're focused on an internal review with a long lookback period that we'll discuss in a minute. So, Bloomberg recently reported that on September 26, bureau leadership issued an email to CFPB enforcement attorneys as well as a group of examiners and asked them to flag any investigations during the past five years that uncovered any potential debanking of customers based on religious or political beliefs. So that five-year period is clearly designed to cover the entirety of the Biden administration and any activities that took place then. CFPB enforcement attorneys are supposed to report on any investigation that produced documents or other information about policies and practices regarding opening, freezing or closing accounts. And they were also told to report on any evidence of an institution making decisions on the basis of religion, political beliefs or lawful business activity. So, it's our understanding based on that email that was released through the media that the deadline for that internal review is October 3rd.
Chris Willis (13:59):
Let's just take a little bit of a detour here, Lori, if you don't mind. First of all, it'll be interesting to see if the CFPB enforcement folks just happen to find anything about debanking from the investigations they were doing about other things. Which, I don't know, that seems like something of a long shot to me, but let's assume they found it. What legal authority would the CFPB have to do anything about debanking? I mean, if you had a small business credit product where there was discrimination on the basis of religion, I get that that's the Equal Credit Opportunity Act.
Lori Sommerfield (14:34):
Correct.
Chris Willis (14:34):
Political affiliation is not a protected class under the Equal Credit Opportunity Act the last time I read the statute, right?
Lori Sommerfield (14:40):
That's correct. It is not.
Chris Willis (14:42):
And the statute itself does not apply at all to deposit accounts, I don't think, because they're not credit.
Lori Sommerfield (14:48):
That's right.
Chris Willis (14:49):
Okay. So, I can't believe I'm about to say this, but would the CFPB have to rely if they did enforcement in this area on the idea that debanking discrimination is a UDAAP violation?
Lori Sommerfield (14:59):
Yes, I think they would. That would have to be the legal theory that they would rely on because there's nothing else that's available except that narrow circumstance of finding discrimination on the basis of religion with regard to certain lending products.
Chris Willis (15:12):
But the problem there is there's already a court order that says that it was an abuse of the CFPB statutory authority to interpret the word unfair in the Dodd-Frank UDAAP statute to include discrimination.
Lori Sommerfield (15:25):
That's true. That would be an obstacle. But I think there's also state UDAAP laws, and then of course there's the Federal Trade Commission Section 5 Act, which is also another form of UDAAP that they could potentially rely on.
Chris Willis (15:37):
But the CFPB doesn't have authority under any of those.
Lori Sommerfield (15:39):
That's true. So, it'd have to be taken up by another agency then.
Chris Willis (15:43):
Okay.
Lori Sommerfield (15:44):
Correct?
Chris Willis (15:44):
I think yes, it would. That's why I think this is kind of an interesting question. We'll see if it comes to anything, but I just was thinking like, okay, what if you find it, what are you going to do about it from a legal standpoint? But let me just stop this frolic and detour and get back to our discussion of debanking. You two have talked about the public statements of the various agencies, which by the way, the FDIC I think has been a little bit silent on this so far, at least as far as I can tell.
Lori Sommerfield (16:14):
They have been very quiet.
Chris Willis (16:16):
But what are we seeing so far in terms of actual regulatory activity, not just public guidance, but like actual on the ground regulatory activity related to this issue?
Lori Sommerfield (16:27):
It's our understanding that the OCC has issued informational requests to nine of the largest banks and to begin evaluating the existence of any debanking activities. And to your point about the FDIC, it's our understanding that the FDIC is having internal discussions about what that agency should do. The SBA has also begun issuing inquiries to small business lenders, but it's my understanding that the OCC informational requests are very broad, voluminous, and burdensome, and they go all the way back to 2020 again, a five-year look back period when they involve data requests and narrative responses to try to identify any potential debanking activities.
