Florida Banking February 2024

GOVERNMENT RELATIONS

ESG 2.0 – DOUBLING DOWN ON LAST SESSION’S HB 3 BY ANTHONY DIMARCO, FBA EXECUTIVE VICE PRESIDENT AND DIRECTOR OF GOVERNMENT AFFAIRS

A s you are all aware, the Florida Legislature enacted HB 3 to fight perceived “wokeness” in Florida financial institutions. The law creates a new “unsafe and unsound banking practice” for all Florida chartered or licensed financial institutions and any bank that is a qualified public depository (QPD) or to any Florida state-chartered bank or credit union. The bill, while recognizing the need for financial institutions to provide or deny banking services based upon an analysis of risk factors unique to each individual customer, provides that it is deemed an unsafe and unsound banking practice to discriminate against a person based upon the following: • Their political opinions, speech, or affiliations; • Their religious beliefs, exercise, or affiliations; • Any factor that is not a quantitative, impartial, and risk-based standard; • Any factor that includes the person’s business sector, e.g., fossil fuels or gun manufacturing; or, • Any rating, scoring, analysis or the like based on a “social credit score.” The law took effect on July 1, 2023 and required financial institutions to attest, under penalty of perjury, that they are in compliance with the new law. All banks and QPDs filed the required attestations in a timely manner. This new law is not quite six months old, and, so far, we are not aware of any violations or complaints. However, this does not appear to be enough for some legislators and they have doubled down on legislation to fight wokeness by filing HB 585 entitled “Access to Financial Institution Customer Accounts.” The bill’s sponsor believes that one debanked customer is one too many. This new bill amends the Florida banking codes to require a bank to file a termination of access report (report) with the Office of Financial Regulation (OFR) when a bank customer or credit union member’s

account access is terminated, suspended, or a similar action is taken, unless the customer initiates the account change or the account is dormant. After filing the report, OFR has 90 days to investigate and determine whether the action “was taken in bad faith as substantiated by competent and substantial evidence that was known or should have been known to the financial institution at the time” of the action. “Bad faith” is not defined in the bill. If OFR makes a bad faith determination, then it has 30 days to report this finding to the Attorney General and the Chief Financial Officer, send the report to the customer, and send the report to any other banking regulator or law enforcement pursuant to any other applicable law. The financial institution’s wrongful termination or failure to send the report in a timely fashion constitutes a violation of the Florida Banking Code and the financial institution is subject to applicable sanctions and penalties therein. The customer then has a private right of action against the bank if OFR determines that the financial institution acted in bad faith. There is a 12-month statute of limitations, and the customer must prove the bad faith beyond a reasonable doubt. Should the bank be a QPD, it must still file a report, regardless of charter, and if found to have acted in bad faith, then it is subject to the violations and sanctions of the QPD statutes. The FBA is OPPOSED to this bill. We believe it to be unconstitutional and preempted by federal law. We also believe that it is an unwarranted and costly intrusion into the free market system. Moreover, the current law of HB 3 has several mechanisms to permit an aggrieved customer to file a complaint against a bank. Finally, there is no definition of “bad faith” and other similar problems with the bill. Please watch for a call to action on this bill.

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