The Scaffold Initiative submitted this supplementary comment on the Federal Reserve's proposed rule prohibiting the use of reputation risk as a supervisory tool. We strongly support the proposed rule and highlight a downstream consequence the Board should consider: when fintech and AI service providers are debanked — denied banking services not because of unlawful activity, but because an examiner flagged them as a “reputational risk” — the 28 million sole proprietors who depend on those providers lose access to invoicing, payment processing, marketing, bookkeeping, and lending tools that sustain their livelihoods. Debanking compounds existing barriers for sole proprietors in underserved communities who are already more likely to be unbanked or underbanked.
SUBJECT: Public Comment on Proposed Rule — Prohibition on Use of Reputation Risk or Other Supervisory Tools to Encourage or Compel Banking Organizations to Engage in Politicized or Unlawful Discrimination
Submitted by: The Scaffold Initiative | thescaffoldinitiative.org | policy@thescaffoldinitiative.org
Submitted to: Board of Governors of the Federal Reserve System, Attn: Benjamin W. McDonough, Deputy Secretary, 20th Street and Constitution Avenue NW, Washington, DC 20551
Date: April 1, 2026
Re: Docket No. R-1884, RIN 7100-AH17
Dear Members of the Board:
The Scaffold Initiative respectfully submits this supplementary comment in response to the proposed rule published on February 26, 2026, which would prohibit the use of reputation risk as a supervisory tool.
The Scaffold Initiative is a Wyoming 501(c)(4) social welfare organization (EIN 41-4911679) dedicated to AI literacy and workforce development for sole proprietors, freelancers, and independent workers in underserved communities. We provide training and advocacy to help the more than 28 million sole proprietors in the United States — disproportionately Black, Hispanic, and veteran-owned businesses — integrate artificial intelligence tools into their business operations.
We strongly support the proposed rule and write to highlight a downstream consequence of reputation risk-driven debanking that the Board should consider: when fintech and AI service providers are debanked, the sole proprietors and small business owners who depend on those providers' tools lose access to the technology that sustains their livelihoods.
The sole proprietor economy operates on a technology stack that is fundamentally different from traditional small business infrastructure. A sole proprietor in an underserved community typically does not have a dedicated accountant, a marketing department, or a compliance officer. Instead, they rely on AI-powered tools for:
When the providers of these tools are debanked — denied banking services not because of unlawful activity, but because an examiner flagged the fintech company as a “reputational risk” — the sole proprietors who depend on those tools bear the cost. The fintech company may be able to find an alternative banking relationship (eventually). The sole proprietor in rural Mississippi or the South Side of Chicago who relied on that platform to run their business cannot wait.
Sole proprietors in underserved communities already face significant barriers to financial access. They are more likely to be unbanked or underbanked. They are more likely to operate in cash-intensive industries. They are more likely to lack the credit history that traditional banks require. Fintech and AI tools have begun to close these gaps — but only when the providers of those tools can maintain stable banking relationships.
Reputation risk as a supervisory tool has systematically undermined this progress. When a bank examiner flags a fintech company's industry as reputationally risky, the resulting debanking cascades through the small business ecosystem. Payment processing stops. Lending platforms freeze. The sole proprietor is left with the same barriers that existed before the technology arrived — but now without the tools they had built their business around.
We urge the Board to adopt the proposed rule and to recognize in the final rule's preamble that the elimination of reputation risk from supervision will benefit not only the directly affected financial institutions and technology companies, but also the millions of sole proprietors and small business owners in underserved communities who depend on a stable fintech ecosystem to operate their businesses.
The Board should also consider coordinating with the Small Business Administration, which has been directed under Executive Order 14331 to notify lenders regarding the reinstatement of debanked clients, to ensure that sole proprietors displaced by debanking-related service disruptions have a clear path to restored access.
Respectfully submitted,
Ricky Tucker
Executive Director, The Scaffold Initiative
policy@thescaffoldinitiative.org
thescaffoldinitiative.org
Reputation risk-driven debanking occurs when a bank examiner flags a company — often a fintech or AI service provider — as a “reputational risk,” leading the bank to deny or terminate banking services. This happens not because of unlawful activity, but because the examiner considers the company's industry or business model to be reputationally risky.
Sole proprietors rely on fintech and AI tools for invoicing, payment processing, marketing, bookkeeping, and access to capital. When the providers of these tools lose their banking relationships, the tools stop working — and the 28 million sole proprietors who depend on them are left without the technology that sustains their livelihoods.
Sole proprietors in underserved communities are more likely to be unbanked or underbanked, operate in cash-intensive industries, and lack the credit history traditional banks require. Fintech and AI tools have begun to close these gaps, but debanking removes the very providers that were reaching these communities.
We urge the Federal Reserve to adopt the proposed rule prohibiting reputation risk as a supervisory tool, recognize the downstream benefits for sole proprietors in the final rule's preamble, and coordinate with the Small Business Administration to ensure displaced sole proprietors have a clear path to restored fintech access.