79–006 

115TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 1st Session 115–414 

FINANCIAL INSTITUTION CUSTOMER PROTECTION ACT 

OF 2017 

NOVEMBER 16, 2017.—Committed to the Committee of the Whole House on the 

State of the Union and ordered to be printed 

Mr. HENSARLING, from the Committee on Financial Services, 

submitted the following 

R E P O R T 

[To accompany H.R. 2706] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Financial Services, to whom was referred the 

bill (H.R. 2706) 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, having considered the same, report favorably thereon with an amendment and recommend that the bill as 

amended do pass. 

The amendment is as follows: 

Strike all after the enacting clause and insert the following: 

SECTION 1. SHORT TITLE. 

This Act may be cited as the ‘‘Financial Institution Customer Protection Act of 

2017’’. 

SEC. 2. REQUIREMENTS FOR DEPOSIT ACCOUNT TERMINATION REQUESTS AND ORDERS. 

(a) TERMINATION REQUESTS OR ORDERS MUST BE VALID.— 

(1) IN GENERAL.—An appropriate Federal banking agency may not formally 

or informally request or order a depository institution to terminate a specific 

customer account or group of customer accounts or to otherwise restrict or discourage a depository institution from entering into or maintaining a banking relationship with a specific customer or group of customers unless— 

(A) the agency has a valid reason for such request or order; and 

(B) such reason is not based solely on reputation risk. 

(2) TREATMENT OF NATIONAL SECURITY THREATS.—If an appropriate Federal 

banking agency believes a specific customer or group of customers is, or is acting as a conduit for, an entity which— 

(A) poses a threat to national security; 

(B) is involved in terrorist financing; 

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(C) is an agency of the Government of Iran, North Korea, Syria, or any 

country listed from time to time on the State Sponsors of Terrorism list; 

(D) is located in, or is subject to the jurisdiction of, any country specified 

in subparagraph (C); or 

(E) does business with any entity described in subparagraph (C) or (D), 

unless the appropriate Federal banking agency determines that the customer or group of customers has used due diligence to avoid doing business 

with any entity described in subparagraph (C) or (D), 

such belief shall satisfy the requirement under paragraph (1). 

(b) NOTICE REQUIREMENT.— (1) IN GENERAL.—If an appropriate Federal banking agency formally or informally requests or orders a depository institution to terminate a specific customer account or a group of customer accounts, the agency shall— 

(A) provide such request or order to the institution in writing; and 

(B) accompany such request or order with a written justification for why 

such termination is needed, including any specific laws or regulations the 

agency believes are being violated by the customer or group of customers, 

if any. 

(2) JUSTIFICATION REQUIREMENT.—A justification described under paragraph 

(1)(B) may not be based solely on the reputation risk to the depository institution. 

(c) CUSTOMER NOTICE.— (1) NOTICE REQUIRED.—Except as provided under paragraph (2), if an appropriate Federal banking agency orders a depository institution to terminate a 

specific customer account or a group of customer accounts, the depository institution shall inform the customer or customers of the justification for the customer’s account termination described under subsection (b). 

(2) NOTICE PROHIBITED IN CASES OF NATIONAL SECURITY.—If an appropriate 

Federal banking agency requests or orders a depository institution to terminate 

a specific customer account or a group of customer accounts based on a belief 

that the customer or customers pose a threat to national security, or are otherwise described under subsection (a)(2), neither the depository institution nor the 

appropriate Federal banking agency may inform the customer or customers of 

the justification for the customer’s account termination. 

(d) REPORTING REQUIREMENT.—Each appropriate Federal banking agency shall 

issue an annual report to the Congress stating— 

(1) the aggregate number of specific customer accounts that the agency requested or ordered a depository institution to terminate during the previous 

year; and 

(2) the legal authority on which the agency relied in making such requests 

and orders and the frequency on which the agency relied on each such authority. 

(e) DEFINITIONS.—For purposes of this section: 

(1) APPROPRIATE FEDERAL BANKING AGENCY.—The term ‘‘appropriate Federal 

banking agency’’ means— 

(A) the appropriate Federal banking agency, as defined under section 3 

of the Federal Deposit Insurance Act (12 U.S.C. 1813); and 

(B) the National Credit Union Administration, in the case of an insured 

credit union. 

