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H.R. 2706 (115th): Financial Institution Customer Protection Act of 2017

H.R. 2706 establishes requirements for the termination of bank accounts to prohibit federal banking regulators from formally or informally suggesting, requesting, or ordering a depository institution to terminate either a specific customer account, or group of customer accounts, except in specific circumstances affecting national security. This provision is designed in an attempt to prevent federal regulators from encouraging banking institutions to close any entity’s bank account without due process.

The bill would also require federal banking agencies to issue an annual report to Congress that describes the number of customer accounts the agency requested or caused to be closed and the legal authority on which the agency relied.

“Operation Choke Point” was a law enforcement initiative launched by the Department of Justice’s (DOJ) Consumer Protection branch during President Obama's Administration to combat consumer fraud by ‘choking off’ businesses alleged to have committed fraud from access to the financial system.

Rather than investigate and prosecute the merchants alleged to have committed fraud, the DOJ partnered with the Federal Deposit Insurance Corporation (FDIC) to identify merchants that may pose a ‘high risk’ for consumer fraud, despite the fact that many may be operating their businesses legally. Through this process, the FDIC equates legitimate and regulated activities like coin dealers and firearms and ammunition sales, with illegal activities like Ponzi schemes, debt consolidation scams, and the sale of drug paraphernalia. Legal businesses identified by the FDIC as ‘high risk’ have seen their accounts terminated by banks seeking to avoid civil and criminal liability.

Last updated Dec 13, 2017. Source: Republican Policy Committee

The summary below was written by the Congressional Research Service, which is a nonpartisan division of the Library of Congress, and was published on Dec 11, 2017.

Financial Institution Customer Protection Act of 2017

(Sec. 2) This bill specifies that a federal banking agency may not request or order a depository institution to terminate a customer account unless: (1) the agency has a valid reason for doing so, and (2) that reason is not based solely on reputation risk.

Valid reasons for terminating an account include threats to national security and involvement in terrorist financing, including state sponsorship of terrorism.

A federal banking agency requesting a termination must provide the depository institution with notification and justification.