"Without prejudice" is a term used in sovereign individual circles. It has something to do with their notion that the U.S. is under admiralty law, rather than common law. They believe that the use of the term withdraws them from the reach of admiralty law (and the IRS, in particular). It's been a while since I've read anything about this, so I may not have it exactly right, but this concept dovetails with your customer's request to have the account re-titled.
Following is an excerpt from a "Patriot" website, stating what they believe about this phrase:
The Sufficiency of the Reservation -- Any expression
indicating an intention to reserve rights, is sufficient,
such as "without prejudice". (UCC 1-207.4)
Whenever you sign any legal paper that deals with Federal Reserve
Notes -- in any way, shape or manner -- under your signature
write: Without Prejudice UCC 1-207.2 This reserves your rights.
You can show, at 1-207.4, that you have sufficiently reserved
your rights.
It is very important to understand just what this means.
For example, one man who used this in regard to a traffic ticket
was asked by the judge just what he meant by writing "without
prejudice UCC 1-207" on his statement to the court. He had not
tried to understand the concepts involved. He only wanted to use
it to get out of the ticket. He did not know what it meant.
When the judge asked him what he meant by signing in that way, he
told the judge that he was not prejudiced against anyone ....
The judge knew that the man had no idea what it meant, and he
lost the case. You must know what it means.
Without Prejudice UCC 1-207
When you use "Without Prejudice UCC 1-207" in connection
with your signature, you are saying:
I reserve my right not to be compelled to perform under any
contract or commercial agreement that I did not enter
knowingly, voluntarily, and intentionally. And,
furthermore, I do not accept the liability of the compelled
benefit of any unrevealed contract or commercial agreement.