(2) DEPOSITORY INSTITUTION.—The term ‘‘depository institution’’ means— 

(A) a depository institution, as defined under section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813); and 

(B) an insured credit union. 

PURPOSE AND SUMMARY

Introduced by Representative Blaine Luetkemeyer on May 25, 

2017, H.R. 2706, the ‘‘Financial Institution Customer Protection 

Act of 2017’’, prohibits a federal banking agency from formally or 

informally suggesting, requesting, or ordering a depository institution to terminate either a specific customer account, or group of 

customer accounts, or otherwise restrict or discourage it from entering into or maintaining a banking relationship with a specific 

customer or group of customers, unless: (1) the agency has a valid 

reason for doing so, and (2) that reason is not based solely on reputation risk. H.R. 2706 requires a federal banking agency to provide a depository institution written justification of any request to 

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terminate or restrict a customer account, except in instances of national security. 

H.R. 2706 also requires appropriate federal banking agencies to 

issue an annual report to Congress that describes the number of 

customer accounts the agency requested or ordered to be closed and 

the legal authority relied upon by the agency to do so. 

BACKGROUND AND NEED FOR LEGISLATION

Operation ‘‘Choke Point’’ is a law enforcement initiative launched 

by the Department of Justice’s 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 Justice Department subpoenas the institutions that provide financial services to 

these merchants, which effectively coerces these financial institutions to cease offering the services. The Justice Department has 

partnered with the Federal Deposit Insurance Corporation (FDIC) 

to identify merchants that pose a ‘high risk’ for consumer fraud, 

notwithstanding the fact that these merchants may be operating 

their businesses legally. In doing so, the FDIC equated legitimate 

and regulated activities such as coin dealers and firearms and ammunition sales with inherently pernicious or patently illegal activities such as Ponzi schemes, debt consolidation scams, and drug 

paraphernalia. The legal merchants identified as ‘high risk’ have 

seen their accounts terminated by banks seeking to avoid civil and 

criminal liability as well as greater regulatory scrutiny. 

The Committee adopted an amendment offered by Rep. Denny 

Heck that would prevent federal banking agencies from abusing executive power when these regulators attempt to shut off law-abiding businesses’ access to depository institutions by prohibiting appropriate banking agencies from ordering or requesting a depository institution to terminate customer accounts unless the agency 

has a valid reason for doing so, and that reason is not based solely 

on reputational risk. 

In a letter of support for H.R. 2706 dated June 5, 2017, the Credit Union National Association wrote: 

[H.R. 2706] would place certain limits on the Federal 

government’s Operation Choke Point. While we strongly 

support the government’s role in ensuring the integrity of 

financial markets and eliminating fraud, the program’s 

broad enforcement tactics could create unnecessary risks 

to consumers and to the economy. 

The legislation would limit Federal banking regulators’ 

ability to discourage or restrict depository institutions from 

entering into or maintaining a financial services relationship with specific customers unless certain criteria are 

met. 

In a letter of support for H.R. 2706 dated October 10, 2017, the 

Consumer Bankers Association wrote: 

[H.R. 2706] would require federal banking regulatory 

agencies to establish requirements for the termination of 

bank accounts and prohibit federal banking regulators 

from formally or informally suggesting, requesting, or orVerDate Sep 11 2014 03:33 Nov 17, 2017 Jkt 079006 PO 00000 Frm 00003 Fmt 6659 Sfmt 6602 E:\HR\OC\HR414.XXX HR414
4 

dering a depository institution to terminate a customer account except in circumstances affecting the security of our 

country or specific illegal activity. 

HEARINGS

The Committee on Financial Services’ Subcommittee on Financial Institutions held a hearing examining matters relating to H.R. 

2706 on July 12, 2017. 

COMMITTEE CONSIDERATION

The Committee on Financial Services met in open session on October 11 and 12, 2017 and ordered H.R. 2706 to be reported favorably to the House as amended by a recorded vote of 59 yeas to 1 

nays (Record vote no. FC–78), a quorum being present. Before the 

motion to report was offered, the Committee adopted an amendment in the nature of a substitute offered by Mr. Luetkemeyer, and 

an amendment to the amendment in the nature of a substitute by 

Mr. Heck by voice vote. 

