Without ever mentioning its name, the Office of the Comptroller of the Currency on Friday issued a proposed rule that would put an end to Operation Choke Point by calling on banks to ensure provide access to services and capital based on the risks of the particular client and not make broad-based decisions that affect entire industries.
A copy of the OCC’s proposed Fair Access Rule can be accessed by clicking here.
Operation Choke Point was an initiative was launched under former president Barack Obama that sought to cut off access to financial services institutions for different types of companies, normally considered to be engaged in unsavory activities. However, banks were closing the accounts of legitimate companies, including debt collectors, as part of their round-up. The initiative was officially terminated in October 2017, but some employees at federal regulatory agencies have been accused of continuing to secretly carry out the operation’s mission.
Comments on the proposed rule are being accepted until Jan. 4, 2021 and can be made by going to www.regulations.gov and searching for Docket ID OCC-2020-0042.
“I commend the OCC for reaffirming that banks must not deny services or limit fair access to legal businesses and individuals,” said Sen. Mike Crapo [R-Ind.]. chairman of the Senate Banking Committee, in a statement. “Business lending decisions should be based on creditworthiness, rather than politics or political pressure. This has long been a priority of mine, especially since the inception of Operation Choke Point, and I appreciate the critically important work the OCC has done on this issue.”
While it appears that the reason behind the OCC’s decision has more to do with the oil and energy industries, it will hopefully also have an impact on companies in the accounts receivable management industry as well.
Under the proposed rule, institutions that are regulated by the OCC would be required to:
- Make each financial service it offers available to all persons in the geographic market served by the covered bank on proportionally equal terms
- Not deny any person a financial service the bank offers except to the extent justified by such person’s quantified and documented failure to meet quantitative, risk-based standards established in advance by the covered bank
- Not deny any person a financial service the bank offers when the effect of the denial is to prevent, limit, or otherwise disadvantage the person from entering or competing in a market or business segment or in such a way that benefits another person or business activity in which the covered bank has a financial interest
- Not deny, in coordination with others, any person a financial service the covered bank offers
