FTC Issues "Debanking" Warning Letters to Payment Industry

Recent regulatory pronouncements have reflected heightened scrutiny of the practice commonly referred to as "debanking" – the denial or termination of services for a financial institution customer. For many years, financial institutions, feeling pressure from their regulators, have terminated certain customer relationships due to concerns over the risk presented by these customers, including reputational risk or, more concretely, anti-money laundering (AML) or anti-fraud concerns. And, generally, customer agreements provide financial institutions with very broad discretion to terminate customer relationships.

The Debanking Controversy

Debanking has attracted increasing controversy, including media reports of customers being confused and upset over account terminations without clear explanation. Financial institutions, meanwhile, have been reacting to perceived pressure from regulators who may punish them for maintaining relationships with problematic customers, compounded by concerns about disclosing sensitive internal investigative information.

If a financial institution believes a customer has been involved in illicit activity, it can file suspicious activity reports (SARs). But if the problematic activity continues, the institution must determine if it can or should continue the relationship or terminate it due to concerns about facilitating illicit transactions. Moreover, under criminal prohibitions imposed by the Bank Secrecy Act (BSA), the institution cannot disclose to the customer that it filed a SAR or reveal the information underlying its decision to file a SAR and close the account.

Though a financial institution cannot legally terminate a customer relationship on a prohibited ground such as race or religion, financial institutions are neither government actors subject to the First Amendment nor public utilities. Like any other entity in the financial system, they necessarily make business decisions about whom they choose to transact with. This discretion is particularly significant given the role federal regulators and law enforcement have imposed on financial institutions as "gatekeepers" to the U.S. financial system, charged with ensuring that bad actors do not misuse it.¹

The FTC Warning Letters: Expanding Debanking Pushback to the Payments Industry

The FTC chair issued warning letters on March 26, 2026, to four major financial infrastructure platforms and payment providers – two card networks and two payment processors. The warning letters cite the FTC's enforcement authority under Section 5 of the FTC Act, which prohibits unfair or deceptive acts or practices – that is, representations that are material and likely would mislead consumers acting reasonably under the circumstances. None of the letter recipients is a bank.²

According to the FTC, "Companies that deplatform consumers or deny them access to financial products or services may violate the FTC Act if their actions are contrary to consumers' reasonable expectations or if their practices cause substantial injury not reasonably avoidable by consumers and not outweighed by countervailing benefits to consumers or competition." The letters referred to allegations that the institutions had restricted customer access based on ideological or religious grounds.³

The letters also referenced the institutions' terms of service, including provisions addressing eligibility requirements, grounds and procedures for account suspension or termination, prohibited conduct, and content and dispute resolution. The letters presumably invoked the terms of service to suggest that a Section 5 claim could be brought if the written terms are deceptive compared to the institutions' actual practices.

One of the warning letter recipients is Stripe Inc. The Stripe warning letter is notable in that it references the representation in its terms of service that Stripe "does not discriminate based on political affiliation or viewpoints," suggesting that the FTC may view any deviation from this representation as potentially deceptive. It is also notable that, unlike the other warning letters, the Stripe letter is specifically referenced in the letters to the card networks.

The letters to the card networks also warned against "turn[ing] a blind eye when their financial institution members debank consumers," suggesting the FTC may pursue enforcement against card networks for facilitating member institutions' debanking practices. Finally, the letters warn that taking adverse action against consumers in response to the laws, demands or expected demands of a foreign government may also violate the FTC Act.

The (Recent) Past Is Prelude

Although the focus on debanking in the payments industry is new, the FTC's warning letters did not occur in a vacuum. They represent an expansion of recent scrutiny of debanking in the banking sector into the payment processing and financial infrastructure sectors. On August 7, 2025, President Donald Trump signed Executive Order (EO) 14331, titled "Guaranteeing Fair Banking for All Americans," which serves as the foundational policy directive. The EO prohibits "politicized or unlawful debanking" and directs federal agencies to ensure that financial institutions base account-level decisions on objective, individualized risk assessments rather than on a customer's ideology, public profile or association with (perceived) controversial but legal activities. The EO characterized certain industry practices as "unacceptable," citing the exclusion of law-abiding individuals and businesses from the financial system based on their "political affiliations, religious beliefs, or lawful business activities."

