Republicans on the Senate Banking Committee today blasted regulators for allegedly pressuring banks to cut off services to certain customers while Democrats said overdraft and other bank fees were driving people away from banking.
During a hearing on “debanking,” some Republicans accused banks of turning away conservative customers and customers associated with particular industries, particularly cryptocurrency. Committee Chairman Tim Scott (R-S.C.) equated the alleged practice to racial redlining, although he viewed regulators as the primary force behind the denial of bank services.
“Under the Biden administration, we’ve seen the rise of what many are calling Operation Chokepoint 2.0, where federal regulators exploited their power, pressuring banks to cut off services to individuals and businesses with conservative disposition, or folks aligned with industries they just didn’t like — like the color of one’s skin in my family’s history,” said Scott, who is Black.
A major focus was on alleged debanking of customers engaged in cryptocurrency activities, with the FDIC releasing documents before the hearing reportedly showing that regulators discouraged banks from providing services to the sector. One of the witnesses at the hearing — Nathan McCauley, co-founder and CEO of crypto platform Anchorage Digital — said his firm sought banking services at 40 banks, including firms that wanted Anchorage’s business, but all the banks said no.
“I believe that regulators pressured banks to shut an entire industry out of the federal banking system,” McCauley said, pointing to a series of regulatory actions in the past few years. “The irony of having trouble accessing the federal banking system despite the fact we ourselves are a federally chartered bank cannot be overstated,” he added.
Ranking Member Elizabeth Warren (D-Mass.) said banks not regulators are to blame for any debanking. She said that “tens of millions of customers have been blacklisted by the banking industry because they overdrafted their accounts a few times.” She also said the list of debanked include formerly incarcerated individuals, Muslim and Armenian Americans, nonprofit groups and charities, and lawful cannabis businesses. She accused the largest banks of taking “shortcuts” when it came to assessing risks.
“Rather than investing the time and the resources to identify true criminal risks and shutting down those accounts, big banks are relying on black box algorithms and middlemen companies and shutting down accounts without doing careful due diligence,” she said.
