The Federal Deposit Insurance Corporation (FDIC) revised it’s guidance to banking institutions concerning issues related to third party processors and lists of industry types indicated as “high risk”. For some reason unknown to this writer, “firearms” and “ammunition” were among the risky business types. Recently, some attention has been brought to the issue by the firearms industry, NSSF, NRA-ILA, firearms blogs, etc.
Industry members appear to have adjusted, choosing to take their business to organizations willing to do business with a highly regulated, legitimate industry. However, the FDIC guidance was disseminated 3 years ago; certainly most bank compliance officers are operating and suggesting policy under the guidance. So the entirety of the damage done, will never be known.
The FDIC, in it’s official explanation, states that interested parties had raised concerns that FDIC guidance placed legitimate regulated industries on the high risk lists, and in the interest of clarification, FDIC revised it’s guidance. FDIC’s FIL-41-2014, published July 28th, 2014 states (in part) the reasons for FDIC revision:
“The lists of examples of merchant categories have led to misunderstandings regarding the FDIC’s supervisory approach to TPPPs, creating the misperception that the listed examples of merchant categories were prohibited or discouraged…Accordingly, the FDIC is clarifying its guidance to reinforce this approach, and as part of this clarification, the FDIC is removing the lists of examples of merchant categories from its official guidance and informational article”
The current online version of the FDIC Supervisory Insights -Summer 2011 has already been updated; the “high risk” list removed. The guidance above also indicates that FDIC revised all other guidance that included the list of “high risk” merchants, and removed the lists.
However, it may be too little too late; as the common analogy “you can’t un-ring a bell” indicates. The firearms industry has already seen the effects of the “misperception” and is adapting to them. It’s likely that banks choosing to disengage from the firearms industry at this point will not suddenly open their arms to gun dealers and manufacturers, regardless of the revision by FDIC.
Also, as with any regulatory compliance specialist, bank compliance officers likely tend to be conservative in these matters, and understand that compliance entails much more than simply enforcing written directives. Anyone associated with regulatory enforcement will verify that written directives are generally always followed, and so are unwritten directives.
This isn’t bad news for the firearms industry in general, and members in particular who seek loans or other business relationships with banking institutions. However, the original guidance from FDIC went out in 2011, so it’s not unreasonable to ask questions about how bank policy has changed in the interim, and if those changes will effectively remain in place.
It’s evident that banks implemented specific policies regarding business relationships with firearms dealers, and others in the industry. For example, as recently as May 2014, The Washington Times reported that a Massachusetts gun dealer reported receiving notification from TD Bank that their business was “no longer welcome”. There are plenty of similar examples documented in various media outlets in which firearms dealers stated that they were refused loans (having good credit), or had their accounts closed suddenly and arbitrarily. It remains to be seen if the move by FDIC will change anything with respect to the way certain banks treat the firearms industry.
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