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I am sorry but the OP is writing a lengthy article to legitimize his claim? Here is the point, as I see it and it is very simple: If having a bank account is a

by csomar 2y ago

I am sorry but the OP is writing a lengthy article to legitimize his claim? Here is the point, as I see it and it is very simple: If having a bank account is a requirement to operate legally, a bank can NOT refuse any customer unless they have been barred by a court. It doesn't matter whether you are selling crypto, weed, porn or socks. This is done in France, and many other countries by the way. The bank has an obligation to service, as your life's obligations requires such a bank account. Pat went on a dozens of pages of non-sense to avoid this particular point explaining how the banking system work, the bank obligations and other crap. It's just a bunch of filler non-sense that doesn't address the core point.

tptacek 2y ago
That doesn't make any sense. As the article points out, it's akin to saying that a lender must loan to you unless they've been barred by a court. The accounts you are thinking about are all, under the hood, lines of credit, even though they don't look like that.
- csomar 2y ago
  Since the Fed is the provider of the liquidity and also sets the rules on what is a collateral and what is not, I say yes, the bank must loan you the money as long as you satisfy the conditions of the loan. The bank is roughly a re-seller of the Fed liquidity. They shouldn't be an arbiter of who gets to access that liquidity but rather an administrative entity that follows the rules.
  - tptacek 2y ago
    That doesn't make sense. When your business account stiffs a bunch of customers who get their ACH transactions reversed, and you're insolvent, your bank has to pay off those transactions. It can't just go to the Fed and say "give me money to cover for this insolvent business". Your bank is not in fact literally just a front end for the Fed.
- alexey-salmin 2y ago
  No, it's not akin to that. You can live without loans but you can't leave without a debit bank account. As the parent points out there's indeed such a law in France but from personal experience I can tell that it doesn't prevent the bank from closing your account without an explanation (the explanation I was given off-record was my citizenship). The law merely forces the bank to open you an account which can later be closed. So definitely the right direction but IMO not far enough.
  - tptacek 2y ago
    A debit bank account is a line of credit. It effectively is a loan.
    - alexey-salmin 2y ago
      You're not participating in a good faith discussion. Yes, it is technically a line of credit but it's not the reason why you're being refused service. Overdraft risks for a personal account are small and can easily be accounted-for in the service fee or via insurance (which is the same in the end). The reason for account closure is the fear of anti-AML laws and sanctions that have nothing to do with loans. Banks in fact love offering small loans and it's not uncommon to have your account closed while having a pre-approved loan at the same time — these are different bank divisions in action. And in any case, turning personal debit accounts into credit accounts is not something that was asked for. I lived long enough to have used Visa Electron and Maestro cards that made most of overdraft scenarios impossible. It was the banking industry decision to get rid of them.
      - tptacek 2y ago
        The entire article is about why that isn't true in the cases he's talking about.
        alexey-salmin 2y ago
        What exactly isn't true? That compliance is the reason why accounts get closed? As far as I understood the article this is the main reason he gives. Loans or other objective reasons that can make the interaction with the client unprofitable are only drawn as (bad) analogies and not as the actual explanation.
- lmm 2y ago
