BILL NUMBER: AB 38 AMENDED
BILL TEXT
AMENDED IN SENATE JUNE 27, 2011
AMENDED IN ASSEMBLY MAY 27, 2011
AMENDED IN ASSEMBLY MARCH 21, 2011
INTRODUCED BY Assembly Member Bradford
DECEMBER 6, 2010
An act to add Division 18 (commencing with Section 40000)
40001) to the Financial Code, relating to
banking development districts.
LEGISLATIVE COUNSEL'S DIGEST
AB 38, as amended, Bradford. Banking development
districts. Banking: underserved communities.
Existing law provides for various programs and activities in the
development of economic opportunities for businesses in the state.
The California Small Business Financial Development Corporation Law
establishes small business financial development corporations and
provides for their regulation by the Business, Transportation and
Housing Agency. Existing law, the Banking Law, provides for the
regulation of banks by the Department of Financial Institutions.
This bill would create a Banking Development District Program,
within the department, that would encourage the establishment of
banking branches in designated geographic locations where there is an
underserved community, as defined. The bill would require the
department to provide information on the Banking Development District
Program to the Treasurer and would authorize the Treasurer to
utilize the Banking Development District Program when promoting the
Treasurer's Time Deposit Program. The bill would require the
department to adopt rules and regulations for the establishment and
maintenance of banking development districts. The bill would
authorize the department to work with local agencies and economic
development officials to identify local incentives for banks
participating in the Banking Development District Program, as
specified.
This bill would require the department to work with local agencies
to compile a list of underserved communities. The bill would require
the department to post that list on the department's Internet Web
site.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. The Legislature finds and declares all of the
following:
(a) Too many Californians are disconnected from the financial
mainstream. National estimates show that 10 percent of households,
including nearly one-quarter of the minority population, are
"unbanked," meaning they lack a basic checking or savings account. In
California, 12 percent of adults do not have a checking or savings
account, according to the United States Census. Recent market
research indicates that Fresno and Los Angeles have the second and
third highest percentages of unbanked residents in the country. In
San Francisco, the Brookings Institution found that one in five
adults, and half the city's African Americans and Latinos, do not
have bank accounts. The unbanked are most likely to be people who are
less educated and have lower incomes.
(b) The unbanked poor pay more to conduct their financial lives.
Utilizing check cashing outlets and money order services to pay bills
and expenses can have costly side effects as the result of fees and
service charges.
(c) Families without accounts often do not have a safe place to
keep their money. They may walk around with large amounts of cash in
their pockets, or keep it at home in a coffee can. Robberies can be
more prevalent around check cashing outlets. A burglary or fire could
cost them their life's savings in a matter of moments.
(d) Lower income households often pay more for financial services.
According to a recent Brookings Institution study, a full-time
worker without a checking account could potentially save as much as
$40,000 during his or her career by relying on a lower cost checking
account instead of check cashing services. As a result, without a
checking account or lower cost checking account, lower income
families have added difficulty saving for and investing in
wealth-building assets, the investments they do make are too often
not in their best financial interest, and business opportunities in
lower income markets are unduly depressed.
(e) A bank account is also the first step to financial security
and asset building for many families. A bank account helps people
take the first step onto this path. Without an account, it is much
more difficult to get well-priced car loans, credit cards, or
mortgages, which are the exact financial tools needed to climb up the
economic ladder. Many families stay stuck on a different and more
expensive path, going to pawn shops, payday lenders, and rent-to-own
stores.
(f) While financial institutions may see the long-term business
potential of underserved areas, they may have a short-term concern
that it would take a number of years before they can attract enough
retail deposits to become viable. Those concerns are magnified by the
fact that lower income workers often need to use banking services in
off-business hours because they work in multiple jobs, making it
more difficult for banks to attract customers with standard business
practices.
(g) In 1999, the State of New York established a Banking
Development District Program and made available a range of state and
city incentives to participating financial institutions. The
incentives provided through the program aim to help banks get over
short-term obstacles to profitability, enabling them to branch into
neighborhoods with long-term business potential, and better serve
low-income consumers with existing bank branches.
(h) It is the intent of the Legislature in enacting this act to
create a Banking Development District Program to spur increased and
enhanced banking services in underserved communities that will spur
greater financial inclusion and promote local economic development.
The desired outcome is that more Californians will enter the
financial mainstream and build savings and wealth through
participating banks' offerings and marketing of reasonably priced
transactional, loan, and credit products.
SEC. 2. Division 18 (commencing with Section 40000) is added to
the Financial Code, to read:
DIVISION 18. BANKING DEVELOPMENT DISTRICT PROGRAM
IN UNDERSERVED COMMUNITIES
40000. The Banking Development District Program is hereby created
in order to encourage the establishment of banking branches that
provide needed products and services in specifically designated
geographic locations where there is an underserved community. These
designated locations shall be known as banking development districts.
Financial institutions may seek to participate in the program to do
either of the following:
(a) Open a new outlet in an area designated as a banking
development district.
(b) Develop and market a new product line or group of services in
an existing outlet in an area that is designated as a banking
development district.
40001. For purposes of this division, the following definitions
shall apply:
(a) "Bank" refers to any commercial bank, savings bank, savings
association, or credit union.
(b) "Unbanked" refers to a person who lacks both a basic checking
account and a savings account.
(c) "Underbanked" refers to a person who has a bank account but is
not fully integrated in the financial mainstream.
(d)
(b ) "Underserved community" is a remote
location or impoverished area that lacks banking services
commensurate with the services provided to higher income areas with a
population of similar size.
(e) "Banking development district" is a specifically designated
geographic location comprising an underserved community that has been
designated as such by the department pursuant to this division.
(f)
(c) "Local agency" means a city, county, whether
general law or chartered, city and county, or town.
(g)
(d) "Department" means the Department of Financial
Institutions.
40002. (a) The Banking Development District Program
shall be established within the department.
(b) The department
and local agencies may compile a list of department
shall work with local agencies to compile a list of underserved
communities or regions that lack a concentration of banks and
services in order to provide banks with a clear demonstration of
those areas that are in the most need.
(c) The department shall provide information on the Banking
Development District Program to the Treasurer and the Treasurer may
utilize the Banking Development District Program when promoting the
Treasurer's Time Deposit Program. The Treasurer may take into
consideration banking development district areas as a criterion when
authorizing participation by financial institutions in the Time
Deposit Program.
(b) The department shall post the list compiled pursuant to
subdivision (a) on the department's Internet Web site.
40003. The department may work with local agencies and economic
development officials to identify local incentives for participating
banks. These local incentives may include, but shall not be limited
to, the following:
(a) Local agency deposits.
(b) Local agencies may help banks locate suitable commercial space
for branches and may provide real estate assistance.
(c) Local tax incentives. Banks may be eligible for additional
incentives if a banking development district overlaps with an
enterprise zone.
(d) Workforce development. Customized training may be developed
for tellers, back-office or administrative staff, information
technology, security, and other select job categories.
40004. The department shall adopt rules and regulations for the
establishment and maintenance of banking development districts, as
provided for in this division.