Celia Flowers had big dreams at a young age. While still in high school, she set her sights on building a business. After high school, she got a job at a local title company and developed a love for digging through dusty records and piecing together the puzzle of property ownership. She knew then and there that she wanted to run her own title company. Over the next decade, she went to school at the University of Texas and then worked as a landman before deciding to go to law school at Baylor University with the dream of one day buying a title company of her own.
In 1993, Celia followed through on her entrepreneurial dreams. She bought her first title agency and set to work growing the business. Celia and her daughter, Erica Hallmark, now own and operate East Texas Title Companies, which is licensed in more than 80 counties across the state—and counting.
The Tyler, Texas-based business helps thousands of property buyers every year by providing title services and insurance for real estate transactions. Across Texas, title companies have seen a recent uptick in so-called “cash purchases”—any transaction where the buyer doesn’t require a bank loan—as people relocate from states like California, where housing costs are much higher.
Along with the rise in cash transactions, however, comes a serious new threat from Washington. The U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) recently finalized a new rule that forces title companies to collect and report detailed information about non-financed real estate transactions in residential property, particularly those involving business entities or trusts.
Under this new rule, these reports must include pages of personal details about everyone involved in the transaction, information about the property, and how payments were made. Breaking the rules—even accidentally—could lead to huge penalties.
FinCEN claims its rulemaking power under the Bank Secrecy Act, which delegates total discretion to the Secretary of Treasury to decide whether and when to require systematic collection of information and reporting on consumer transactions. Here FinCEN, operating under delegated authority from the Secretary, is exercising this discretionary power to compel collection of information and reports on many non-financed residential transactions because the agency now deems those transactions inherently “suspicious” as systematic reporting might yield information the government finds useful.
For East Texas Title, compliance would be time-consuming and costly, including legal counsel and staff time to create new procedures to track and ensure proper reporting for every transaction. Beyond these practical challenges, Celia and Erica face a double threat: being forced to perform government surveillance on their clients by reporting private information from legitimate transactions, while risking severe penalties for an inadvertent mistake.
This overreaching regulation is not just burdensome. It’s also a rat’s nest of constitutional problems.
When Congress passed the Bank Secrecy Act, it gave a blank check to the Treasury secretary to decide who must report what personal information.
Only the people’s representatives in Congress can write the laws that govern us. By shirking its own lawmaking responsibility, Congress undermined our democratic system and let unelected bureaucrats make rules without answering to voters.
The Constitution only grants Congress the power to regulate commerce between states. The federal government shouldn’t force businesses to collect information on real estate cash transactions that take place entirely within Texas.
And finally, the Fourth Amendment protects people against “unreasonable searches and seizures” of “persons, houses, papers, and effects.” This includes business records. Congress can’t dragoon private businesses into violating the privacy of Americans on its behalf just because they want to buy a house and don’t need a loan.
With free representation from Pacific Legal Foundation, Celia, Erica, and East Texas Title Companies are fighting back. Their federal lawsuit takes on both the new rule and the Bank Secrecy Act to protect their business’ and client’s privacy from unlawful government interference and will restore the separation of powers.
What’s At Stake?
- When Congress directs executive action, it must set clear limits and instructions. The law must guide how that power is used. Without standards, neither courts nor the public can tell if the actions stay within the law.
- The government can’t dragoon companies into violating the privacy of Americans just because they buy property.
