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De-banked: The threat of cancel culture in the financial industry

April 4, 2023

Cancel culture is a term that has gained a lot of attention in recent years. While this term is often associated with social media platforms and college campuses, disturbing events over the past few years in North America have indicated that the practice has entered the financial industry. 

This new materialization of cancel culture presents a chilling new set of threats to our freedom. Those banned from YouTube or Twitter can find other places to speak. Those banned from banking services, by contrast, have nowhere to turn. The threat to free speech and democratic participation is clear.

One such incident occurred in Canada in February 2022, where a group of independent truckers launched a strike in protest to COVID-19 vaccination mandates. 

One of the challenges that met the truckers in their strike came in the form of bank account suspensions from two major Canadian banks, RBC and CIBC. Bank officials claimed at the time that freezing the truckers’ accounts was necessary in response to “potential fraud and money laundering.” However, it quickly became the opinion of many politicans and members of the public that that these banks had done this in cooperation with the Canadian government’s efforts to squash the protest. 

In November 2021, WePay, a JPMorgan Chase subsidiary, terminated payment services for a high-profile event featuring a speech by Donald Trump Jr., which was scheduled to be held by the conservative Defense of Liberty PAC in Missouri. WePay accused the organization of violating its policy against promoting “hate, violence, racial intolerance, terrorism, the financial exploitation of a crime, or items or activities that encourage, promote, facilitate or instruct others regarding the same.” This led to the cancellation of the event, despite WePay’s eventual decision to reverse the termination. 

These are just a couple of many incidents in recent years where individuals or groups have been “canceled” by financial institutions. The fossil fuel and firearms industries, as well as businesses selling controversial materials, have also been targeted, with their payment services being terminated, resulting in many of them being unable to bounce back from the financial blow. 

The decisions to deny financial services to high-profile individuals or groups are often reversed after public outcry and threats of lawsuits, but what about individual people who lack the public standing to fight back? This is the problem. Finance is one of the most heavily regulated sectors of the economy, characterized by vague and varying regulatory standards that are articulated in no manual or published rule. 

One of the most prominent consequences of such regulations is that wealthy, established people and groups are much more equipped to stay afloat with a private team of lawyers and accountants than are young entrepreneurs and innovators. 

One regulatory obstacle that de-banked individuals face is an inability to find another financial institution to serve them. This is due to pressure from regulators whose standards can prevent entry by new banks that might be willing to serve unpopular individuals and industries. 

In an ideal world of perfectly free markets, cancel culture among big banks would be of little consideration as it would be easy to start a new bank. Unfortunately, the American economy can be less than perfectly free in some markets, where competition is dramatically distorted by a heavy blanket of regulation and barriers to entry. Indeed, banks today increasingly bear more resemblance to public utilities than truly private enterprises as they continue to rely on the government to bail them out of trouble and stave off new competition. 

The combination of thick regulation and high barriers to entry also raises concerns that the financial services industry could be vulnerable to social and political pressure to stifle unpopular speech through demonetization. It is naïve to expect these bans will not expand beyond the most egregious groups to many others. This emergence of cancel culture in the financial industry poses a significant threat to First Amendment rights and access to legal services. 

While canceled individuals or groups with public standing may be able to fight back, the same cannot be said for ordinary people who lack the means to do so. 

The heavy regulatory burden and high barriers to entry in the financial services industry make it difficult for de-banked individuals to find alternative providers, raising concerns about the potential for the industry to be used to stifle free speech and democratic participation. 

It is crucial for policymakers to take a realistic and nuanced approach to financial regulation, one that recognizes the potential for regulatory capture and the need to protect individual liberties and democratic values. 

ABOUT THIS AUTHOR

Andrew Reder is an honors BBA/MBA student who studies in the Economics and Management programs. Andrew’s alignment with The Northwood Idea and his passion for mentoring fellow students has encouraged him to lead several initiatives, including this publication and tutoring at the Northwood Timberwolf Learning Center. Andrew also holds a position as research scholar for the Robert C. and Janice S. McNair Center for the Advancement of Free Enterprise and Entrepreneurship, where he participates in invaluable research projects manifesting the importance of The Northwood Idea to the success of the economy and human flourishing. Andrew lives in Larkin Township, Michigan, with his parents and five siblings. Besides his campus leadership activities, he is heavily involved in his local township, where he serves on the Board of Review. When he has free time, he enjoys reading, fiction writing, and spending time with his family.

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