Chris Willis (17:08):
Okay. Well, we'll see what happens with those as it plays out. James, let me turn to you. What do you think the M&A impact of this might be?
James Stevens (17:17):
Well, it's new, so I can't tell you that I've seen a lot of real impact on this yet. And I do think that thus far the inquiry has been focused on the very largest banks in the country who are not usually the people involved in M&A in recent times. But there is a massive amount of M&A going on at the smaller bank level. And I think that most people think that given the general regulatory, the generally improved regulatory environment, that we will see much more M&A in the future. But this new approach to trying to address this debanking issue is sort of a step in the opposite direction. So rather than the environment being totally clear to allow banks to grow and prosper and provide economic growth for the country, now instead we are sort of imposing more regulation on in terms of this debanking issue.
And so yeah, it could impact M&A. I mentioned earlier when we were talking about CRA that a CRA downgrade to less than satisfactory means that a bank cannot engage in branching or M&A. I think that if you're a target bank, you're trying to sell your bank and you have some kind of camel's rating downgrade or a CRA or you're being cited for violations or potential violations under this guidance, then you're not going to be attractive to a buyer. So, I think that you will see a lot of due diligence on this area to the extent it can be done. As you all know, generally confident supervisory information is confidential. Banks can't share exam reports, they can't share communications with their regulators. So, this is another issue that will have to be kind of probed around the edges and in compliance with the prohibitions on sharing confidential supervisory information. But it'll be another issue like the Bank Secrecy Act or fair lending or just general camel's issue that whether you're a buyer or a seller, you'll have to think about in the M&A context.
Chris Willis (19:32):
We've sort of set the stage about the executive order and the actions taken by the regulators. So, let me get the two of you to weigh in, and I may join you too, on the subject of how big of a risk do you think this poses to the banking industry? Is this just a bunch of public talk or is there going to be some real action here where banks are at risk of having something significantly negative happen to them as a result of this complex of inquiries?
James Stevens (19:58):
I think the idea of trying to regulate debanking is in a way just as bad as Operation Choke Point. They both involve additional and unpredictable regulation of banks with a very subjective standard being applied. And it was very difficult for banks to bank people that were participating in the targeted industries back during Operation Choke Point because those banks were concerned they were going to get into regulatory hot water if they bank people in those industries. But now you have a similar situation where these same banks may feel like they can't avoid banking some of these people, even if they have serious concerns from a risk-based approach about the ability of these people that are participating in these industries to repay loans or the very, I'm in favor of eliminating reputational risk. I'm in favor of eliminating anything that makes the regulatory environment less clear.
But at some point, you have to acknowledge that if you are loaning to someone, that it could create reputational risks for the bank and reputational risks have issues. I think that also you worry about if you have somebody that's in a very highly regulated industry or an industry that's out of favor that something could happen to that borrower and that borrower can't repay their loan because they have now been put out of business or they're facing lawsuits or something of that effect. So, it's very difficult to sort of dissect this and say, are you making a debanking decision that's not allowed under this new environment, or are you making a risk-based banking decision not to bank somebody because you're concerned? And I think that we're sort of back to the death by a thousand cuts once again that we thought we had left behind with Project Choke Point. Lori, what's your perspective on this?
Lori Sommerfield (21:50):
Well, I think this initiative for which the impetus is this executive order presents significantly increased enforcement risk for financial institutions of all types based on their both current and past debanking practices if they exist. But I think the biggest risk stems from the executive order itself, we talked about that Section 5C that basically requires the federal banking agencies to refer anyone to DOJ where it believes that the institution has engaged in unlawful debanking on the basis of religion in violation of ECOA. That's a very serious big stick, I would say in this whole executive order. As we talked about earlier, Chris, too, there's the issue of the CFPB and the federal banking agencies possibly undertaking their own enforcement actions against financial institutions. But that is problematic for the reasons we discussed, unless it's a very narrow approach under a legal theory that you are discriminating on the basis of religion under ECOA if you engage in a particular type of lending.
