The bank typically contacts the company with short notice, somewhere around thirty days is the average. It comes in a phone call. Nothing is written down by the bank that can create a paper trail that the denial was based on arbitrary prejudice against a company. The termination letters say only that on such and such a date all accounts will be closed, any outstanding fees deducted from balances, and cashier’s checks will be mailed to the former customer. No regrets. No goodbyes. This is gaslighting, the business edition.
Cloak and Dagger Bullying
It is a dark, murky, under the table world when a bank decides to cut off lending, credit and services to a firearms company. It leaves companies bullied, fearful and gun shy. Even after finding a new banker, which typically takes three to four attempts, their lawyers counsel flying low to avoid the radar.
Company officers interviewed for this article have shared their tales of betrayal. It’s all off the record. They are unwilling to air their grievances in public. They fear for themselves. They also fear for their new banker becoming the target of social media’s viral activism.
Between the notice and the end date, the company embarks on a journey looking for a new bank. Their healthy balance sheets, strong income statements, robust sales flowing through their merchant services accounts taking in orders over the phone and online, and payroll services all looking for a new home. These are the characteristics of businesses that US commercial banks should be competing to add to their client book.
But the companies quickly find that its not that easy to open new accounts; not even at banks that they had formerly done business with. The branch manager may be happy to sign up the company. But as soon as the account is passed up the line, risk managers at the corporate level intercede. A game of questions to which answers only raise more questions begins slowly wearing down the company’s patience.
Basically, the bank wants the company to decide to go away without having to say no. Once again, it is all verbal. Nothing gets written down that might implicate the bank that it is engaging in unfair business practices. All the while, the clock counts down to the day when the company has merchant service to process orders at points of sale or online, no way to pay employees, not even a checking account.
These days, gun companies mostly rely on each other to find bankers who will quietly take their business. But they must never be named. These banks don’t advertise that they want the business. They are nearly impossible to find unless you know someone who will refer you in the same way people found speakeasies during Prohibition.
Sadly, criminal cartels probably have an easier time laundering money than legitimate businesses in disfavored industries doing millions of dollars of legal business have obtaining the lending, credit, and services they deserve.
It’s Getting Worse
It’s important to note that the banks know they are skirting the law here. The issue of fair access to bank services was settled in rules laid down in 2015 at the end of Operation Chokepoint, an initiative that denied banking services to companies was declared defunct. But some banks continued the practice setting up a “Banking vs. the Second Amendment” fight that I wrote about in January 2020.
As recently as July 2020, the practice continues with banks quietly carrying on with their maximize plausible denial methods.
Wells Fargo Risks Reputation Over Private “Chokepoint” Policy Against Gun Industry