Iowa lawmakers move forward with bill to prevent financial discrimination

State senators advanced a bill Monday that would ban financial institutions from “debanking” or discriminating against people on the basis of their religious or conservative political beliefs.

Advocates speaking on behalf of Iowa banks, credit unions and businesses said a measure banning financial institutions from discriminating against people on the basis of their religious or conservative political beliefs was a “solution in search of a problem” that would hamper free markets.

Lawmakers moved Senate Study Bill 3094 out of subcommittee Monday. It calls for prohibiting financial institutions such as banks and credit unions from discriminating against providing financial services to a person by using a “social credit score,” defined in the legislation as an institution keeping track of a person’s religious practices, associations, protected speech, expression or conduct.

Financial institutions could not decline providing services to a business owner because that person does not disclose information about their business’ greenhouse gas emissions, does not conduct diversity audits or refuses to “assist an employee in obtaining an abortion or gender reassignment service” under the bill. A person’s participation in business activity related to firearms, gas and oil sales could also not be considered.

Supporters of the bill said an amendment, not yet public, is planned for the bill that would clarify that the measure applies to large banks that serve over $100 billion in assets. It also would add the anti-discrimination requirements to large payment processors, like PayPal, that process over $100 billion in credit card transactions.

Matt Sharp, senior counsel with the conservative Christian advocacy group Alliance Defending Freedom, told lawmakers the bill is necessary because of cases in the U.S. and abroad of large financial institutions closing accounts or denying services to individuals and groups because of their beliefs.

Sharp cited allegations by Indigenous Advanced Ministries, a Tennessee-based Christian nonprofit focused on mission work in Uganda, that Bank of America closed their accounts unexpectedly in 2023 due to it speech and religious beliefs — as the organization’s website details its stances against abortion and same-sex marriage.

Bank of America sent a letter to the nonprofit saying its “risk profile no longer aligns with the bank’s risk tolerance,” Fox News reported, and that the accounts closed due to the bank’s “internal debt collection policy.” Bank of America officials said religious beliefs do not play a factor in the decision to close accounts, but some, including Alliance Defending Freedom advocates, disputed this claim.

Sharp said the planned amendment would also address concerns about situations like the Indigenous Advanced Ministries’ account closure, preventing people’s speech or religious views from being considered while banks assess risk.

“(Risk-based standards) are fine when you’re talking about an industry,” Sharp said. “Obviously if the bank’s making a loan, there’s different risks with a toy manufacturer or car manufacturer factor in that industry than there is in oil and gas. But as written right now, that allows banks a huge loophole that they can say anything is too risky, and doing it based upon someone’s speech or religious views, we don’t think that’s appropriate.”

Sen. Herman Quirmbach, D-Ames, said enforcement of the law — and evaluating discriminatory risk-based standards — could be “dicey issues” if the bill becomes law. He brought up a hypothetical situation where a business seeking to borrow money has enough collateral to cover the costs of a loan, but that an investigation finds they are currently facing a lawsuit that could put them at risk of not being able to pay back the outstanding loan.

If those lawsuits are in cases that involve charges based on releasing dangerous pollutants, like lawsuits brought against tobacco or asbestos producers, Quirmbach said, they could be considered unlawful by “social responsibility” considerations even though its in the best financial interest of a bank to deny the loan.

“Now, along comes this law, and says, ‘Well, you can’t use the social-related, directly or indirectly, readings to deny alone,'” Quirmbach said. “What kind of situation is that leave that bank or credit union in? They’re making a purely financial decision based on the well-being of their stockholders and depositors by turning down this loan, but then they have an alternative legal exposure if they do that. I see all kinds of enforcement problems here that could create just a thicket of legal lawsuits and other filings.”

Quirmbach also said that Iowa already has strong protections against religious discrimination in the Civil Rights Code of Iowa, making the bill unnecessary.

Mike Rozenboom and Sharon Presnall, lobbyists with the Iowa Bankers Association, said the bill was unnecessary as there are not any “social credit scores” being used at Iowa banks that they are aware of, and that the anti-discrimination provisions in the bill are already covered by both state and federal law.

The Bankers’ Association pointed to Wells Fargo, the largest employer in the Des Moines area, as an example that the issues highlighted in the bill are not a problem in Iowa. Wells Fargo lobbyist Doug Struyk said the financial services company is the number one agriculture lender in the state, number one firearms lender in the country and one of the top lenders for the oil and gas industries.

Rozenboom also said there are concerns that the bill would limit banks’ ability to make any decision for “reputational reasons,” such as declining services to the Church of Satan or working with the pornography industry, even if it goes against a bank employee’s own First Amendment rights or the bank’s best financial interests. He also said that the measure would abridge free markets in the state.

“Iowa Bankers opposes government intervention in markets, whether that’s from the left or the right,” Rozenboom said. “This certainly is government intervention of markets, and we oppose that. We think markets should function freely.”

Republican Sens. Lynn Evans and Dave Rowley advanced the bill with plans to amend it. Evans said while he supported the measure, he had concerns about the possibility of “frivolous lawsuits” resulting from the measure, with people attempting to sue banks for denying loans on the basis of religion or their financial dealings, even when that is not the case.

Rowley said when he read the bill, he thought of Canada banks’ decision to freeze assets in more than 200 accounts under emergency powers during the Truckers’ Convoy protests in Canada over COVID-19 restrictions. He said while the issue may not be present in Iowa at the moment, he believed it was important to pass the legislation now to prevent the issue from arising in the state.

There is a constituency with … an interest in wanting to know that if they have certain beliefs, if they hold certain positions or they are among a certain group, that they’re not going to be discriminated against in the financial world, and that their bank accounts will not be closed or if there are threats to something,” Rowley said.

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