Newly promulgated “Fair Access Rule” could alter banks’ decision-making, but its future is uncertain

The US Office of the Comptroller of the Currency (the OCC) recently promulgated a rule that would effectively bar the nation’s largest banks from refusing services to otherwise sound companies for reputational reasons. The rule, which is commonly referred to as the “Fair Access Rule,” was issued on January 14, 2021, and is set to take effect on April 1, 2021.

The Fair Access Rule was proposed on November 20, 2020. Its inception followed a letter from the Alaska congressional delegation in June of 2020 expressing concerns that the nation’s largest banks would not lend to new projects related to oil and gas in the Arctic—allegedly for political reasons. The OCC then asked for data from several large banks, which showed that some banks had ceased to provide services to fossil-fuel industries over the past two years. In the rule’s proposal, the OCC also highlighted that banks are being pressured to withdraw services from certain healthcare providers, firearm manufactures, private correctional facilities, and farming operations.

To address these concerns and promote fair access to financial services, the OCC issued the Fair Access Rule. The Fair Access Rule would generally require a covered bank with more than US$100 billion in total assets to, among other things, justify any denial of services by showing a customer’s “quantified and documented failure to meet quantitative, impartial risk-based standards established by the bank in advance.”

The comment period for the proposal ended on January 4, 2021, and the OCC issued the final rule just 10 days later with an effective date of April 1, 2021. In the preamble to the final rule, the OCC notes that it received approximately 35,700 comments from various stakeholders, including “approximately 28,000 form letters collected by a single organization,” and that approximately 4,200 comments supported the proposal, while approximately 31,290 opposed it. The preamble also provides an overview of the comments, stating that supporting commenters “generally agreed that banks should not be allowed to discriminate against lawful industries, politicize access to financial services, or provide access to financial services based on subjective or category-based decision-making” while opposing commenters “generally challenged the legal, substantive, and procedural basis of the rulemaking and, among other issues, argued that banks have an appropriate role in addressing customer, shareholder, or other stakeholder concerns about matters of public policy.”

The impact that the Fair Access Rule will have on the banking industry is unclear, not least because the rule will face several hurdles before ever going into effect. The rulemaking was pushed along expediently by a Trump-appointed Comptroller, Brian Brooks, and the final rule was issued on Mr. Brooks’ last day as Acting Comptroller. Although it has now been finalized, Biden’s pick for Comptroller could elect to postpone the rule’s effective date and reopen the rulemaking process in an effort to modify or repeal the rule.

Postponing a rule’s effective date has become common practice for transitioning administrations, though the decision to do so is still reviewable under the Administrative Procedure Act (APA) given such decisions are considered substantive rulemaking subject to notice-and-comment requirements. In addition, the newly minted Congress could overturn the rule via the Congressional Review Act (CRA), though disapproval under the CRA would require both houses to pass a joint resolution, which may be unlikely given the evenly-divided Senate. If the Fair Access Rule does ultimately go into effect, then it could, and likely would, also face challenges by the private sector in court, including procedural arguments regarding compliance with the APA.

* Updated by the Authors on January 29, 2021.

On January 28, 2021, the OCC issued a short statement announcing that “it has paused the publication of its rule to ensure large banks provide all customers fair access to their services.” The statement explained that pausing the publication of the Fair Access Rule will give the next Comptroller time to review the rule as well as the public comments that the OCC received. In concluding, the statement noted that the “OCC’s long-standing supervisory guidance stating that banks should avoid termination of broad categories of customers without accessing individual customer risk remains in effect.” While the rule follows several other Biden administration freezes on various agency rulemakings, the OCC noted that pausing the Fair Access Rule’s publication was an independent decision.