The Financial Institution Customer Protection Act, H.R. 766, would establish requirements for federal regulators to request a bank to close any customer account, except in some cases of national security.

In order to do so federal regulators would need to submit a written request to the bank with an explanation of why such termination is needed. It specifies that regulators must have a material reason not based solely on the reputation risk of the account holder. The bill would also require federal banking agencies to report the number of accounts they requested to be closed each year and the legal authority with which they did so.

The bill passed the House with a partisan 250–169 vote. 240 of the supporting votes were cast by Republicans, and all opposing votes were cast by Democrats. The President has threatened to veto the bill if it were to pass in the Senate.

Why is it partisan?

H.R. 766 characterizes a typical disagreement over government intervention. Republicans argue that too much federal authority will result in an abuse of power, while Democrats argue that increased regulation is necessary to prevent financial crimes.

House Republicans explain Operation Choke Point, a Department of Justice (DoJ) initiative to prevent businesses believed to have committed consumer fraud from accessing the financial system. According to House Republicans, the DoJ “identif[ies] merchants that pose a ‘high risk’ for consumer fraud, reportedly, without regard to whether or not these merchants were operating their businesses legally,” leading to instances of banks shutting down accounts of legal businesses.

Democrats argue that H.R. 766 would restrict federal ability to prevent money laundering and financial fraud. In its veto threat, the White House wrote that “Requiring Federal banking agencies to satisfy a written materiality requirement is unnecessary, overly burdensome, and could impede the Federal banking agencies’ ability to ensure financial institutions comply with important regulatory obligations.” The White House also noted that a written explanation could disclose sensitive information.