Five Things to Know About the “Debanking” Executive Order

President Trump recently signed an executive order¹ (the Order) aimed at preventing the so-called practice of “debanking,” which refers to actions taken by banks and other financial services providers to restrict the ability of certain individuals, groups, or industries to access financial products and services for reasons seemingly unrelated to the individualized risks presented by each customer. Specifically, the Order seeks to limit “politicized or unlawful debanking” by ensuring that clients are not denied access to financial services products and services because of their constitutionally or statutorily protected beliefs, affiliations, or political views and that banking decisions are instead made on the basis of “individualized, objective, and risk-based analyses.” Although the Order’s legal authority is dubious, banks that seek to end or have previously ended relationships with clients in the cryptocurrency industry or clients with conservative-leaning beliefs will need to be vigilant — even if the relationship was terminated for apolitical reasons (e.g., Bank Secrecy Act or Anti-Money Laundering Act concerns).

1. How Does the Order Define “Politicized or Unlawful Debanking?”

The Order defines “politicized or unlawful debanking” as

an act by a bank, savings association, credit union, or other financial services provider to directly or indirectly adversely restrict access to, or adversely modify the conditions of, accounts, loans, or other banking products or financial services of any customer or potential customer on the basis of the customer’s or potential customer’s political or religious beliefs, or on the basis of the customer’s or potential customer’s lawful business activities that the financial service provider disagrees with or disfavors for political reasons.

In theory, the Order would apply neutrally to clients of all political beliefs. In practice, however, it is clear that the Order is intended to end perceived anti-conservative and/or anti-Republican bias on the part of banks.²

2. What Does the Order Do To Stop Debanking?

The Order mandates a multi-pronged approach for the federal banking regulators³ to address politicized or unlawful debanking.

• Federal banking regulators must conduct a review to identify financial institutions that have engaged in or are currently engaging in debanking. Within 120 days of the Order, each federal banking regulator must conduct a review to identify financial institutions subject to its jurisdiction that have or have had any “formal or informal[] policies or practices that require[d], encourage[d], or otherwise influence[d]” the financial institution to engage in politicized or unlawful debanking. If any financial institutions are identified in that review, the federal banking regulators are directed to take appropriate remedial action to the extent authorized and consistent with applicable law. The Order specifically notes that a federal banking regulator may levy fines, issue consent decrees, or impose other disciplinary measures against any financial institution subject to its jurisdiction.
• Federal banking regulators must amend existing regulations and guidance to eliminate consideration of a potential client’s reputational risk. Within 180 days of the Order, each federal banking regulator must, “to the greatest extent permitted by law,” remove the use of reputation risk or equivalent concepts that could result in politicized or unlawful debanking, as well as any other considerations that could be used to engage in politicized or unlawful debanking, from any guidance documents, manuals, or other materials. The federal banking regulators must also consider rescinding or amending existing regulations that could result in politicized or unlawful debanking and ensure that any customer’s reputation is considered for regulatory, supervisory, banking, or enforcement purposes solely to the extent necessary to reach a reasonable and apolitical risk-based assessment.
• The SBA must notify financial institutions that make SBA-guaranteed loans that the financial institutions must reinstate any customers subjected to politicized or unlawful debanking. Within 60 days of the Order, the SBA must give notice to all financial institutions for which it guarantees loans under its lending programs, that they must, within 120 days of the Order, make reasonable efforts to identify any previous clients “denied access to financial services,” or “denied access to payment processing services” as a result of politicized or unlawful debanking in violation of any applicable statutory or regulatory requirement, and notify and reinstate any client that was “denied service” as a result of politicized or unlawful debanking.
• Treasury must develop a comprehensive strategy to stop politicized or unlawful debanking. Within 180 days of the Order, the Secretary of the Treasury must develop a comprehensive strategy for further measures to combat politicized or unlawful debanking activities of financial institutions and financial regulators across the federal government. The focus on financial regulators here rightly acknowledges that federal banking regulators supported some of the most famous examples of alleged debanking.⁴

3. What Is the Legal Basis for the Order?

As written, the Order purports to narrow the ability of banks and other lenders to use their own discretion on whom they choose to lend to and do business with, but how that will lawfully be accomplished remains to be seen.

The Order cites three specific laws on which federal regulators could base a finding of politicized or unlawful debanking: Section 5 of the Federal Trade Commission Act⁵ (FTC Act), Section 1031 of the Consumer Financial Protection Act⁶ (CFPA), and the Equal Credit Opportunity Act⁷ (ECOA). However, as discussed further below, none of these laws — whether based on plain language or prior interpretation by the Trump administration — appear to be a strong vehicle for a banking regulator to bring a claim against a regulated entity.

4. Is the Order Vulnerable to Legal Challenges?

The Order stands on dubious legal ground, but challenging any actions taken under the Order may be time-consuming or make financial institutions a target of the Trump administration.

