BILL ANALYSIS Ó
AB 385
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Date of Hearing: April 8, 2013
ASSEMBLY COMMITTEE ON BANKING AND FINANCE
Roger Dickinson, Chair
AB 385 (Dickinson) - As Amended: April 2, 2013
SUBJECT : Bank on California program.
SUMMARY : Establishes the Bank on California Program in the
Department of Business Oversight (DBO). Specifically, this
bill :
1)Provides that the Program shall provide support and
coordination to regional programs located in communities
throughout California.
2)Specifies that regional programs shall be voluntary
public-private initiatives led by local government, in
partnership with financial institutions and community based
organizations.
3)Requires participating financial institutions to do all of the
following:
a) Offer a low-or no-cost checking account with no monthly
minimum balance requirement;
b) Adapt internal systems to allow a customer with a
negative banking history or Chex Systems record to open an
account;
c) Accept Consular identity cards and other alternative
forms of identification as primary identification;
d) Waive one set of nonsufficient funds or overdraft fees
per program participant per year;
e) Report data to the commissioner on a quarterly basis on
key metrics including, but not limited to, the number of
accounts opened and closed, the ZIP Codes of program
accountholders, and the average and median monthly balances
of program accounts.
f) Train branch staff on program policies and procedures;
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and,
g) Participate in outreach activities to promote the
program to low-income communities.
4)Requires the Commissioner in coordination with local programs,
commencing in 2014, to do the following:
a) Request and collect the following data from
participating financial institutions on a quarterly basis,
sharing this data with local programs as necessary:
i) The total number of program accounts opened.
ii) The total number of previously opened program
accounts closed.
iii) The ZIP Codes of program accountholders.
iv) The median and average account balances of all open
program accounts.
b) Provide the chairs of both the Senate Committee on
Financial Institutions and the Assembly Banking and Finance
Committee with a brief annual summary on the activities of
the program.
i) Allows the Commissioner to request information from
local programs in order to complete the report which
shall include, but is not limited to, the following:
(1) Data on program account opening, closing,
account balance, and customer ZIP Codes presented by
location and quarter, as well as cumulatively.
(2) Adherence by participating financial
institutions to negotiated account features.
(3) Financial institution activities in support of
local programs, including branch trainings, data
reporting, participation in meetings and activities,
and other program outcomes reported by local programs.
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c) Pursue voluntary agreements with financial institutions
with a presence through California to offer program-style
products.
d) Identify geographic localities with a high density of
unbanked individuals and households and no existing
program.
e) Provide support to local programs by:
i) Establishing guidelines and best practices for
programs.
ii) Providing information and guidance on regulatory and
other banking issues.
iii) Intervening on behalf of local programs if a
participating financial institution is not adhering to
the program commitments.
iv) Providing assistance to disseminate program
materials and other information.
v) Hosting one convening per year for all programs.
5)Defines "commissioner" as the Commissioner of Business
Oversight.
6)Defines "department" as the Department of Business Oversight.
7)Defines "program" as the Bank on California Program.
8)Defines "unbanked" as any individual or household that lacks
any kind of deposit account at an insured depository
institution.
9)Making findings and declarations.
EXISTING LAW
1)Currently has no statutory requirements regarding the Bank on
California Program. The Bank on California Program was
launched as an initiative by Governor Schwarzenegger in 2008.
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2)Implements the Governor's Reorganization Plan, which combines
as of July 1, 2013, the Department of Corporations (DOC) and
the Department of Financial Institutions (DFI) to create the
DBO.
3)Gives DFI the responsibility to oversee the operations of
state-licensed financial institutions, including banks, credit
unions, industrial banks, savings associations, trust
companies, foreign banking organizations, business and
industrial development corporations, money transmitters,
issuers of payment instruments and travelers checks, and
premium finance companies.
FISCAL EFFECT : unknown.
COMMENTS :
BANK ON CALIFORNIA (Program):
The Bank On movement started in San Francisco in 2006 with the
launch of Bank on San Francisco. In 2008, the state of
California launched Bank On California from the office of former
Governor Arnold Schwarzenegger. There are currently eleven
"Bank On" programs launched in California. Most Bank On programs
in California are led by the municipal government or the local
United Way.
