Senator Tim Scott’s FIRM Act would stop regulators from debanking American citizens

Senate Banking Committee Chairman Tim Scott (R-S.C) has introduced a bill to prevent regulators debanking disfavored groups. The Financial Integrity and Regulation Management (FIRM) Act is a key step in addressing the politicization of the American financial system stretching back to the Obama Administration.

Using the justification of risk management, banks have come under increased scrutiny by regulators to sever ties to industries which may pose a “reputational risk.” In recent years, individuals, businesses, and other groups have raised concerns about being “debanked” or losing access to financial services due to political targeting.

Using the nebulous pretext of “reputational risk,” politically-motivated regulators in the Obama and Biden administrations have targeted disfavored groups such as firearms dealers, payday lenders, and crypto dealers for debanking. Without access to the financial system, these industries are unable to access capital, process electronic payments, or safely deposit earnings. In short, regulators targeted them for destruction while freezing individuals out of the financial system.

The FIRM Act would seek to end this by removing “reputational risk” as a category under federal supervision. Without this pretext, federal regulators will no longer be able to arbitrarily debank American citizens without suspicion of a genuine crime.

As Senator Scott put on Mornings with Maria on Fox News this morning:

Eliminating reputational risk is the way we allow our banks to make decisions on credit worthiness, not on fear of America’s regulators…what a regulator is able to do with reputational risk is to say that the institution may lose market cap because their banking industries that may cause reputation – loss of their positive reputation – in the marketplace. It’s just as we say in South Carolina, hogwash. It’s merely a weaponization of their rules.

ATR led a coalition letter last month calling on Congress to address the issue of regulators using the flimsy pretext of “reputational risk” to freeze individuals and industries out of the system for political reasons. This coincided with Senator Scott leading a Banking Committee hearing exploring how this supervisory category is abused.

Senator Scott successfully assembled a broad coalition to support the bill, including every Republican member of the Banking Committee, industry stakeholders, and members of the State Financial Officers Federation.

ATR is proud to add itself to the list of supporters.