Several payday lenders recently resolved litigation against the FDIC that alleged that the FDIC had pressured banks to terminate their customer deposit account relationships based on reputational concerns. As part of the settlement, the FDIC released: 1) a statement regarding its internal policies and procedures for when it recommends termination of a customer’s deposit account; and 2) a letter from the FDIC’s Deputy General Counsel to the payday lender plaintiffs’ counsel acknowledging that certain FDIC employees acted in a manner inconsistent with FDIC policies. Both documents are available here.
The documents note that “regulatory threats, undue pressure, coercion, and intimidation designed to restrict access to services for lawful businesses have no place at the FDIC,” and commits to additional training of examination employees before the end of 2019, which will cover examples taken from “Operation Choke Point.”
The FDIC statement emphasizes that it encourages financial institutions to take a risk-based approach to assessing individual customer relationships–taking into account compliance with applicable state and federal laws–and not to categorically deny services to customers without regard to risk. The statement also notes that the FDIC only recommends that a financial institution terminate a customer’s deposit account through formal procedures. If insured institutions are not effectively managing risks associated with deposit accounts, the FDIC may take action through a Report of Examination requiring thorough vetting and supervisory approval; recommendations to terminate accounts are not made through informal suggestions or criticisms.