Contending that the Biden Administration’s investigation of Credova Financial LLC was an instance of politically motivated debanking, the CFPB is dropping its probe of the company.
“After reviewing the case, the Bureau has determined that this investigation exemplifies the type of weaponization against disfavored industries and individuals that President Trump and Acting Director Vought are committed to ending,” Mark Paoletta, chief legal officer of the CFPB wrote in a letter to James Giudice, general counsel and chief legal officer at PSQ Holdings, Credova’s parent company.
Paoletta continued, “In sum, this investigation was not aimed at protecting consumers, but at suppressing activities protected by the First and Second Amendment. This investigation also represents precisely the kind of unconstitutional targeting that President Trump prohibited in his Executive Order on debanking.”
President Trump has issued an Executive Order directing banking agencies to adopt policies to ensure that financial institutions do not use reputational risk as a basis for restricting access to banking services—a process known as “debanking.”
Trump, in the order, stated that financial institutions have engaged in unacceptable practices to restrict law-abiding individuals and businesses from access to financial services on the basis of their political beliefs or lawful business activities. He said some financial institutions targeted conservatives and those on the political right following the events at the U.S. Capitol on January 6, 2021.
Banking regulators have said they are adjusting guidance and regulations to ensure that debanking has ended. And Rep. Andy Barr, R-Ky., has said he will introduce legislation codifying Trump’s Executive Order.
Credova has said that 90% of its business comes from shooting sports and outdoor recreation sectors. It said it provides point-of-sale financing to outdoor recreation merchants and the firearms industry.
Paoletta said the record of the investigation demonstrates that it was conducted in a biased manner that targeted the company’s exercise of its constitutional rights. He said that in the early stages of negotiations the Bureau’s staff said that Credova should consent to cease leasing firearms as part of its business.
“The Bureau’s demands in its proposed settlement agreement unmistakably appear targeted at shutting down Credova’s firearms business through crushing monetary penalties and arbitrary injunctive restrictions,” Paoletta wrote.
He alleged that after a period of inactivity and allowing evidence to go stale, the CFPB ratcheted up its probe via a proposed consent decree submitted to the company on December 3, 2024, shortly before President Biden left office.
Paoletta said the date was the same day that Public Square, Credova’s parent company, announced the addition of Donald Trump Jr. to its board of directors. The CFPB then pressured Credova to settle before the inauguration of President Trump, he added.
“I am glad that Credova had the fortitude to resist that pressure,” Paoletta wrote.
“The Bureau confirmed what we have always known: the investigation was biased, targeted lawful commerce, and designed to suppress constitutionally protected activity rather than protect consumers,” the company said, in a blog post.
The Washington Post reported that there have been more than 50 complaints filed against Credova in the CFPB’s database. Many of the complaints relate to debt collection practices, the Post reported. The Post also reported that the company has a record of consumer complaints and settlements over state consumer protection violations,
The news organization also reported that the company and the California Department of Financial Protection and Innovation entered into a consent order in 2024 to resolve claims that the firm failed to provide details about possible third-party convenience fees.
And in 2021, the company and another Nevada-based finance firm reached a settlement with the Massachusetts attorney general’s office to resolve claims that they illegally leased dogs in violation of the state’s consumer protection law, according to the Post.
We have been following debanking issues for many years on our blog and podcast show. Click this link to listen to a podcast show consisting of a debate about the wisdom of a few state debanking statutes. Click this link to listen to a podcast about “Operation Chokepoint,” a former government initiative to discourage banks from doing business with payday lenders. Click this link for a discussion of reputational risk.
On September 24, we will hold a webinar, “A New Era for Banking: What President Trump’s Debanking Executive Order and Related State Laws Mean for Financial Institutions, Government, and Banking Customers.” This is a must-attend event for officers, directors, legal and compliance professionals at financial institutions and those working for financial regulators.