  > The accounts you are thinking about are all, under the hood, lines of credit, even though they don't look like that. You present this statement as though it's an immutable law of nature, rather than a design feature of the US banking system that allows them to offer an excuse for closing accounts that's convenient for those banks. (The fact that someone on HN can read about it and feel smart because they think they understood the deep reality that lesser people don't get is also a convenient design feature).
  - tptacek 2y ago
    As long as we agree that it's a basic feature of the US financial system I don't think there's much for us to argue about.
    - alexey-salmin 2y ago
      I haven't seen any proof that it's a basic feature of bank accounts. Some specific services (checkbooks, embossed and offline-chip cards, visa/mc acquiring) can require a credit-worthy account, but these services can be denied without denying the account itself.
      - patio11 2y ago
        Does your envisioned product allow someone to direct deposit a paycheck? Then congratulations, it is a credit account, because a) we expect to spend paychecks including very soon after receiving them but b) payroll companies sometimes screw up payroll and can in some cases pull the money back.
        alexey-salmin 2y ago
        Can you reference a law saying that the bank is obligated to force an overdraft on a non-overdraft account when the transaction is reversed? This was a screw up by neither the bank nor their client, I see all reasons to bounce it back and let the wrong party figure it out. Furthermore I saw that exact case IRL in another country and the payroll company had to settle it with the employee (not with the bank) in court. I understand that US banking can be very different here but neither googling nor chatgpt was able to provide any specific proofs. Some people claim online that a bank can never refuse an ACH transaction but it's obviously false, they do it easily when the account is closed, blocked or overdrawn beyond a certain limit.
- southernplaces7 2y ago
  It makes perfect sense because of the very bloody obvious point that your account isn't really a line of credit since you gave a full deposit equal to the funds you have available. If the bank wants to lend your money around as part of its fractional reserve process, that's their business, but opening an account with funds you expect to have access to at any time is not the same as asking for a loan. Please.
  - tptacek 2y ago
    No, that's not even a little bit how a checking account works. Assume nothing moves instantaneously, everything has a settlement period, everything is reversible, and, apart from the bank's willingness to decline you for an account, none of that mechanism is ever exposed to you. You'll be much closer to the true nature of the system than your belief that, having "fully deposited" money into an account, the bank can safely assume it has custody of that sum of money. This is the challenge Patrick is up against with a piece like this: most of his readers share the deeply broken assumption you've brought to it.
    - southernplaces7 2y ago
      It doesn't matter how it works in the background. A checking account is marketed as a bank account in which your balance matches what you put into it and unlike a formal, named loan, it's necessary for many very basic transactions of daily living for even ordinary people who participate in no business banking. Thus, being frozen out by some bullshit regulatory "compliance" nonsense or some brainless, fearful risk assessment is at a whole different level than it would be if you ere denied a loan for similar reasons. Banks that fear risk so much should organize their checking account system better for the full range of their customers, but that requires more effort than simply unbanking people and then communicating with them through grudging hostility about the reasons why as their lives take a major hit, and then being defended for this conduct by someone who gets mealy mouthed about how checking accounts are actually loans, as if they involved a major financial favor by the bank to you as a customer.
      - 2y ago

