General Michael Flynn posted a letter to his social media account showing accounts being closed by Chase next month due to ‘reputational risk’. There was one thing odd about the letter – the first name it was addressed to had been blacked out. It turns out Flynn’s credit cards weren’t cancelled. It was his wife’s accounts being closed. And, amidst a backlash, Chase is re-opening them.
Chase now says the letter was a mistake,
A Chase spokesman would not comment on what caused the ‘mistake’, but said: ‘We’ve contacted our customer to let her know that we made an error and we apologized for any inconvenience this caused.’
Rapid Travel Chai shares in the comments a story about a family mmeber having their accounts closed by Chase recently. They’d started spending a lot more on Chase cards, but once they explained that they’d moved their primary spend over from an American Express card Chase re-opened the accounts, he said.
There are several things that can trigger a bank to be concerned about doing business with you.
- Here’s one thing that looks a lot like fraud. Your spending patterns might make you look like a bust-out risk. You’re a good customer for awhile and then you start spending a lot all of a sudden, your circumstances might have changed and you could be using up your credit prior to a default.
- “Reputation risk” cited here is something banks may be concerned about for their own sake (how would it look if their card was used to purchase materials for a terrorist bombing) or more likely to assuage regulators. The federal government leans on banks over whom they do business with – it’s not merely enough for a customer to be acting entirely legally, regulators might not be able to ban guns for instance but they can pressure banks not to do business with those who sell guns due to ‘reputation risk’.
American Express will put you under financial review usually rather than unilaterally cancelling your account. It comes as a surprise and the ability to charge gets suspended. In some ways the processes are similar, but the letter to General Flynn and to Rapid Travel Chai’s family member didn’t say that it was possible to appeal the decision – even though in both cases the closures were reversed.