Dear FIBA Members,
We write to provide you with an update on Florida HB 585, which as you recall, provided that a customer who reasonably believed that a financial institution terminated or restricted access to the customer’s account in “bad faith” could file a complaint with the Florida Office of Financial Regulation (OFR), triggering an investigation by the OFR. Pursuant to that bill, if the OFR determined that the financial institution’s action was taken in “bad faith,” the OFR would notify and provide a report of its findings to the Attorney General, the Florida Chief Financial Officer and the customer. HB 585 also created a private right of action to permit the customer to sue the financial institution within 12 months of the finding by the OFR of “bad faith.”
You may recall that last month, I traveled to Tallahassee together with Legal & Regulatory Affairs (LARA) Committee Chair, Marina Olman, for meetings with Anthony DiMarco of the Florida Bankers Association, the OFR and Florida Senate staff and leadership, to discuss the negative impact the bill would have on the financial services industry, if passed. During our meeting with the Senate, Marina, Anthony and I expressed that the bill would result in increased compliance costs, significant regulatory burdens and litigation costs, and heightened risks for banks. We focused on three key issues with the bill that required the Senate’s attention. Those issues were: (i) the creation of a private right of action for aggrieved customers; (ii) the lack of a definition for the term “bad faith;” and (iii) the potential requirement imposed on the OFR to disclose confidential information and records of a financial institution that are protected under Florida law.
Following our meeting, on March 8, 2024, the Florida House and Senate passed Florida House Bill 989 (HB 989), replacing Florida HB 585. Governor DeSantis has not yet signed HB 989. If he does, HB 989 would become effective July 1, 2024. While HB 989 introduced new language that will require clarification and guidance from the OFR, Marina and I are proud to report that HB 989 addressed the three issues we raised in our meeting with Senate staff and leadership.
HB 989 removed the reference to “bad faith” and instead provides that an investigation by the OFR may be triggered by allegations of actions that constitute “unsafe and unsound practices” as described in section 655.0323, Florida Statutes created by 2023 Florida House Bill No. 3 (HB 3). HB 989, if signed into law, would amend section 655.0323, to provide customers who suspect that a financial institution acted in violation of the “[u]nsafe and unsound practice” standards established under HB 3, with a right to submit a complaint to the OFR, which the OFR would then be under an obligation to investigate. The OFR, upon completing the investigation, would be required to create a report reflecting the findings of the investigation (Report), and deliver a copy of such Report to the customer and the financial institution. If the OFR determines a violation occurred, the OFR would also share the Report with the Department of Financial Services and the Attorney General. The Report, however, may not contain or must redact, confidential information – resolving another issue we raised with the Senate.
HB 989 does not create new sanctions or penalties that were not already in HB 3. Most importantly, the HB 585 language creating a private right of action permitting customers to sue financial institutions for damages was not incorporated into HB 989. This change is a significant win for the banking industry. We are gratified to have been able to achieve this result, and grateful to legislative leaders for hearing our concerns and acting to avert the enactment of legislation that would have been extremely costly to the banking industry.
If the Governor signs HB 989 into law, it will be necessary to obtain clarification with regard to a number of issues arising out HB 989 (including, significantly, whether other banks that conduct business in Florida such as non-QPD national banks, non-QPD out-of-state chartered banks and non-QPD Edge Act corporations, would become subject to HB 3 and HB 989). We can seek clarity on this and other issues through engagement with the OFR, including during OFR’s rule development processes. We discussed some of these points during our AML conference this week, and we plan to hold a LARA panel once HB 989 is signed into law to update our members and discuss the issues FIBA may wish to raise in a comment letter.
As always, we are pleased to serve our members and will continue to keep you informed as this further develops.
Regards,
David Schwartz
CEO & President
Marina Olman
LARA Chair