Credit unions may have recently received a letter from the Small Business Administration (SBA) related to President Donald Trump’s August 7 executive order, “Guaranteeing Free and Fair Banking for All Americans.”
In August, the SBA sent letters to more than 5,000 lenders directing them to ensure they are not “debanking” individuals or businesses based on political, religious, or ideological beliefs—either independently or at the direction of federal regulators. The SBA also instructed lenders to reinstate any customers who may have been wrongfully denied access to financial services on these grounds.
The executive order further directs federal banking regulators to remove references to “reputation risk” from their supervisory materials, identify financial institutions with policies or practices that may have facilitated politicized or unlawful debanking, and take appropriate remedial action.
Following its initial August letter, the SBA released a model form on September 30 to assist smaller financial institutions with those with less than $30 billion in assets in responding to the earlier communication. The form is designed to help institutions demonstrate compliance with the executive order’s directive to identify and address any prior “debanking” actions.
Although the model form was developed at the request of community banks, the SBA’s September 30 letter also referenced “other small lenders,” suggesting that credit unions may use the form as well.
For state chartered, privately insured credit unions, the SBA form was primarily intended for institutions supervised by federal banking regulators to support simplified compliance. However, the information being requested appears consistent with what is required of federally insured credit unions, and using a similar response format may be appropriate.
The SBA inquiry goes beyond simple data collection, as the agency is requesting confirmation of practices that are now being characterized as potentially wrongful and may apply retroactively to actions taken before the executive order. Any information provided could be used in potential enforcement actions.
Therefore, credit unions should consult with their legal counsel before submitting any response to the SBA letter or model form to ensure their submission is accurate, appropriately limited in scope, and consistent with legal guidance.
California’s Credit Unions and Nevada’s Credit Unions continue to call on the SBA for better, clearer guidance and direction regarding the recent letters sent to credit unions about the president’s Executive Order on preventing “debanking” for politicized or unlawful practices.
For more information, email Lisa Quaranta.
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Using the above phone number and email address, you can gain access to a knowledgeable team that’s ready to address all your credit union’s compliance inquiries — promptly and efficiently. With the Compliance Hotline, you can proactively respond to impromptu questions and issues by getting clarity and insight on technical topics that normally slow you down. We want to help you unlock the full potential of your League membership by leveraging the resources and support you need to navigate the complex world of compliance effortlessly. We’re ALWAYS just a phone call or email away!
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For more information, email Lisa Quaranta.
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