Accordingly, on September 8, 2025, the Office of the Comptroller of the Currency (OCC) indicated that a bank's record on debanking would be considered in licensing determinations and Community Reinvestment Act performance ratings, linking fair access considerations to supervisory expectations. The OCC also cautioned that BSA reports such as SARs should not be used to justify account closures if the underlying basis for the decision to file the SAR is unrelated to legitimate AML concerns.

The OCC and Federal Deposit Insurance Corp. (FDIC) followed up October 30, 2025, with a joint Notice of Proposed Rulemaking Regarding Prohibition on Use of Reputation Risk by Regulators. If adopted, this proposed rule would prohibit the two agencies from taking adverse action against an examined institution or one of its employees on the basis of reputation risk. The proposed rule would also prohibit the agencies from requiring, instructing or encouraging an institution to close customer accounts or take other adverse actions based on a person or entity's political, social, cultural, or religious views or beliefs, as well as constitutionally protected speech or solely on the basis of politically disfavored but lawful business activities perceived to present reputational risk.

Finally, on December 10, 2025, the OCC published preliminary findings from its review of large banks' debanking activities. Summarizing the OCC's initial review of debanking activities at nine large national banks, the preliminary findings claimed that these nine banks "made inappropriate distinctions among customers in the provision of financial services on the basis of their lawful business activities by maintaining policies restricting access to banking services or requiring escalated reviews and approvals before providing certain customers access to financial services."

The preliminary findings identified the industry sectors subjected to restricted access as 1) oil and gas exploration, development or production in the Arctic, 2) coal mining or coal-powered plants, 3) firearms, firearms accessories or ammunition manufacturing or distribution, 4) private prison construction or operation, 5) payday and payroll lending, consumer debt collection and repossession agencies, 6) tobacco or e-cigarette manufacturing, distribution or online retail, 7) adult entertainment, 8) political action committees and political parties, and 9) digital asset activities. The OCC concluded by noting that it is still reviewing thousands of consumer complaints "to identify instances of political and religious debanking, which it will report on in due course."

A "Whole of Government" Approach

The FTC warning letters strongly suggest that the current administration is taking a "whole of government" approach to the issue of terminating certain financial system customers. Although the warning letters are targeted to four specific payment infrastructure companies, they nonetheless send the same general message to the entire payments industry previously sent by the OCC and FDIC to the banking industry they regulate.

• This developing situation creates difficult issues for financial institutions, card networks and payment processors, which now face increasing government pressure regarding their choices about whom to do business with – including decisions based on reasons beyond traditionally prohibited factors such as race, ethnicity, gender or religion. Complicating matters further, financial institutions are highly regulated and can suffer civil or even criminal penalties for transacting with customers involved in illicit finance.
• Consider a financial institution contemplating terminating its relationship with a company in the adult entertainment industry due to concerns about human trafficking or the abuse of minors. Will it now hesitate because it fears being accused – by the customer, elements of the media or even a regulator – of improperly terminating that relationship based on a "mere" political opinion or value judgment? The debanking controversy will also inform internal debates at financial institutions between compliance and business teams regarding whether to onboard or retain potentially risky customers.
• Although documented decisions to terminate customers suspected of illicit activity should be defensible from both regulatory and contractual perspectives, financial institutions should expect their processes for detecting suspicious activity and financial crimes to come under increasing scrutiny, along with allegations of decision-making based on subjective bias.

If you have any questions, please contact the authors or another member of Holland & Knight's Consumer Protection Defense and Compliance Team.

Notes

¹ Though payment processors may not have the same specific "gatekeeper" regulatory pressure, they are each party to contracts that impose on them responsibilities and financial liability mirroring the legal obligations of financial institutions.

² Stripe has obtained a Georgia merchant acquirer limit bank charter for purposes of payment network membership but does not offer insured deposits or loans and is not federally regulated as a bank. 

³ Including Stripe's suspension of payment processing for the Trump presidential campaign after January 6, 2021.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.