To Carry Out EO, SBA Orders Its Lenders to Review and End Debanking Practices

On August 26, the US Small Business Administration (SBA) instructed its network of more than 5,000 lenders to “cease any politicized or unlawful debanking actions,” in direct response to President Donald Trump’s recent Executive Order (EO) 14331, “Guaranteeing Fair Banking Access for All Americans.”

The EO, issued on August 7, directs “Federal banking regulators,” including the SBA, to remediate past instances and prevent against future acts of politicized or unlawful debanking, which it refers to as the practice of withholding financial services on the basis of a customer’s or potential customer’s political, religious or lawful business activities with which the institution may disagree. The EO also requires the SBA, specifically, to provide notice to all lenders that participate in its loan guarantee programs of certain obligations the lenders must carry out.

Similar to the EO, in its letter to lenders, the SBA references past actions by the Obama and Biden administrations that allegedly unlawfully denied access to financial services on the basis of political, religious or disfavored beliefs, such as Operation Choke Point, and declares an end to such practices.

Requirements for SBA-backed lenders

By December 5, 2025, SBA-backed lenders must take the following actions:

• Identify past or current policies or practices that require, encourage or influence the lender to engage in politicized or unlawful debanking.
• Make reasonable efforts to identify, reinstate and provide notice to any previous clients of the lender or its subsidiaries denied service through a politicized or unlawful debanking action.
• Identify potential clients denied access to the lender’s financial services or payment processing services due to politicized or unlawful debanking, and provide notice of the denied access and the renewed option to engage in the services.

By January 5, 2026, each lender must also submit to the SBA a report addressing and demonstrating their compliance with the EO. Failure to carry out the above actions could result in a lender losing its good standing with the SBA and subject it to “punitive measures.” Such measures could include “non-renewal of delegated authority, a headquarters meeting, increased reporting, a Supervisory Letter, requiring a Board Resolution or Commitment Letter, and for intermediaries, withholding of technical assistance grant funds and, as identified in the Fair Banking Executive Order, referral to the U.S. Attorney General for appropriate civil action.”

Looking ahead

While the SBA’s letter marks the first public action by a Federal banking regulator in response to the debanking EO, we have already seen banking regulators, Congress and states take steps to eliminate “politicized and unlawful debanking,” such as by removing “reputational risk” references from bank examinations and guidance. We expect to see more policy and rule changes at the federal and state levels to effectuate the administration’s quest to hold accountable those financial institutions it believes wrongfully penalized customers or potential customers based on their political, religious or disfavored but lawful business activities.

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