by csomar 2y ago

tptacek 2y ago

That doesn't make any sense. As the article points out, it's akin to saying that a lender must loan to you unless they've been barred by a court. The accounts you are thinking about are all, under the hood, lines of credit, even though they don't look like that.

csomar 2y ago
Since the Fed is the provider of the liquidity and also sets the rules on what is a collateral and what is not, I say yes, the bank must loan you the money as long as you satisfy the conditions of the loan. The bank is roughly a re-seller of the Fed liquidity. They shouldn't be an arbiter of who gets to access that liquidity but rather an administrative entity that follows the rules.
- tptacek 2y ago
  That doesn't make sense. When your business account stiffs a bunch of customers who get their ACH transactions reversed, and you're insolvent, your bank has to pay off those transactions. It can't just go to the Fed and say "give me money to cover for this insolvent business". Your bank is not in fact literally just a front end for the Fed.
alexey-salmin 2y ago
No, it's not akin to that. You can live without loans but you can't leave without a debit bank account. As the parent points out there's indeed such a law in France but from personal experience I can tell that it doesn't prevent the bank from closing your account without an explanation (the explanation I was given off-record was my citizenship). The law merely forces the bank to open you an account which can later be closed. So definitely the right direction but IMO not far enough.
- tptacek 2y ago
  A debit bank account is a line of credit. It effectively is a loan.
  - alexey-salmin 2y ago
    You're not participating in a good faith discussion. Yes, it is technically a line of credit but it's not the reason why you're being refused service. Overdraft risks for a personal account are small and can easily be accounted-for in the service fee or via insurance (which is the same in the end). The reason for account closure is the fear of anti-AML laws and sanctions that have nothing to do with loans. Banks in fact love offering small loans and it's not uncommon to have your account closed while having a pre-approved loan at the same time — these are different bank divisions in action. And in any case, turning personal debit accounts into credit accounts is not something that was asked for. I lived long enough to have used Visa Electron and Maestro cards that made most of overdraft scenarios impossible. It was the banking industry decision to get rid of them.
    - tptacek 2y ago
      The entire article is about why that isn't true in the cases he's talking about.
      - alexey-salmin 2y ago
        What exactly isn't true? That compliance is the reason why accounts get closed? As far as I understood the article this is the main reason he gives. Loans or other objective reasons that can make the interaction with the client unprofitable are only drawn as (bad) analogies and not as the actual explanation.
lmm 2y ago
> The accounts you are thinking about are all, under the hood, lines of credit, even though they don't look like that. You present this statement as though it's an immutable law of nature, rather than a design feature of the US banking system that allows them to offer an excuse for closing accounts that's convenient for those banks. (The fact that someone on HN can read about it and feel smart because they think they understood the deep reality that lesser people don't get is also a convenient design feature).
- tptacek 2y ago
  As long as we agree that it's a basic feature of the US financial system I don't think there's much for us to argue about.
  - alexey-salmin 2y ago
    I haven't seen any proof that it's a basic feature of bank accounts. Some specific services (checkbooks, embossed and offline-chip cards, visa/mc acquiring) can require a credit-worthy account, but these services can be denied without denying the account itself.
    - patio11 2y ago
      Does your envisioned product allow someone to direct deposit a paycheck? Then congratulations, it is a credit account, because a) we expect to spend paychecks including very soon after receiving them but b) payroll companies sometimes screw up payroll and can in some cases pull the money back.
      - alexey-salmin 2y ago
        Can you reference a law saying that the bank is obligated to force an overdraft on a non-overdraft account when the transaction is reversed? This was a screw up by neither the bank nor their client, I see all reasons to bounce it back and let the wrong party figure it out. Furthermore I saw that exact case IRL in another country and the payroll company had to settle it with the employee (not with the bank) in court. I understand that US banking can be very different here but neither googling nor chatgpt was able to provide any specific proofs. Some people claim online that a bank can never refuse an ACH transaction but it's obviously false, they do it easily when the account is closed, blocked or overdrawn beyond a certain limit.
southernplaces7 2y ago
It makes perfect sense because of the very bloody obvious point that your account isn't really a line of credit since you gave a full deposit equal to the funds you have available. If the bank wants to lend your money around as part of its fractional reserve process, that's their business, but opening an account with funds you expect to have access to at any time is not the same as asking for a loan. Please.
- tptacek 2y ago
  No, that's not even a little bit how a checking account works. Assume nothing moves instantaneously, everything has a settlement period, everything is reversible, and, apart from the bank's willingness to decline you for an account, none of that mechanism is ever exposed to you. You'll be much closer to the true nature of the system than your belief that, having "fully deposited" money into an account, the bank can safely assume it has custody of that sum of money. This is the challenge Patrick is up against with a piece like this: most of his readers share the deeply broken assumption you've brought to it.
  - southernplaces7 2y ago
    It doesn't matter how it works in the background. A checking account is marketed as a bank account in which your balance matches what you put into it and unlike a formal, named loan, it's necessary for many very basic transactions of daily living for even ordinary people who participate in no business banking. Thus, being frozen out by some bullshit regulatory "compliance" nonsense or some brainless, fearful risk assessment is at a whole different level than it would be if you ere denied a loan for similar reasons. Banks that fear risk so much should organize their checking account system better for the full range of their customers, but that requires more effort than simply unbanking people and then communicating with them through grudging hostility about the reasons why as their lives take a major hit, and then being defended for this conduct by someone who gets mealy mouthed about how checking accounts are actually loans, as if they involved a major financial favor by the bank to you as a customer.
    - 2y ago