Not for the first time, the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) is facing legal action over its rules and regulations.
East Texas Title Companies, which is headquartered in Tyler, Texas, and operates in more than 87 of the state’s counties, announced that it had filed a lawsuit against FinCEN on April 14. The suit seeks to block a rule that will be effective Dec. 1 requiring data collection and reporting for cash real estate purchases. East Texas Title Companies argues the rule is an intrusive burden.
“Congress cannot shirk its lawmaking responsibilities by granting federal agencies a blank check to write laws,” said Luke Wake, an attorney at Pacific Legal Foundation, which is representing East Texas Title in the suit. “FinCEN is now mandating unreasonable collection and reporting of personal information to the federal government; the agency claims a sweeping power to require reporting on conceivably any consumer transaction simply because systematic reporting might prove useful to the government.”
The case, East Texas Title Co. v. Bessent, was filed in U.S. District Court for the Eastern District of Texas.
The Facts
In 2024, FinCEN, operating under the supervision of the U.S. Secretary of Treasury, finalized a rule that will mandate title companies to collect and report detailed information on non-financed real estate transactions, including the personal details of all individuals involved and details on how the payments were made. This rule was instituted with the expectation that violations would result in fines and possibly criminal charges. The rule is set to go into effect in December.
The plaintiff in the case is named as Celia Flowers, owner and attorney at East Texas Title. She and her daughter, Erica Hallmark, own and manage the East Texas Title Companies, which facilitates or gathers information regarding thousands of real estate closings each year. Specifically, the plaintiff noted that her company’s coverage area has seen a surge in “cash purchases,” or transactions in which the buyer does not require a bank loan.
The plaintiff argued that compliance with FinCEN’s non-financed transaction reporting rule would be costly and time-consuming for East Texas Title. Additionally, under this new rule, the plaintiff maintains that her company would still risk severe penalties for an inadvertent mistake.
Flowers also objected to the rule on the grounds that it allegedly violates the Constitution’s separation of powers. The plaintiff argued that her company should not be “forced to perform government surveillance on their clients by reporting private information from legitimate transactions.”
“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,” read a brief release by Pacific Legal Foundation. “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.
“This overreaching regulation is not just burdensome. It’s also a rat’s nest of constitutional problems,” Pacific Legal adds.
The plaintiff and her representatives further argued the U.S. Constitution only grants Congress the power to regulate commerce between states and that the federal government has no standing to require businesses to collect information on real estate cash transactions that take place entirely within Texas.
Lastly, East Texas Title invoked Fourth Amendment protections against “unreasonable searches and seizures” of “persons, houses, papers, and effects.” This includes, the plaintiff claimed, business records. Congress lacks the right to require private businesses into violating the privacy of Americans on its behalf because a house is being purchased without a loan, the plaintiff argued.