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WSJ: Banks Staying Away From Controversial Customers

By    |   Thursday, 30 January 2014 07:14 AM

Banks are avoiding customers who are involved in activities that are legal, but may draw the attention of government officials, according to bank executives, consultants and lawyers, The Wall Street Journal reports.

Among the customers being rejected by banks are those selling marijuana, payday lenders, digital-currency concerns, Internet gamblers and convicted criminals.

Banks want to steer clear of any more legal burdens than they already face. And they don't want to have to spend a lot of money just to make sure it's OK for them to deal with certain clients.

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"In an era where banks are already suffering from a deficit of trust, the last thing they want to do is venture into things that can be perceived as risky, unsavory or detrimental to the social fabric," Andy Schmidt, research director at consulting company CEB TowerGroup, tells The Journal.

While demand for bank loans is stagnant, rejecting questionable customers won't have a major impact on profits, according to The Journal.

"Banks are making practical decisions about profitability versus risk exposure, and they are concluding this hill isn't worth the battle," Gerard Comizio, a partner who specializes in banking at law firm Paul Hastings, tells the paper.

Michael Tucker, CEO of Greenfield Co-operative Bank in Western Massachusetts, tells The Boston Globe that he said no to several medical marijuana-related companies that asked about setting up accounts.

He's worried not just about stores selling marijuana, but also about landlords who lease space to pot stores, warehouses or growers. If the bank offers mortgages to those landlords, their monthly payments could be deemed illegal drug money, Tucker notes.

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Banks are avoiding customers who are involved in activities that are legal, but may draw the attention of government officials, according to bank executives, consultants and lawyers, The Wall Street Journal reports.
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2014-14-30
Thursday, 30 January 2014 07:14 AM
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