In August 2025, the Small Business Administration issued guidance targeting "debanking," the practice of denying or terminating financial services based on a customer's political views, religious beliefs or involvement in controversial but legal industries. This directive, issued under Executive Order 14331 "Guaranteeing Fair Banking for All Americans," required SBA-participating lenders to review their policies, identify any potentially discriminatory practices, and submit compliance reports by Jan. 5, 2026. We recently asked Jacob Bennett, CEO and co-founder of Crux Analytics, to break down what the guidance means for credit unions and how they can prepare for further debanking-related regulatory actions down the road.
CU Times: For credit union leaders, what did the Jan. 5 deadline represent? And, what types of challenges has the guidance brought for credit union compliance teams?
Bennett: The deadline represented far more than a regulatory checkbox. The executive order has fundamentally reshaped how financial institutions must document, justify and defend every account decision they make. Credit unions participating in SBA lending programs must identify any potentially discriminatory policies and submit compliance reports. Non-compliance risks loss of SBA good standing, non-renewal of delegated authority and potential Department of Justice referral.
The difficulty confronting credit union compliance teams is not simply understanding what the rules prohibit. The real problem lies in demonstrating what they permit. NCUA Letter 25-CU-05, issued Sept. 25, 2025, explicitly eliminated ‘reputation risk’ from the examination and supervisory process. Examiners will no longer base supervisory concerns on reputation risk, nor will they engage in discussions about it during examinations.
Yet the removal of reputation risk creates its own documentation burden. Credit unions retain their obligations under the Bank Secrecy Act and anti-money laundering requirements. When a credit union terminates an account or denies services for legitimate BSA/AML concerns, that decision may still invite regulatory scrutiny if the member operates within what regulators might perceive as a ‘disfavored, controversial or politicized industry.’ The practical effect is that financial institutions must now convert abstract reputational concerns into concrete, measurable risk assessments backed by thorough documentation.
The reality extends beyond regulatory compliance. Small businesses already face constant economic uncertainty, from supply chain disruptions to policy whiplash. They need financial partners that can help them navigate unexpected challenges, not just process transactions. Credit unions have historically excelled at this relationship-based approach, understanding local market conditions and providing strategic guidance during volatile periods, but are still growing within the small business space. The debanking regulations simply add another layer of complexity during this crucial inflection point and in an environment where small business owners depend on their financial institution to help them see around corners.
CU Times: What kind of regulatory activity should credit unions expect in 2026 concerning debanking?
Bennett: Regulators will weigh debanking practices in licensing and supervisory decisions throughout 2026. The NCUA's proposed rulemaking, published Oct. 21, 2025, would bar the agency from pressuring credit unions to deny or terminate services based on members' political, social, cultural or religious positions. Comments were due Dec. 22, 2025, and final implementation is expected throughout 2026.
The OCC has already indicated in Bulletin 2025-22 that debanking practices will factor into licensing applications and CRA ratings for banks. Credit union leaders should anticipate similar considerations influencing NCUA supervisory decisions, merger applications and field of membership expansions in the coming year.
The Federal Register notice establishing EO 14331 defines ‘federal banking regulators’ to include the NCUA alongside the SBA and other agencies. By Feb. 3, 2026, all covered regulators must review supervisory and complaint data to identify institutions engaged in unlawful debanking, particularly on the basis of religion, with potential referrals to the Attorney General for civil action.
CU Times: What types of opportunities does the spotlight on debanking provide to credit unions, and what steps should they take to ensure a strong compliance posture?
Bennett: For credit unions that already prioritize relationship banking and member service over transactional efficiency, this regulatory environment presents a competitive advantage. Institutions that can demonstrate transparent, consistent, risk-based decision making will stand out as regulators scrutinize the broader financial services industry.
Credit unions possess a structural advantage in this environment. America's Credit Unions noted in its support of the NCUA's proposed rule that credit unions typically maintain member relationships regardless of political beliefs or viewpoints, while also ensuring that their ability to make independent risk assessments free from regulatory pressure is preserved. The cooperative model, built on the principle of sustained member relationships rather than transactional banking, naturally aligns with the executive order's intent to prevent discrimination based on personal views while allowing institutions to manage legitimate financial risks.
However, alignment in principle requires demonstration in practice. Rather than viewing these requirements solely as compliance burdens, forward-thinking credit unions can use them to strengthen their competitive position and member relationships. Credit union leaders should prioritize three immediate actions:
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Conduct a five-year look-back review of account terminations and service denials. The SBA's compliance form for institutions under $30 billion in assets requires a thorough examination of existing records, though it stops short of demanding formal attestation. Nonetheless, this review must be documented comprehensively.
- Update policies and training materials to ensure all adverse account decisions are supported by concrete, quantifiable risk factors specific to each individual client, as regulatory guidance requires, rather than generalized industry profiles or subjective reputational concerns.
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Establish clear audit trails that distinguish BSA/AML-driven decisions from any action that could be characterized as politically motivated. OCC Bulletin 2025-23 clarifies that banks must not use voluntary Suspicious Activity Reports to inappropriately share customers' confidential financial information. Credit unions should apply the same standard to their own SAR policies.
