Last week, The Office of the Comptroller of the Currency (OCC) finalized a rule that would make it illegal for any financial institution regulated by the OCC with over $100 billion in assets to reject potential customers for any reason other than financial risk.

In essence, the new rule would no longer allow banks to reject giving out loans to industries that have practices they do not agree with.

The agency proposed the rule roughly two months ago, and it was met with great controversy, with the most common being whether or not financial institutions should be able to deny certain customers like the ammunition, oil and gas, and payday lender industries from receiving financial loans.

Former Acting Comptroller Brian Brooks, who left the agency Thursday, shares in defense of the new rule, “As Comptrollers and staff in previous administrations have made clear in speeches, guidance, and testimony, banks should not terminate services to entire categories of customers without conducting individual risk assessments.” Brooks adds, “It is inconsistent with basic principles of prudent risk management to make decisions based solely on conclusory or categorical assertions of risk without actual analysis. Moreover, elected officials should determine what is legal and illegal in our country.”

Critics and Supporters Argue over Meaning of Fair Access to Credit

The new ruling is built on the backbone of fair access to credit, financial services, and treatment of services per the OCC’s mission to uphold the 2010 Dodd-Frank Wall Street Reform law. Many Republicans have praised the new ruling as it will keep banks from being able to discriminate against whom they choose to work with. Brooks shared in defense of the rule that banning a banking institution's ability to reject loans from certain industries would create “fair access to financial services.”

Democrats, however, argue that this new rule misconstrues the intention of fair access to credit because "fair access" is meant to provide protection against discrimination in terms of race, income, and other socioeconomic factors.

North Dakota Sen. Kevin Cramer pushes back against the critics, explaining, "Fairness matters. Discrimination is not allowed in our society and big banks should not be an exception. No matter how important their services are, they do not have the right to create de-facto bans on legal businesses like energy producers and gun manufacturers." His state would stand to gain from the new ruling because of its status as the nation's biggest oil and natural gas producers.

John Court heads regulatory affairs at the Bank Policy Institute, and in a recent interview with NPR, he shares that the Trump administration scrambled to put the rule together before Biden's administration took over. While the incoming administration can certainly undo the rule, it will be very difficult. Court criticizes the ruling, saying, “It's a very poorly constructed rule that, in my view, is not well thought out, is clearly hastily conceived and hastily constructed.”

Greg Baer, the president and CEO of the Institute, also pushes back explaining how a governmental overreach on private banking businesses on this level could have unintended consequences. Bear shares, “The rule lacks both logic and legal basis, it ignores basic facts about how banking works, and it will undermine the safety and soundness of the banks to which it applies."

Court also shared that many banking institutions have moved toward so-called environmental social government frameworks (ESG). ESG guidelines make it so that banking institutions can have the flexibility to make decisions that impact the environment, racial equality, and other social issues. Having this rule finalized would keep banks from implementing ESG practices because they would have to lend out money for oil and gas projects that could potentially harm the environment as well as provide loans to gun manufacturers for assault-style rifle production.