The U.S. House has passed legislation to block federal banking regulators from requesting that financial institutions terminate a customer’s account without material reason and written proof.
The measure, HR 766, passed the House last Thursday when 10 Democrats joined 240 Republicans to pass the measure 250-169.
According to the text of the measure, the bill was intended “to provide requirements for the appropriate Federal banking agencies when requesting or ordering a depository institution to terminate a specific customer account, to provide for additional requirements related to subpoenas issued under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, and for other purposes.”
U.S. Rep. Blaine Luetkemeyer, a Missouri Republican, first introduced the legislation in 2014 in response to actions taken by the Federal Deposit Insurance Corporation and the Federal Reserve as part of “Operation Choke Point.”
“This legislation is straightforward by stating that federal banking agencies must put in writing any suggestion to terminate a customer’s banking account and by requiring agencies to define terms by which they regularly use in the examination process,” he said in 2014.
The legislation — the Financial Institution Customer Protection Act — would dictate that federal banking regulators can’t request or order that a financial institution terminate its banking relationship with a customer without material proof. Additionally, the bill requires federal banking agencies to define several terms to help “ensure that the Department of Justice’s broad interpretations of the law are limited and the original intent of the statue is restored,” according to the 2014 statement.
Operation Choke Point was an initiative of the Justice Department, announced in 2013, to investigate the business U.S. banks were doing with payday lenders and other companies likely to have higher risk for engaging in fraud and money laundering.
Gun rights and second amendment advocacy groups — including the National Rifle Association & the National Shooting Sports Foundation — have argued the initiative could be and has been used to influence banking institutions to terminate their relationships with firearms industry members.
According to the NSSF, who backed the bill, Luetkemeyer’s legislation would “help stem ‘Operation Choke Point’ abuses.”
And both the FDIC and the DOJ have investigated the actions of federal banking regulators under Operation Choke Point as a result of a letter sent by Luetkemeyer in 2014, and co-signed by 30 other legislators.
However, because it was unclear how many businesses, whether legitimate or fraudulent, were affected by the initiative, Luetkemeyer created a platform to allow businesses to share their Operation Check Point stories.
The measure still has to be considered and passed by the U.S. Senate.
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