Capital One and JPMorgan Chase are taking a calculated risk by challenging Donald Trump in court rather than agreeing to settlements over allegations that they improperly closed accounts linked to him and his businesses.
Legal specialists and banking-industry figures say the decision to fight could expose the institutions to political pressure and scrutiny. Yet settling may create an even bigger problem by encouraging a wave of similar claims from other customers who say they were denied banking services for political reasons.
Trump and his businesses have accused the banks of shutting down their accounts because of their political views. Both institutions reject that allegation.
Capital One has said its decision followed an internal anti-money-laundering review. The bank has not accused Trump or his businesses of money laundering. Trump’s organization, however, has argued that the review was merely a justification for a politically motivated decision.
JPMorgan is facing a separate lawsuit filed by Trump in which he seeks at least $5 billion in damages. He alleges that the bank and CEO Jamie Dimon improperly closed his accounts as part of what he describes as an ideological campaign.
Why settling could create a larger headache
For the banks, the question is not simply whether to avoid a costly courtroom battle.
A settlement could potentially establish a roadmap for thousands of other customers to pursue similar claims, particularly as regulators investigate allegations of politically motivated debanking across the financial industry.
The Office of the Comptroller of the Currency is examining roughly 100,000 complaints involving alleged debanking, along with banks’ internal policies. The investigation includes major institutions such as Capital One and JPMorgan.
Legal experts say acknowledging that accounts were closed without adequate justification could expose banks to additional lawsuits, regulatory action and demands for compensation.
Todd Zywicki, a George Mason University law professor, said the uncertainty surrounding any settlement could itself become a major risk, particularly if it provides information that other potential claimants could use.
Debanking generally refers to a financial institution ending a customer’s access to banking services because of legal, financial, compliance or reputational concerns.
Trump has intensified pressure on Wall Street
Republican politicians have long accused major banks of discriminating against conservative groups and industries. Claims of so-called political debanking have involved religious organizations, cryptocurrency businesses, gun-related groups and fossil-fuel companies.
The dispute involving Capital One began with a lawsuit filed by Eric Trump and the Trump Organization. They alleged that the bank closed more than 300 accounts after the January 6, 2021, attack on the U.S. Capitol because of political bias.
Trump later escalated the battle by suing JPMorgan and Dimon. The lawsuit alleges that the bank acted unlawfully by closing accounts because of political considerations.
The banks have relied in part on the broad discretion normally contained in customer agreements governing account closures. Capital One has maintained that its actions followed its internal policies and regulatory guidance.
JPMorgan has dismissed Trump’s lawsuit as without merit and said it does not close accounts based on political affiliation.
Fighting may offer a stronger legal position
Banking analysts say the underlying strength of the institutions’ legal defenses will be central to their decision to continue fighting.
The broader legal landscape generally gives banks considerable latitude to terminate customer relationships, although financial institutions also operate under extensive regulatory requirements that can dictate when and why accounts are closed.
The cases also come as the Trump administration has confronted a number of institutions it considers hostile, including law firms, universities and media organizations.
Some organizations that resisted the administration in court have secured favorable rulings, while others that reached agreements have faced criticism over whether they were attempting to avoid confrontation.
For banks, the concern is particularly acute because a settlement involving alleged systemic conduct can have consequences well beyond a single dispute. Previous financial-industry settlements, including those stemming from the mortgage crisis and market-manipulation scandals, have sometimes been followed by years of additional litigation.
Deep pockets and heavyweight legal teams
Capital One and JPMorgan also have the resources to sustain lengthy legal battles.
JPMorgan has retained Jones Day, while Capital One is represented by Debevoise & Plimpton. Both are among the country’s prominent law firms.
The banks’ leadership may also be willing to accept the risks involved in taking on a sitting president rather than agreeing to terms that could have consequences across the wider financial sector.
For now, that leaves both institutions facing an unusual calculation: a courtroom fight may be politically uncomfortable, but surrendering could prove far more expensive in the long run.
