US banks stay away from sensitive customers

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Under fire from various regulators, US banks increasingly shun clients involved in activities that are legal but could attract government scrutiny, according to executives, consultants and lawyers.

Banks are sacrificing the income of a wide range of customers, from marijuana dealers and payday lenders to virtual currency companies, online players and people who have been convicted of a crime, to play it safe.

“In an age where banks already suffer from a trust deficit, the last thing they want to do is venture into things that may be perceived as risky, unpleasant or damaging to the social fabric,” said Andy Schmidt, research director at consulting . CEB TowerGroup company in Arlington, Va.

The decision to pull out comes at a time when banks are struggling with tepid demand for loans, low interest rates and a tangle of new regulations.

While the temptation to deal with certain companies can be high, some banking industry veterans said, it is not worth provoking regulators or adding more resources to ensure clients are complying with industry standards. And in the banking industry in general, such pullbacks are not likely to affect earnings.

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