COMMITTEE VOTES

Clause 3(b) of rule XIII of the Rules of the House of Representatives requires the Committee to list the record votes on the motion 

to report legislation and amendments thereto. The sole recorded 

vote was on a motion by Chairman Hensarling to report the bill favorably to the House as amended. The motion was agreed to by a 

recorded vote of 59 yeas to 1 nays (Record vote no. FC–78), a 

quorum being present. 

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Insert offset folio 6 here HR414.001
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COMMITTEE OVERSIGHT FINDINGS

Pursuant to clause 3(c)(1) of rule XIII of the Rules of the House 

of Representatives, the findings and recommendations of the Committee based on oversight activities under clause 2(b)(1) of rule X 

of the Rules of the House of Representatives, are incorporated in 

the descriptive portions of this report. 

PERFORMANCE GOALS AND OBJECTIVES

Pursuant to clause 3(c)(4) of rule XIII of the Rules of the House 

of Representatives, the Committee states that H.R. 2706 will restore the rule of law by requiring federal banking agencies to justify requests to terminate customer bank accounts maintained by 

depository institutions and requiring civil subpoenas issued by the 

Department of Justice in investigations affecting a federally insured financial institution to be supported by facts. 

NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX

EXPENDITURES

In compliance with clause 3(c)(2) of rule XIII of the Rules of the 

House of Representatives, the Committee adopts as its own the estimate of new budget authority, entitlement authority, or tax expenditures or revenues contained in the cost estimate prepared by 

the Director of the Congressional Budget Office pursuant to section 

402 of the Congressional Budget Act of 1974. 

CONGRESSIONAL BUDGET OFFICE ESTIMATES

Pursuant to clause 3(c)(3) of rule XIII of the Rules of the House 

of Representatives, the following is the cost estimate provided by 

the Congressional Budget Office pursuant to section 402 of the 

Congressional Budget Act of 1974: 

U.S. CONGRESS, 

CONGRESSIONAL BUDGET OFFICE, 

Washington, DC, October 31, 2017. 

Hon. JEB HENSARLING, 

Chairman, Committee on Financial Services, 

House of Representatives, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 2706, the Financial Institution Customer Protection Act of 2017. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Sarah Puro. 

Sincerely, 

KEITH HALL, 

Director. 

Enclosure. 

H.R. 2706—Financial Institution Customer Protection Act of 2017 

H.R. 2706 would prohibit federal banking regulators—the Federal Deposit Insurance Corporation (FDIC), the National Credit 

Union Administration (NCUA), the Office of the Comptroller of the 

Currency (OCC), and the Federal Reserve—from requesting or requiring that a depository institution terminate certain customer accounts except in specific circumstances affecting national security. 

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The bill also would require each federal banking regulator to report 

annually on the number of requests to terminate customer accounts 

that any of those agencies has made to a bank. 

On the basis of information from the federal banking regulators, 

CBO expects that the prohibitions in H.R. 2706 would not alter the 

actions those regulators take under current law. However, the additional reporting requirement in the bill would impose costs on 

those agencies. Administrative costs incurred by the FDIC, the 

OCC, and the NCUA are recorded in the budget as an increase in 

direct spending. CBO estimates that the cost to complete the annual reports would not be significant. Moreover, those agencies are 

authorized to collect premiums and fees from insured depository institutions to cover administrative expenses. Thus, CBO expects 

that the net effect on the federal budget would be negligible. Administrative costs to the Federal Reserve are reflected in the federal budget as a reduction in remittances to the Treasury (which 

are recorded in the budget as revenues). CBO expects that any additional administrative costs to the Federal Reserve under the bill 

also would be insignificant. 

Because enacting H.R. 2706 would affect direct spending and revenues, pay-as-you-go procedures apply. 

CBO estimates that enacting H.R. 2706 would not significantly 

affect net direct spending or on-budget deficits in any of the four 

consecutive 10-year periods beginning in 2028. 

H.R. 2706 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act. 

