On November 20, 2020, the Office of the Comptroller of the Currency (“OCC”) issued a proposed rule that would impose on large national banks and federal savings associations (collectively, “banks”) a requirement to provide “fair access” to the financial products and services those institutions offer. The proposal is intended to preclude the banks it covers from making decisions about providing financial services based categorically on the type of a customer’s business or the customer’s geographic location. In support of the proposal, the OCC gives examples of nonprofit and for-profit organizations and businesses that it says banks have been encouraged or pressured to boycott, including family planning organizations, privately owned correctional facilities, gun manufacturers, independent ATM operators, agricultural businesses, and businesses conducting various activities in the energy sector of the U.S. economy.

The proposal would establish an affirmative obligation for a bank to make each of its products and services available to all individuals and lawful businesses in the geographic market it serves on “proportionally equal terms.” The text of the proposed regulation does not provide a definition of “proportionally equal terms.” A footnote in the preamble describes the standard as requiring, at a minimum, that a bank make pricing and denial decisions commensurate with “measurable risks based on quantitative and qualitative characteristics.” Elsewhere, the preamble indicates that pricing and denial decisions should be supported by quantitative, risk-based analysis and not made on the basis of personal beliefs on matters of substantive government policy or on assessments about future legal or political changes. The preamble suggests that the OCC would disfavor denial decisions based on a bank’s assessment of its reputation risk, but it does not indicate how considerations such as enhancement or preservation of shareholder value or customer relationships could affect a bank’s decisions.

In addition, the proposal would impose three prohibitions on the banks it covers. First, a bank would be prohibited from denying financial services to an individual or business except as justified by the potential customer’s “documented failure to meet quantitative, impartial risk-based standards established in advance.” Second, a bank would be prohibited from denying financial services if the denial impedes the customer from conducting business in a particular market or produces a benefit to an individual or business in which the bank has a financial interest. Third, a bank would not be permitted to act in coordination with others to deny a financial service to an individual or business.

A bank would be subject to the rule if it has the ability to affect markets by raising the price for financial services offered by that bank or its competitors, or by “significantly impeding” the business of one individual or legal entity to the advantage of another. A bank with $100 billion or more in assets would be presumed to satisfy this standard, but it could seek to rebut the presumption by submitting written argument to the OCC.  A bank with less than $100 billion in assets is presumed not to satisfy the standard.

The authority that the OCC specifically cites in support of the fair access proposal is 12 U.S.C. § 1, which was amended by the Dodd-Frank Act to describe the agency as “charged with” assuring fair access to financial services by the institutions and other persons subject to its jurisdiction, and 12 U.S.C. § 93a, which authorizes the OCC to prescribe rules to “carry out the responsibilities of the office.”  The comment period for the proposal closes on January 4, 2021.

Photo of Karen Solomon Karen Solomon

Karen Solomon advises clients on a broad range of financial services regulatory matters. Karen’s extensive experience working in agencies that supervise national banks and Federal savings associations enables her to offer an informed, practical approach to addressing regulatory issues.

Before joining Covington, Karen …

Karen Solomon advises clients on a broad range of financial services regulatory matters. Karen’s extensive experience working in agencies that supervise national banks and Federal savings associations enables her to offer an informed, practical approach to addressing regulatory issues.

Before joining Covington, Karen served as the Acting Senior Deputy Comptroller and Chief Counsel at the Office of the Comptroller of the Currency (OCC). In that role and in her prior role as Deputy Chief Counsel, Karen’s work included developing and drafting regulations and advising on issues involving bank powers, structure, compliance, and preemption as well as on licensing, legislative, and litigation-related matters. She had a leadership role in key OCC initiatives, including the agency’s implementation of the Volcker rule, recent fintech chartering initiative, and federal preemption efforts. She also worked extensively with other Federal agencies on joint or collaborative regulatory projects. Karen joined the OCC in 1995. Before that, she was Deputy Chief Counsel at the Office of Thrift Supervision (OTS) and, earlier, held senior positions at the OTS’s predecessor agency, the Federal Home Loan Bank Board.