Imagine you go to the ATM or tap your credit card at checkout, only to find out your account has been frozen. You panic as you think about how to pay your bills. You won’t get much explanation from your bank — maybe a boilerplate letter or a customer service representative regurgitating a script.
One thing is clear, though. The bank is done with you and won’t tell you why.
This is called “debanking,” a hot-button issue in Congress. Rep. James Comer, R-Ky., the chair of the House Oversight Committee, has vowed to investigate debanking. And Rep. Andy Barr, R-Ky., has introduced the Fair Access to Banking Act to prevent debanking of law-abiding customers.
Banks typically don’t want to close their customers’ accounts, but pressure to do so comes from the federal government. A 1970 law, the Bank Secrecy Act, requires banks to monitor their customers’ transactions and report anything suspicious to the federal government.
Failing to do so can result in steep fines. Rather than risk the penalties, many banks shut down customers’ accounts. And since federal law prohibits banks from disclosing that they reported suspicious activity to the government, banks are often hesitant to tell their customers why an account has been closed.
What qualifies as “suspicious activity”? Lots of things. Overseas transactions. Buying and selling cryptocurrency. Even large purchases at stores that sell guns or ammunition — including places like Dick’s Sporting Goods and Cabela’s.
Maybe most of all, though, banks and the government don’t like “unexplained transactions.” If that label seems sinister, consider how many of your transactions would look mysterious to a stranger poring over your financial records.
People often have large, “unexplained” transactions for innocent reasons. For instance, a man told the New York Times that his accounts were shut down after he made a few significant cash withdrawals to pay a contractor to renovate his kitchen.
This secret surveillance has a more fundamental problem: It violates the Constitution. Under the Fourth Amendment, the government needs probable cause and a warrant before it can sift through someone’s financial papers. But the Bank Secrecy Act upends that process. It allows the government to force banks to review everyone’s financial records to look for anything suspicious and then report what they find to the government.
The framers of the Constitution saw something similar happen when British officers rummaged around colonists’ property and conscripted private citizens to help, using so-called “writs of assistance.” The framers adopted the Fourth Amendment to end those practices.
The Institute for Justice, a public interest law firm, works to hold the line through its Project on the Fourth Amendment. Yet, abuses are cropping up.
In the 1970s, the Supreme Court upheld the Bank Secrecy Act against Fourth Amendment challenges. It’s time to reconsider. Financial records today reveal so much more than in 1970. Imagine what someone could find if they had free access to your bank account, credit card transactions and digital transfers.
They could figure out what you buy, which political causes you support, which people you frequently meet, and which businesses you visit.
Modern financial records open a window into your life that did not exist before.
Similar considerations led the Supreme Court in 2018 to refuse to apply its 1970s-era precedent to cellphones. Phones no longer track what numbers we dial. The phones catalog where we go, house our most intimate written communications and even hold medical records. So, the Supreme Court reasoned, applying old caselaw to new technology made no sense.
That same logic applies to financial records. In an increasingly cashless society, our financial records reveal as much about us as our cellphones do. If the government wants to see them, it should have a warrant.
