Bankers in Arizona and Iowa have beaten back state legislation that could have penalized banks for making loans to illegal immigrants, but the bankers say their fight is not over.
Anti-immigration sentiment continues to build in pockets of the country, and bank trade groups are already bracing for another go-around with lawmakers next year, said Tanya Wheeless, the president and chief executive of the Arizona Bankers Association.
"Immigration is a huge issue right now, and there are lawmakers representing constituents who want to make it as difficult as possible for immigrants to be here illegally," she said.
Provisions in bills that lawmakers in both states introduced this year would have prohibited banks from accepting individual taxpayer identification numbers as proof of a borrower's identity. (The Internal Revenue Service issues taxpayer identification cards to tax-paying illegal immigrants, who use them in lieu of Social Security cards.)
The first version of the Iowa bill would have actually stripped a bank of its state charter if it made a mortgage to an illegal immigrant.
Bankers in both states objected to the proposed legislation, largely because they see the fast-growing immigrant population - especially Latinos - as an important customer base. At the urging of their regulators, many mainstream banks have been marketing aggressively to immigrants, by letting them use identification cards issued by their consulates to open accounts and accepting taxpayer ID numbers as proper documentation for home loans.
To reach out to both legal and illegal immigrants, banks are also creating specialized products, hiring Spanish-speaking tellers and loan officers, and even setting up Spanish-language Web sites.
"The banking industry supports laws to curb illegal immigration, but we have a problem with bills that target our industry," Ms. Wheeless said.
Oddly, no bank in Arizona lets illegal immigrants use taxpayer ID numbers as proof of identity, but Ms. Wheeless said her trade group used its lobbying muscle to fight the proposed legislation because a few banks have launched test programs in other states and are considering extending the programs to Arizona.
The bill was defeated in a House committee last month.
She said that her trade group did most of its work behind the scenes.
Anti-immigration sentiment is particularly acute in Arizona - two years ago voters there overwhelmingly passed a referendum denying government services to undocumented immigrants - and any group that opposes anti-immigration measures faces possible retaliation, she said.
After the Arizona bill was defeated and Ms. Wheeless was quoted in the local press, she received phone calls at her home from angry supporters of the bill.
Sharon Presnall, the senior vice president of government relations at the Iowa Bankers Association, said a number of banks in the state make loans to both legal and illegal immigrants.
When a bill there was introduced last month, the group persuaded lawmakers to revise it to exempt any company that complied with the USA Patriot Act's customer identification requirements, Ms. Presnall said.
But the group still had concerns with the legislation and, along with trade groups in other industries, finally persuaded lawmakers to kill it late last month.
Specifically, Ms. Presnall said, the bill was unclear on how it would treat companies that buy loans, and the Iowa bankers feared the secondary market for their loans would dry up.
The bill also would have punished employers, including banks, for hiring illegal immigrants. Bankers were concerned that there was no safe harbor for banks that unintentionally accepted fraudulent employment verification documents for people who were actually illegal immigrants, she said.
"We don't want to turn bankers into INS agents," she said.
John Sorensen, the president and CEO of the Iowa Bankers Association, said it is encouraging its members to reach out to the immigrant population.
"Communities in Iowa have become quite diverse, and many bankers across the state have recognized that they need to do all they can to better serve the Latino communities," Mr. Sorensen said.
