We deny an applicant’s request to open a deposit account for two reasons: (1) if the applicant is outside of our market area, or (2) if we receive a negative ChexSystems report. Do banks deny deposit account requests for any other reasons?

We do not have access to data on our members’ reasons for denying deposit accounts, but a few examples we have seen are denials for failing to meet certain qualifications for a particular account type (such as a minimum deposit amount or special qualifications for health savings accounts) and one instance of a denial due to a customer’s known gambling habit. Also, when Illinois law authorized medical and, later, recreational cannabis use, some of our members adopted policies of not banking marijuana-related businesses because it remains illegal under the federal Controlled Substances Act to manufacture, distribute, or dispense marijuana.

Also, we are not aware of any federal or Illinois law that expressly prohibits banks from denying deposit account requests for specific reasons, but we do not recommend leaving account denials to frontline employees’ discretion due to CRA concerns and other risks.

Note that the FDIC “encourages institutions to take a risk-based approach in assessing individual customer relationships rather than declining to provide banking services to entire categories of customers” and does not discourage financial institutions from providing banking services to any category of customers if they can properly manage the relationship and mitigate associated risks. Additionally, the CFPB’s Supervision and Examination Manual suggests that fair lending standards also could be applied to deposit accounts, meaning that denying deposit accounts on a prohibited discriminatory basis could be considered a discriminatory unfair, deceptive, or abusive act or practice.

For resources related to our guidance, please see:

FDIC FIL-5-2015, Statement on Providing Banking Services (January 28, 2015) (“Accordingly, the FDIC encourages institutions to take a risk-based approach in assessing individual customer relationships rather than declining to provide banking services to entire categories of customers, without regard to the risks presented by an individual customer or the financial institution’s ability to manage the risk. Financial institutions that can properly manage customer relationships and effectively mitigate risks are neither prohibited nor discouraged from providing services to any category of customer accounts or individual customer operating in compliance with applicable state and federal law.”)

CFPB Supervision and Examination Manual: UDAAPs, page 10 (March 2022) (“A discriminatory act or practice is not shielded from the possibility of being unfair, deceptive or abusive even when fair lending laws do not apply to the conduct. For example, not allowing African-American consumers to open deposit accounts, or subjecting African-American consumers to different requirements to open deposit accounts, may be an unfair practice even in those instances when ECOA does not apply to this type of transaction.”)

CFPB Supervision and Examination Manual: UDAAPs, pages 13–14 (March 2022) (“Through discussions with management and a review of available information, determine whether the entity’s internal controls are adequate to prevent unfair, deceptive or abusive acts or practices. Consider whether: . . . (l) The entity’s policies, procedures and practices do not target or exclude consumers from products and services, or offer different terms and conditions, in a discriminatory manner.”)

CFPB Supervision and Examination Manual: UDAAPs, pages 15–16 (March 2022) (“Through a review of marketing materials, customer agreements, and other disclosures, determine whether, before the consumer chooses to obtain the product or service: . . . Marketing or advertising do not improperly target or exclude consumers on a discriminatory basis, including through digital advertising.”)