By Saeed Azhar, Nupur Anand and Chris Prentice
NEW YORK, June 15 (Reuters) - Big U.S. lenders are bracing for further public scrutiny over whether they improperly closed customer accounts as a top watchdog wraps up a review that is expected to name and shame banks and result in disciplinary action, said several people with knowledge of the matter.
The Office of the Comptroller of the Currency is poised to publish in coming weeks the findings of a supervisory review of whether lenders including JPMorgan
and Bank of America cut off or denied services on religious or political grounds, often dubbed debanking. It has also examined whether lenders denied services to legitimate, conservative-aligned sectors such as fossil-fuel companies, gun makers and crypto, the people said.
Debanking generally refers to the process whereby a financial institution suddenly cuts off or restricts services to individuals or businesses. Following Republican President Donald Trump's order last year, authorities have been cracking down on what Trump has characterized as politically motivated debanking pushed by Democrats, creating headaches for lenders, who deny the claims and say they have merely been following risk management rules.
Republicans have for years been ramping up pressure on Wall Street banks to drop what they describe as left-leaning "woke" policies that they say are discriminatory, and Trump says he has personally had accounts closed for such political reasons.
The growing pressure has led some banks to rethink longstanding policies for lending and other account services, according to one of the people and banks' public announcements.
The U.S. Attorney's Office in Washington is also probing lenders over debanking, according to two of the people. The Wall Street Journal first reported that probe last week.
REGULATORS PROBE DEBANKING COMPLAINTS
In December, the OCC published a preliminary report flagging that nine big banks from 2020 to 2023 had policies of restricting services to some industries and groups or of requiring excessive risk-management screens, often to avoid the reputational risk associated with banking them. The agency said it was reviewing those policies and around 100,000 related complaints.
Since then, it has conducted multiple rounds of inquiries, with some lenders still fielding queries in recent weeks, four people said. The watchdog's questions have focused on banks' decision-making processes for providing and revoking services and have been extremely detailed, they added.
In its full review, the OCC is expected to highlight specific banks and cases, adding they anticipate the watchdog will escalate some to formal sanctions, two people said. Those could include a private supervisory notice demanding the banks fix their lending policies, or even public enforcement actions which would likely be settled with penalties.
The OCC has said it is also scrutinizing Citigroup, Wells Fargo, Capital One, U.S. Bank, PNC, TD Bank and BMO Bank. Spokespeople for the nine banks declined to comment.
Lenders say they close accounts for various reasons, including unusual activity, paperwork problems, or because the account is not being used for its stated purpose, but that political leanings are not one of them.
The sources declined to be identified because the matter is sensitive. An OCC spokesperson declined to comment.
Speaking to lawmakers this month, Comptroller Jonathan Gould said the agency was investigating debanking and exploring a potential legal theory of liability. "We are well advanced in that process," he added.
A White House spokesperson did not respond to a request for comment.
TRUMP SUING LENDERS FOR DEBANKING
Trump in January 2025 accused JPMorgan and BofA of discriminating against conservatives, and he and affiliated businesses are suing JPMorgan and Capital One over account closures. The banks have denied the accusations.
Another complaint that has received attention among Republicans came from Indigenous Advance Ministries, a Memphis-based Christian charity that works in Uganda. In 2023, it accused BofA of closing its accounts on religious grounds. In response to scrutiny from Republican state attorneys general over that complaint, BofA said Indigenous Advance was engaged in debt collection and that the bank does not serve that sector, or small businesses that operate overseas.
The charity did not respond to a request for comment.
Sam Brownback, a Republican who leads the National Committee for Religious Freedom, has said that in 2022 JPMorgan closed an account linked to him on religious grounds. JPMorgan said it was closed due to inadequate information.
Crypto companies, which donated heavily to Trump's election campaign, have also complained that banks have shunned their industry.
Some lenders are shifting their policies. JPMorgan has removed restrictions on banking a number of sectors, including on rifles for civilian use, according to a letter the bank sent to firearm group NSSF in January this year. The letter, which cites Trump's executive order, has not previously been reported.
Citi last year also dropped a policy that had restricted services to retail clients selling firearms.
LEGAL THEORY UNCLEAR
The sources said it was unclear on what grounds regulators could pursue potential enforcement actions, since many of the groups the OCC flagged would not be protected by fair lending laws.
The U.S. Attorney's Office in Washington is investigating whether banks violated the Financial Institutions Reform, Recovery and Enforcement Act of 1989, a law traditionally used to prosecute bank-related fraud, one of the sources said. Reuters could not ascertain if the OCC is exploring a similar theory.
Stephen Gannon, a partner at Davis Wright Tremaine, said the OCC may argue that lenders flouted safety and soundness standards by penalizing customers for lawful activity and by overemphasizing the risk that certain client dealings could harm banks by damaging their reputation.
That risk, which Trump's regulators stopped policing last year, "has been consistently criticized as vague," said Gannon.
(Reporting by Saeed Azhar, Nupur Anand and Chris Prentice in New York; Additional reporting by Tatiana Bautzer in New York and Pete Schroeder in Washington; Editing by Michelle Price and Matthew Lewis)
