Tennessee bill fights religious discrimination in banking. Critics say its a solution in search of a problem

Rep. Jason Zachary, R-Knoxville, is sponsoring legislation to provide religious protections to banking customers. He is seen here last week on other legislative business. (AP Photo/George Walker IV)
Rep. Jason Zachary, R-Knoxville, is sponsoring legislation to provide religious protections to banking customers. He is seen here last week on other legislative business. (AP Photo/George Walker IV)

Did two conservative religious groups lose their bank accounts because of their beliefs, or for some other reason?

Their representatives testifying before Tennessee lawmakers Tuesday did not know for sure — but they said their former banks' sporadic, vague explanations suggested the need for a new state law that would prevent large financial institutions from using non-quantitative factors to determine whether to open an account for someone or give them a loan.

"We can't really ascribe a motive to this," said Matt Goddard, of the National Committee for Religious Freedom, which he said was surprised in 2022 to find its Chase bank account closed and struggled to get a clear answer why. "We don't know. But if it is religion, that should be frowned upon."

Citing legal liability risks, among other things, the Tennessee Banking Association opposes the bill, for which discussion went so long Tuesday the proposal was rolled to next week for a vote.

Nationwide and here in Tennessee, financial institutions have gotten caught up in broader political and cultural fights. In December, Tennessee Attorney General Jonathan Skrmetti sued BlackRock, charging the investment giant is harming consumers by being socially conscious.

In the Banking & Consumer Affairs Subcommittee on Tuesday, Tennessee lawmakers discussed a freshly-coined concept — "debanking" — and heard arguments for and against a bill proponents said would prevent the largest banks operating in the state from denying service to Tennesseans based on political beliefs or a "social credit score."

But House Bill 2100, critics said, represents a solution in search of a problem, and if enacted would create significant legal and regulatory risks for banks in Tennessee.

Weighing a potential client's risk is the responsibility of a bank's board and management, said Amy Heaslett, the general counsel of the Tennessee Banking Association, in testimony before lawmakers Tuesday.

She said the bill would prohibit a bank from factoring in things like character, reputational risk or business sector in deciding whether to work with a client — meaning a bank, she said, could not refuse to work with say, a business that promotes "unethical conduct" like an adult store, the Church of Satan or a marijuana shop.

Banks don't use social credit scores or reject or end relationships with customers solely because of their religious or political views, said Stacey Langford, the banking association's executive vice president, in her testimony Tuesday.

"Unfortunately, there are situations were customers have been denied services for legitimate business reason and then they make the claim that they were denied because of those social, political or religious affiliations," she said.

There are all sorts of reasons someone might lose their bank account, she said. Perhaps, she speculated, they do business in a country flagged for money laundering or did not properly disclose all the relevant information to meet federal or bank criteria, and because of federal guidelines the bank cannot disclose its rationale.

She added that JP Morgan Chase, one of the association's members, reports that it banks with over 50,000 nonprofit religious organizations around the country.

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After months of study, the bill's House sponsor, state Rep. Jason Zachary, R-Knoxville, said he found no examples of Tennessee-based banks canceling or denying services based on religious beliefs.

For this reason, he and lawmakers amended the bill Tuesday such that its rules would only apply to banks with assets of $100 billion of more, which he said included 28 of the nation's largest financial institutions but excludes every Tennessee chartered bank.

Proponents of the bill characterized it in civil rights terms as a bulwark against a rising specter of religious discrimination.

"In the 1930s and '40s, in a despicable practice known as redlining, financial institutions created maps with certain neighborhoods marked in red," said Matt Sharp, general counsel of the influential conservative law firm Alliance Defending Freedom, in his testimony in Nashville on Tuesday. "Lenders viewed residents of these neighborhoods as 'hazardous' or 'too risky' and would not issue them home loans. But as we know such financial redlining was not based on financial risk. It was based on racial discrimination against predominantly Black neighborhoods. Today, we're witnessing a growing modern threat of redlining."

As an example, he told the story of the Memphis-based nonprofit Indigenous Advance Ministries, which he said helps impoverished widows and children in Uganda. Right before a mission trip, he said, Bank of America closed the group's longstanding bank account and for months didn't furnish answers as to why until The Daily Mail started asking questions.

Bank of America told the British tabloid that religious beliefs are not a factor in any account closing decision.

"Part of the issue is the banks refuse to give a clear answer," said Sharp in a phone interview after the meeting Tuesday.

He said federal law offers inadequate religious freedom protections. And as PR-minded banks start worrying about reputational risk if they work with certain groups, lawmakers around the nation are seeking to build religious protections at the state level, Sharp said.

The Tennessee bill has parallel legislation in Florida, Arizona and Idaho, he said.

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In the committee meeting Tuesday, lawmakers asked Greg Gonzales, the state commissioner of financial institutions who oversees regulation of Tennessee banks, what trends he was observing. He talked about the issue of cybersecurity.

"I know that there's interest in whether environmental social governance issues come up in our work and how we think about those issues," he said. "I can tell you that ESG as a political philosophy simply does not come up in what we do."

Asked what recourse consumers had when they feel they were mistreated by a bank, Gonzales said his agency welcomed complaints, which he said it would take up with the bank in question or direct to the appropriate federal authority.

Bryan Jordan, CEO of Tennessee's biggest bank, the Memphis-based First Horizon Corp., said his bank does not "debank" or deny service to any potential or existing customer based upon any religious views.

"Our view is that we provide access to credit and banking tools and resources broadly speaking, and we don't discriminate based on anyone's affiliation one way or another," Jordan said in an interview Tuesday at the bank's office in downtown Chattanooga. "We want to support our communities as broadly as we can, and we endeavor to do that everyday."

Staff writer Dave Flessner contributed reporting.

Contact Andrew Schwartz at aschwartz@timesfreepress.com or 423-757-6431.

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