But it certainly doesn't cover political affiliation. So I don't know how they do that, except under a UDAAP theory and referral to another agency for the reasons we discussed. I think another big risk for small business lenders is potential loss of good standing with the SBA if they failed to comply with these directives from the SBA under the timeframes that are specified. The press release that accompanied that August 26th letter said, lenders who failed to comply with these directives will lose their good standing with the SBA and will be subject to additional punitive measures. So that's a threat that I could see the SBA following through on. I also just wanted to mention that I think states also are getting their ore in the water on these debanking issues. And it's my understanding that a few states, namely Florida, Idaho, and Tennessee, have recently enacted laws that would prohibit discrimination in banking based on things like political affiliation, religious beliefs, speech in terms of debanking activities. So it's an issue to watch.
James Stevens (23:53):
You're right, Lori, there is some activity at the state level, but there's also activity resisting it at the state level, and it's not totally on political lines. For example, here in Georgia where I am, there have been numerous efforts to impose debanking legislation in this very Republican state that I'm in. And all of those have been routinely denied because I think that the legislature and the people that are concerned about it realize that it actually has an impact on the business of banking, and it's inconsistent with the policies that I think the party is trying to advance.
Chris Willis (24:33):
Well, I just want to echo the comments that both of you made. My personal view is that this whole debanking push does represent very significant risk for the industry, and I think there is likely to be a high level of motivation on the part of the regulators to find examples of debanking activities and make them public. And along with that comes some sort of public statement or enforcement or something like that, similar to what we've seen past Democratic administrations do with respect to issues that they were concerned about. And so, I have to come back to agreeing with you, James, that this is just sort of the same tactics, but in a different direction by the new administration, but we take it very seriously and we think banks should too. So, having said that, what do we think banks should actually be doing to try to get ahead of and mitigate the risk of some regulatory action relating to this issue? Lori, I'm going to let you go first.
Lori Sommerfield (25:35):
Well, clearly with all of these deadlines imminently approaching, if you are a financial institution or a small business lender, you need to pay heed to those deadlines and be undertaking your own internal review. We understand what a massive undertaking it is, but you need to be looking at things like written or verbal complaint records, customer surveys that were received during this five-year lookback period, and try to identify anyone who claims that they were debanked. That data then can be used to identify situations that could fall under the parameters of the executive order, and then drill down into products and services to figure out the categories into which they fall. And of course, institutions and small business lenders should also be looking at loan denials, deposit account closures or restrictions, payment processing practices, and also SBA and paycheck protection program loans to try to match consumer complaints or issues with complaints to operational data on closed accounts. Then all that data can be analyzed to look at the scope of debanking activities if they exist, and develop statistics and trend reporting. And then obviously, on the basis of that macro review, you'd want to then look at your policies, procedures, and practices and determine if any of them need adjustment. James, what's your view?
James Stevens (26:53):
I would say that while I'm not sure if debanking is real, the guidance certainly is, and so I think that banks are going to have to take it seriously and they're going to have to do the work that's required. As Lori described, there's a lot being asked of them as there always is in the banking industry, and so they're going to have to take it very seriously, take a hard look at themselves to make sure that there's nothing there that either in fact is an issue or that could create the implication of that.
Chris Willis (27:20):
Okay. Lori and James, thanks so much for being on the podcast today and telling our audience all about this important issue. And of course, we'll be following it as it plays out and be reporting on any developments both here and on our blogs, TroutmanFinancialServices.com and ConsumerFinancialServicesLawMonitor.com. And of course, please visit and subscribe to both of those blogs. And while you're at it, why not visit us on the web at troutman.com and add yourself to our consumer financial services email list. That way we can send you copies of the alerts and advisories that we release from time to time as well as the invitations to our occasional industry only webinars. And of course, stay tuned for a great new episode of this podcast every Thursday afternoon. Thank you all for listening.
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