Prior to 1978, when the government wanted to access your financial accounts it had the authority to do so without notifying citizens that any access had been requested. Citizens also didn’t have legal grounds to challenge this invasiveness until the Right to Financial Privacy Act was passed successfully in 1978.
The law doesn’t actually protect consumer rights, at least not in the way we might think. When a consumer opens a bank account, that account and its associated information actually belong to the bank. That technicality turned out to be an important provision in protecting consumer information. The case played out in court as United States Versus Miller. The defendant was charged with multiple federal offenses, and he argued that the bank supplied defective documents that ensured his conviction. The courts agreed with him, and so the RFPA was a method to hold banks accountable for this kind of exchange.
The most common analogy to understand the implications of this law would be the numerous takedown requests that Google receives each day. Some of those requests come from the government, which Google reads but is not mandated to follow. Under the RFPA, banks have a similar system. First, the FBI must show that the records in question come from someone who is an immediate threat to national security (phrased as an agent under a foreign power). Matters are complicated even further by privacy laws in various states, which may allow banks to decline requests with additional protection.
Until the Patriot Act of 2001, this system of protections was fairly sound. The passage of the Patriot Act made it possible for governments to compel this information from banks if it was necessary as part of an international terror investigation.
About the Author: Phineas Upham is an investor at a family office hedgefund, where he focuses on special situation illiquid investing. Before this position, Phin Upham was working at Morgan Stanley in the Media and Telecom group. You may contact Phin on his Phineas Upham website or Facebook page.