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Senate Democrats have called on President Trump to reopen the Consumer Financial Protection Bureau (CFPB) immediately if his administration is to have any hope of resolving the debanking epidemic that it claims to oppose.
Last week, Senator Elizabeth Warren (D-MA) wrote an open letter to the President, in which she said that suspending the CFPB’s work will “only impede” the White House’s efforts to tackle unfair debanking.
“This freeze conflicts with the administration’s stated goal of preventing debanking and lowering costs for American families,” she said.
“More Americans across the country will unfairly lose access to deposit accounts as a result.”
Warren, who is also the leading Democrat on the Senate Banking Committee, said the CFPB is currently the “main agency” within the US government that is “working to stop unfair debanking”.
She also noted that, in an executive order issued last month, President Trump had underscored the importance of protecting and promoting “fair and open access to banking services for all law-abiding citizens and private-sector entities”.
Last week, as covered by Vixio, Trump’s new acting director of the CFPB, Scott Bessent, shut down all of the agency’s current operations on his first day in the new post.
Bessent, who is also serving as Trump’s secretary to the Secretary, provided little explanation for the move, and did not indicate whether it is part of a permanent shutdown plan.
In an email to CFPB staff and contractors, Bessent said only that the CFPB’s work has been suspended "to promote consistency with the goals of the administration”.
CFPB’s rulemakings cast aside
Warren said that Bessent’s “unfortunate” decision undermines much of the progress that the CFPB has already made in working towards new rules and regulations that will tackle debanking.
For example, she listed five rules and proposed rules that she believes will be essential to deter financial institutions from arbitrarily and unfairly denying or closing accounts:
- The Prohibited Terms and Conditions Proposed Rule, which would prohibit financial institutions from using contract clauses that allow for debanking based on political affiliation, religious views or other free speech.
- The Data Broker Proposed Rule, which would clarify that data brokers who sell sensitive consumer information are "consumer reporting agencies" under the Fair Credit Reporting Act.
- The Overdraft Fee Final Rule, which would limit bank overdraft fees to $5 or a fee that simply covers the bank’s costs and losses.
- The Prohibitions on Unfair Debanking Rule, which clarifies that discriminatory debanking, including for religious affiliation, can be an unfair act or practice under the Consumer Financial Protection Act.
- The Larger Participant Final Rule, which allows the CFPB to supervise large payment apps such as PayPal and CashApp, enabling it to more easily identify and prevent unlawful debanking practices on these apps.
How widespread is unfair debanking?
On Wednesday (February 5), the Senate Banking Committee met for a hearing to investigate the “real impacts” of debanking on US consumers and businesses.
Addressing the committee, Warren said her staff had accessed the CFPB’s complaints database, and had identified almost 12,000 complaints made by persons who were unable to open accounts or who had their accounts closed.
All of the complaints were filed within the past three years, and more than half were filed against just four banks: Bank of America; J.P. Morgan Chase; Wells Fargo; and Citigroup.
Warren’s Democratic colleagues, including Senator Catherine Cortez Masto (D-NV), said the real number of debanking cases is in the “tens of millions”, but that most of these do not result in official complaints.
Minority members of the committee also agreed that customer blacklisting due to repeated use of overdrafts is the largest source of debanking cases by far.
According to Warren’s staff, recurring themes in the complaints included no warning, no explanation and no chance to appeal or dispute a debanking decision.
“Donald Trump was on to a real problem when he criticised Bank of America for its debanking practices,” Warren told the committee.
“Banks may be taking shortcuts when it comes 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 blackbox algorithms and middlemen companies, and shutting down accounts without doing careful due diligence.”
Although the CFPB is a “favourite whipping boy” of the Republicans on the committee, Warren said it is the only agency that is currently working towards preventing these abuses.
Anchorage Digital — the bank that got debanked
Invited as a witness to the committee hearing was Nathan McCauley, co-founder and CEO of Anchorage Digital, an institutional crypto platform that is also the first and only federally chartered crypto bank.
McCauley said he had joined the hearing to tell the story of something he "could not have imagined” — the story of being shut out of the federal banking system despite being a federally chartered bank.
Since January 2021, Anchorage had held a corporate account at an unnamed bank, which it used to hold client fees from its custody and other services, as well as payroll and other expenses.
In June 2023, Anchorage received an email from the bank saying it would be closing the account in 30 days due to concerns about Anchorage’s crypto clients and their transactions.
“Needless to say, I was shocked,” said McCauley. “We had had a positive relationship with the bank for nearly two and a half years, and not once had they raised any issues with our account.”
Following the closure of the account, Anchorage then faced “extreme difficulty” finding a replacement bank. It approached more than 40 banks and was rejected by all of them.
Many of these banks said they had a blanket policy of not banking crypto clients, referring to warnings against doing so that they had received from the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC).
Ultimately, Anchorage had to cut 20 percent of its staff, and clients who are customers of the Anchorage bank are still unable to send wire transfers via the bank.
“Congress is right to investigate what happened to us and our peers across the industry, and to protect and promote fair and open access to bank services for all law-abiding citizens,” said McCauley.
