A new war is brewing between banks and their customers, and the fight is going public.
PR black eyes of the past would have come from ATM surcharges or foreclosure injustices. Now, news reports are stacking up about angry customers — payday lenders, check cashers, telemarketers, gun dealers and even adult entertainers — who are complaining that their accounts have been, or could be, unfairly terminated.
The businesses say they are legitimate, but banking regulators and the Justice Department are warning that these and other businesses are high risk for money laundering, consumer fraud and other crime. Pressure is being applied through stalled merger approvals and the lingering threat of lawsuits.
The pornography sweep in particular only strengthens bankers’ suspicions that regulators are forcing them to play the role of morality police. And it raises more practical questions for bankers: How do they balance public perception and compliance? What industry will they feel compelled to shut out next?
“Banks are left to guess who deserves access to the banking system and who doesn’t,” says William Isaac, a former Federal Deposit Insurance Corp. chairman who recently stepped down as chairman of Fifth Third Bancorp (FITB). Isaac, who is now head of the financial institutions group at FTI Consulting, has advised payday-lending companies.
JPMorgan Chase (JPM) has closed accounts of individuals or businesses associated with the adult entertainment industry, several media outlets have reported. In one case, the adult film actress Teagan Presley posted on her Twitter site a copy of the alleged letter from Chase saying her account would be closed on May 11. Presley’s husband, film producer Joshua Lehman, toldBusiness Insider, “it was because of our industry.”
Presley later tweeted, “So @chase are you going to close my kids savings acct now cause my name is on there too just like you did my personal acct.”
JPMorgan declined to discuss these reports or answer how widespread the account closures are.