Of the three statutes cited in the Order, the ECOA is arguably the most on-point, but even then, it will be hard for federal banking regulators to make a strong legal case that politicized or unlawful debanking is a violation of the ECOA, which prohibits discrimination in lending on the basis of “race, religion, national origin, sex, marital status, age, because the applicant receives income from a public assistance program, or … has in good faith exercised any right under the Consumer Credit Protection Act.”⁸ Although religion is covered by the ECOA, the statute does not list political or social views as a protected basis. And, while it is conceivable that a disparate-impact argument could be made to bring the political views cited by the Order within the ECOA’s scope (for example, by arguing that the refusal to provide banking services to those of a particular political view disproportionately impacts customers of a particular religion), the Trump administration has essentially prohibited the federal government’s use of the disparate-impact theory by previous executive order.⁹ Further restricting any enforcement efforts by the federal banking agencies, the ECOA only applies to lending (and related) products and services, not all banking products and services. Accordingly, a decision to end a client’s checking account may have different ramifications than closing a client’s credit card.

The other two statutes cited in the Order, the FTC Act and the CFPA, may also prove problematic for regulators seeking to make out a case of politicized or unlawful debanking. Both the FTC Act and the CFPA prohibit “unfair” and “deceptive” acts and practices (with the CFPA also prohibiting acts and practices that are “abusive”), but both acts are silent on discrimination. Attempts by the federal banking regulators to read “discrimination” into these laws (as well as the ECOA) during the Biden administration were met with strong legal objections. For example, in 2022, the Federal Trade Commission (FTC or Commission) reached a settlement with a number of car dealerships in which, among other things, the FTC argued that alleged discriminatory conduct constituted an “unfair” practice under the FTC Act.¹⁰ The Commission approved the settlement over the objection of the two Republican commissioners, both appointed by President Trump, with one Commissioner stating plainly that “[t]he FTC Act is not an antidiscrimination statute.”¹¹ Similarly, the Consumer Financial Protection Bureau (CFPB) in 2022 amended its examination manual to provide that “certain discriminatory practices” beyond what is prohibited by ECOA “may also trigger liability under the” CFPA.¹² Trade groups successfully sued to block the amendments, with the district court agreeing with the plaintiffs that the changes “exceed[ed] the agency’s statutory authority under the [CFPA].”¹³ The court also analyzed the case under the FTC Act and reached the same conclusion.¹⁴ Although the prior administration appealed the ruling, the Trump administration in April of this year stipulated to the dismissal of the appeal with prejudice, effectively making the district court’s ruling final.¹⁵

5. What Does the Order Mean for Banks?

Despite the Order’s questionable legal authority, banks should be prepared to interface with their federal regulators regarding perceived debanking actions that may have occurred in the past and should consider developing strategies to assure regulators that “politicized or unlawful debanking” will not occur in the future. Notably, certain federal regulators, such as the OCC, have already begun taking steps to address debanking, revising guidance and pledging to amend regulations that have the potential to encourage politicized or unlawful debanking.¹⁶ Likewise, the Acting Chairman of the FDIC Board, Travis Hill, issued a statement that the FDIC “fully supports President Trump’s Executive Order” and is planning to issue a rulemaking that would prohibit examiners from “criticizing institutions on the basis of reputational risk or directing or encouraging institutions to close accounts on the basis of political, social, religious, or other views.”¹⁷

Banks will also need to consider addressing historical and future risks created by the Order. For example, banks should consider whether there are particular clients or categories of clients that the bank may have exited in recent years over issues that could now be viewed by regulators or aggrieved former clients as politicized or unlawful. Given the supervisory scrutiny of banks’ documentation of AML reviews, compliance teams may need to ensure that the bank’s records fulsomely memorialize the reasons justifying account exit. Similarly, banks will need to carefully assess how they document decisions to exit customers going forward. The Order does not create an absolute right for all customers to bank at any institution they desire, and banks should develop clear policies governing what may lead to a rejection or exiting of a customer.

Two types of “debanked” clients warrant special consideration:

• Digital Assets. Many banks were accused of debanking clients connected to cryptocurrencies and other digital assets during the Biden administration, as most of the banking industry retreated away from digital assets as a whole due to perceived risks and increasing regulatory pressure. The Trump administration, however, has made developing the digital assets industry a priority, with President Trump directing numerous actions aimed at establishing the U.S. as the “crypto capital of the planet.” Accordingly, banks should be prepared for potential regulatory scrutiny about alleged debanking of cryptocurrency or digital asset clients, and consider revising policies and procedures to ensure that risk assessments for digital asset clients are conducted on an individualized basis.
• Conservative Causes. Additionally, banks that ended relationships with clients who may have been conservative-leaning should be particularly proactive in preparing to respond to inquiries from federal banking regulators. In particular, banks should review documentation associated with the exit decisions of those customers and consider whether the bank’s records accurately describe the reasoning for the decision.

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© Arnold & Porter Kaye Scholer LLP 2025 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.