The CBO staff contact for this estimate is Sarah Puro. The estimate was approved by H. Samuel Papenfuss, Deputy Director for 

Budget Analysis. 

FEDERAL MANDATES STATEMENT

This information is provided in accordance with section 423 of 

the Unfunded Mandates Reform Act of 1995. 

The Committee has determined that the bill does not contain 

Federal mandates on the private sector. The Committee has determined that the bill does not impose a Federal intergovernmental 

mandate on State, local, or tribal governments. 

ADVISORY COMMITTEE STATEMENT

No advisory committees within the meaning of section 5(b) of the 

Federal Advisory Committee Act were created by this legislation. 

APPLICABILITY TO LEGISLATIVE BRANCH

The Committee finds that the legislation does not relate to the 

terms and conditions of employment or access to public services or 

accommodations within the meaning of the section 102(b)(3) of the 

Congressional Accountability Act. 

EARMARK IDENTIFICATION

With respect to clause 9 of rule XXI of the Rules of the House 

of Representatives, the Committee has carefully reviewed the provisions of the bill and states that the provisions of the bill do not 

contain any congressional earmarks, limited tax benefits, or limited 

tariff benefits within the meaning of the rule. 

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DUPLICATION OF FEDERAL PROGRAMS

In compliance with clause 3(c)(5) of rule XIII of the Rules of the 

House of Representatives, the Committee states that no provision 

of the bill establishes or reauthorizes: (1) a program of the Federal 

Government known to be duplicative of another Federal program; 

(2) a program included in any report from the Government Accountability Office to Congress pursuant to section 21 of Public 

Law 111–139; or (3) a program related to a program identified in 

the most recent Catalog of Federal Domestic Assistance, published 

pursuant to the Federal Program Information Act (Pub. L. No. 95– 

220, as amended by Pub. L. No. 98–169). 

DISCLOSURE OF DIRECTED RULEMAKING

Pursuant to section 3(i) of H. Res. 5, (115th Congress), the following statement is made concerning directed rulemakings: The 

Committee estimates that the bill requires no directed rulemakings 

within the meaning of such section. 

SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1. Short title 

This Section cites H.R. 2706 as the ‘‘Financial Institution Customer Protection Act of 2017’’. 

Section 2. Requirements for deposit account termination requests 

and orders 

This Section prohibits a federal banking agency from formally or 

informally suggesting, requesting, or ordering a depository institution to terminate either a specific customer account, or group of 

customer accounts, or otherwise restrict or discourage it from entering into or maintaining a banking relationship with a specific 

customer or group of customers, unless: (1) the agency has a valid 

reason to do so, and (2) the reason is not based solely on reputation 

risk. The validity requirement is satisfied if a federal banking 

agency believes that a specific customer or group of customers 

poses a threat to national security, including any belief that they 

are involved in terrorist financing. 

This section also requires a federal banking agency that requests 

or orders a depository institution to terminate an account or group 

of accounts to provide the request or order to the institution in 

writing and accompany the request or order with a written justification for why such termination is needed, including any specific 

laws or regulations the agency believes are being violated. Such 

justification may not be based solely on the reputation risk of the 

depository institution. Neither the agency nor the institution is required to inform a customer of the justification accompanying the 

agency’s request for the customer’s account termination. Notice is 

to a customer is prohibited if the federal banking agency requests 

or orders a depository institution to terminate a customer account 

(or a group of customer accounts) based upon a belief that customer 

or those customers pose a threat to national security. 

Each appropriate federal banking agency must issue an annual 

report to Congress stating the aggregate number of specific customer accounts that the agency requested or ordered a depository 

institution to terminate during the previous year and the legal auVerDate Sep 11 2014 03:33 Nov 17, 2017 Jkt 079006 PO 00000 Frm 00008 Fmt 6659 Sfmt 6602 E:\HR\OC\HR414.XXX HR414
9 

thority on which the agency relied in making such requests or orders. 

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

H.R. 2706 does not repeal or amend any section of a statute. 

Therefore, the Office of Legislative Counsel did not prepare the report contemplated by Clause 3(e)(1)(B) of rule XIII of the House of 

Representatives. 

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