Senate Banking Committee Chairman Tim Scott (R-S.C.) has expressed support for President Trump’s Executive Order aimed at addressing the issue of debanking. The order is intended to protect Americans’ access to financial services and prevent banks and regulators from denying services to federally legal businesses and law-abiding citizens.
“Debanking federally legal businesses and law-abiding citizens is un-American, and President Trump’s Executive Order (E.O.) is a critical step towards protecting Americans’ access to financial services. Here in Congress, I’ve led my colleagues in fighting back against debanking, including passing legislation to end the subjective use of ‘reputational risk’ in bank supervision. I am glad to see today’s E.O. which will ensure that no regulator, and no bank, is above the principles of fairness and market access. I’ll continue to work with President Trump to end the debanking of law-abiding Americans and federally legal businesses on the basis of their political or religious affiliations,” said Senator Tim Scott.
Earlier this year, Senator Scott hosted a legislative hearing where witnesses shared experiences related to being denied banking services. He criticized financial regulators under the Biden administration for pressuring institutions to cut off services based on political or religious grounds. During a committee hearing with Federal Reserve Chair Jerome Powell, Scott raised concerns about debanking practices, receiving a commitment from Powell to work with the committee on solutions.
Senator Scott has also led discussions with Senate Banking Republicans and leaders from major consumer banks regarding regulatory issues affecting financial institutions. At these events, testimony was presented on how federal banking regulators have used “reputational risk” as a reason for regulatory actions—a practice critics say allows agencies to pursue political agendas unrelated to bank safety or soundness.
In response, Senator Scott introduced legislation designed to limit federal banking agencies’ ability to use reputational risk as part of their supervisory process. The bill has received endorsements from several industry groups including the American Bankers Association, Bank Policy Institute, Financial Services Forum, Blockchain Association, Online Lenders Alliance, ATM Industry Association, INFiN Alliance, National Pawnbrokers Association, National Shooting Sports Foundation, as well as support from 26 state financial officers. Representative Andy Barr (R-Ky.) introduced companion legislation in the House.
The Financial Integrity and Regulation Management (FIRM) Act advanced out of the Senate Banking Committee during its first markup session of the 119th Congress. Following passage of this bill by the committee, federal regulators took steps to remove reputational risk as a regulatory tool.
