FIRM Act
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Would prohibit all federal banking agencies from considering 'reputational risk' — the potential for negative publicity to harm a bank's standing — when regulating, examining, or supervising depository institutions and credit unions, and would require agencies to purge reputational risk from all guidance, rules, and examination manuals.
The bill is a direct response to concerns that agencies have used reputational risk reviews to pressure banks into cutting off legal businesses from financial services, a practice critics call 'Operation Choke Point.' If enacted, it would mark a significant rollback of one supervisory tool that federal banking regulators have applied for decades.
What this bill would do
What it would do
The bill would bar the FDIC, OCC, Federal Reserve, National Credit Union Administration, and Consumer Financial Protection Bureau from engaging in any activity related to reputational risk supervision of depository institutions and credit unions. Agencies would be required to remove all references to reputational risk — or any substantially similar term — from their guidance documents, rules, examination manuals, and similar materials. The prohibition would cover issuing supervisory findings or criticism, making ratings decisions, conducting examinations or data collection, and taking formal or informal enforcement actions based on reputational risk. One exception applies: agencies could still consider negative publicity related to transactions involving state sponsors of terrorism or foreign terrorist organizations.
The bill would not restrict banks' own discretion to choose their customers, so long as those decisions comply with existing law. It would not repeal any other supervisory authority that agencies hold. Each covered agency would have 180 days after enactment to submit a compliance report to the relevant congressional committees confirming implementation and describing internal policy changes made.
Key provisions
- 1Would require each federal banking agency to remove all references to reputational risk from its guidance, rules, examination manuals, and similar documents.
- 2Would prohibit agencies from establishing any rule, standard, or supervisory expectation related to reputational risk of a depository institution, whether binding or not.
- 3Would bar agencies from conducting examinations, assessments, or data collection related to reputational risk, and from issuing supervisory findings, ratings decisions, or enforcement actions based on it.
- 4Would exempt from the prohibition any reputational risk consideration tied to an institution's transactions with state sponsors of terrorism or foreign terrorist organizations.
- 5Would require each federal banking agency to report to Congress within 180 days confirming implementation and describing internal policy changes made.
Who would be affected
All federally supervised banks, savings institutions, and credit unions subject to examination by the FDIC, OCC, Federal Reserve, NCUA, or CFPB. Businesses in industries — such as firearms dealers, payday lenders, or cannabis-adjacent firms — that have claimed banks dropped them due to agency reputational risk pressure would benefit most. The five federal banking agencies themselves would face binding new limits on their examination and enforcement authority.
Why it matters
If enacted, federal banking agencies could no longer cite reputational risk when issuing examination findings, downgrading supervisory ratings, or taking enforcement actions against a bank. Industries that believe they were effectively cut off from banking through informal agency pressure would lose that specific supervisory lever. Banks would retain the legal right to choose their own customers, but agencies could no longer penalize them for the public profile of those customers.
What would change
Agencies directed to act
Effective dates
- Each agency's report to Congress confirming implementation due
Funding and costs
Congressional Budget Office estimate
CBO estimates that enacting the FIRM Act (H.R. 2702) would increase net direct spending and decrease revenues by insignificant amounts (each between -$500,000 and $500,000) over the 2026–2035 period.
CBO estimates the FIRM Act would have negligible budgetary effects: net direct spending — mandatory spending by agencies such as the FDIC — would increase by an insignificant amount over 2026–2035, primarily due to administrative costs at the FDIC. Revenues would decrease by an insignificant amount over the same period, because additional costs at the Federal Reserve would reduce its remittances to the Treasury. The bill contains a private-sector mandate (requiring regulated financial institutions to potentially pay higher fees), but CBO estimates the cost of that mandate would fall well below UMRA's annual threshold of $206 million; no intergovernmental mandates were identified.
How implementation would work
Each covered federal banking agency would need to conduct a comprehensive audit of all guidance documents, examination manuals, rules, and supervisory communications to identify and remove reputational risk language. No notice-and-comment rulemaking is required — the statutory prohibition takes effect directly on enactment. Within 180 days, each agency must submit a written report to the Senate Banking Committee and the House Financial Services Committee confirming compliance and detailing any internal policy changes. There is no designated enforcement mechanism if an agency fails to comply, beyond congressional oversight.
Legislative status & sources
Latest action
Placed on the Union Calendar, Calendar No. 131.
Official CRS summary
Show the CRS summaryHide the CRS summary
This bill prohibits the consideration of reputational risk by federal banking agencies when regulating, examining, or supervising a depository institution or credit union. The bill defines reputational risk as the potential for negative publicity or public attention to decrease confidence in the institution, lead to litigation, reduce revenues, or result in other adverse impacts to the institution.
Agencies must report on the implementation of this bill.
Legislative subjects
Banking and financial institutions regulation; Congressional oversight; Finance and Financial Sector; Financial services and investments; Government information and archives; Government studies and investigations
Committee report
H. Rept. 119-164