On July 1, 2024, banks and other financial institutions doing business in Florida will be required to comply with new rules designed to ensure fair access to banking and prevent politically or ideologically motivated denial of services. While Florida-licensed and chartered banks have been subject to some of these rules since the enaction of the 2023 House Bill 3, this year’s House Bill 989 creates a new consumer complaint procedure that expands the rules to any financial institution operating in Florida. Therefore, the financial industry should be preparing to comply with the new requirements as the July 1 effective date approaches.

De-banking Prohibitions

In 2023, the Florida Legislature enacted a banking statute prohibiting covered institutions from denying, canceling, suspending, or terminating banking services on the basis of:

• Political beliefs and affiliations;
• Religious beliefs and affiliations;
• Any factor that “is not a quantitative, impartial and risk-based standard;” or
• The customer’s “social credit score,” which includes politics, religion, firearms, fossil fuels, advocacy, ESG factors, and participation in “social justice programing” or diversity, equity, and inclusion programs.

Covered institutions must certify compliance with the law on an annual basis. When enacted, the statute applied only to financial institutions licensed or chartered in Florida. The 2024 amendment, however, expands the scope of the law to all state or federal banks, savings associations, trust companies, credit unions, and other categories of financial institutions. This will sweep in many financial institutions that were not previously covered.

It is not clear from the law exactly what degree of operations are required to bring an institution within the amended scope of the statute. However, any financial institution with a physical presence within Florida should assume it has the obligation to comply with the law. Whether the law extends to an institution without a physical presence in the state that has a lending or banking relationship with a Florida resident is an unresolved question.

Consumer Complaint Process

HB 989 also creates a new process for customers to submit complaints to the Florida Office of Financial Regulation (OFR) if they believe a financial institution has violated the law. After a complaint is submitted, the OFR must notify the financial institution, which then has 90 days to file a response.

The complaint filing also starts a 90-day window for the OFR to begin investigation. If the OFR finds a violation, the OFR must notify the consumer, the financial institution, the Department of Financial Services, and the appropriate enforcing authority (namely the state attorney or the Florida attorney general).

Getting Ready for July 1

Banks and other covered entities should be taking several steps to comply with these requirements. First, companies should review their policies and training materials to confirm decisions on account access are not made based on prohibited grounds. Second, banks should designate employees to review and respond to consumer complaints. Third, entities should look out for the OFR’s forthcoming rules to implement the details of the system for processing and responding to complaints.

Finally, while working on compliance with Florida’s fair access law, companies should keep in mind the expectations of federal regulators. In particular, the Federal Reserve’s framework for risk management instructs financial institutions to consider reputational risks. On the other hand, a July 2022 joint statement from the Federal Reserve, FDIC, OCC, and other regulatory agencies encouraged banks not to deem entire industries high risk but rather to use individualized risk assessments of customers. Companies should aim to ensure compliance with Florida’s law regulations is consistent with federal regulatory approaches.

Financial institutions should also keep a watchful eye on this new type of state legislation beyond Florida. Tennessee has enacted a similar fair access to banking law that also goes into effect on July 1, and several other states have introduced legislation on this front. These laws are part of a multi-state movement seeking to prevent the use of ESG factors and political or ideological grounds in a range of corporate decisions.