The Consequences of Paying Down Credit

Here's a story that's been going around greater Blogsylvania for a couple of days. Andrew Sullivan, AMERICAblog, and Article 19 each noted it, and the original column can be seen here. There's a couple in Rhode Island who paid a higher amount than usual on their Mastercard and were told that this had triggered an investigation by the Department of Homeland Security by. The column was written by Bob Kerr, who said that they'd fallen astray of the Bank Privacy Act, but it appears to me that it's actually the Bank Secrecy Act that caught them in its web. The Comptroller of the Currency has a handbook on the law (warning: PDF), and you can read the House testimony of a Federal Reserve Board official on it. But for a pithy summary of how the Bank Secrecy Act works, you probably can't do better than Privacilla.org.

The Bank Secrecy Act was originally intended to fight money laundering, and when the Patriot Act came along, the Bank Secrecy Act was subsumed into it to combat money laundering in the service of funding terrorism. The couple from Rhode Island fell astray of its requirements that financial institutions identify and report "suspicious activity" among its accounts. (The "secrecy" of the title comes from the fact that your bank, credit union, or credit card company doesn't tell you that you're being reported.) Once we get paranoid enough, the smallest variation from the norm--like paying off your credit card after sending in the minimum payment for months--sends up red flags; anything that's at all unusual registers as suspicious activity. That's a development that's particularly uncomfortable (and dangerous) in a country that celebrates the individual and succeeding by breaking the rules. At least when Big Brother watched the population in 1984, he used a big screen and everybody knew they were being watched.