Bank on's are established in: Bank on San Francisco, Bank on Los
Angeles, Bank on Oakland, Bank on San Jose, Bank on Fresno, Bank
on Sacramento (Sacramento City and County, Yolo County, Placer
County, El Dorado County and Amador County), Bank on Orange
County, Bank on Stanislaus, Bank on American Canyon, Bank On
Napa Valley, Bank On Central Coast (Monterey, Salinas, Santa
Cruz, Watsonville) is under implementation.
Since Bank on California launched in 2008 without statutory
oversight, the program has been housed in several state
departments including the Governor's Office of Planning and
Research, the State and Consumer Services Agency, and recently
found a home in DFI. Due to the program being pushed from
department to department in the span of 4 years, it is difficult
to determine the success of the program and whether it
appropriately serves the needs of the local Bank On Programs.
The program has thrived predominantly due to the local level
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programs and the large-scale recognition of Bank on San
Francisco. AB 385 is needed to create long-term stability and
guidance to the Bank On programs. Due to the shuffling,
concrete data on the success of the statewide program and the
local programs is hard to determine because some departments did
not collect any data or keep track.
Bank on California programs at the local level are largely
funded by non-profits and coalition organizations.
Bank on California involves a voluntary partnership between
certain financial institutions and cities, is intended to
increase the supply of starter account products offered by
participating financial institutions, raise awareness among
unbanked individuals about the benefits of account ownership,
and make quality money management education more easily
available to un- and underbanked individuals.
As stated in AB 385's finding and declarations it is important
to note:
The goal of the Bank on California Program is to financially
empower lower income consumers by making it easier and more
affordable for them to deposit their paychecks, pay their
bills, and start saving.
The Bank on California Program increases the supply of starter
account products that work for the low-income, unbanked
Californians by developing baseline product criteria that must
be offered by all participating financial institutions.
The Bank on California Program raises awareness amongst
unbanked consumers about the benefits of account ownership and
spurs Californians to open accounts.
The Bank on California Program makes quality money management
education more easily available to low-income Californians and
raises statewide awareness of the unbanked problem and
potential solutions.
An estimated 7.8 % of Californians are unbanked and an
additional 18% are considered underbanked.
The average unbanked Californian pays one thousand dollars
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($1,000) to cash a year's worth of paychecks.
Californians with bank accounts are more likely to save, have
higher credit scores, and get better priced car and home
loans.
Data from the 2011 FDIC "National Survey of Unbanked and
Underbanked Households"
8.2 % of US households are unbanked. This represents 1 in 12
households in the nation, or nearly 10 million in total.
20.1 % of US households are underbanked. This represents one
in five households, or 24 million households.
An estimated 7.8% of Californians are unbanked and an
additional 18% are considered underbanked.
18.2% of African-American California households and 16.7% of
Hispanic California households are unbanked, and an additional
33% of African-Americans and 24% of Hispanic households are
underbanked.
Report from the Federal Reserve Bank of Saint Louis, 2010
Unbanked consumers spend approximately 2.5 to 3% of a government
benefits check and between 4% and 5% of payroll checks just to
convert these checks into cash. Additional dollars are spent to
purchase money orders to pay routine monthly expenses. When you
consider the cost for cashing a bi-weekly payroll check and
buying about six money orders each month, a household with a net
income of $20,000 may pay as much as $1,200 annually for
alternative service fees-substantially more than the expense of
a monthly checking account fee.
NEED FOR THE BILL:
Under AB 385, the Bank on California Program would be
established within the DBO. Currently the program is
voluntarily housed at DFI. The bill does not take the
responsibility away from DFI but instead acknowledges after July
1, 2013, DOC and DFI will be combined to create the new DBO. AB
385 gives the program a much needed permanent home at the state
level and establishes the important program in statute
indefinitely. This will provide local programs more direction
and support and will provide the DBO the tools to collect and
retain information to better evaluate the success and needs of
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the programs.
AB 385 sets up minimal requirements of what a local Bank On
should strive for, as well as places a greater responsibility on
the DBO to stay in engaged and involved in the program. While
the bill does create a foundation, the program as a whole
remains voluntary at every level. A local government can
determine whether or not to create a local bank on and a
financial institution can decide whether or not to participate.
As noted, the requirements in the bill are the minimal
requirements that all participating financial institutions agree
to when voluntarily deciding to participate in the Bank On
program. AB 385 does not go above and beyond requiring anything
what the local governments asked their financial institutions to
agree to. If a financial institution is not able to provide
those services to the unbanked then the financial institution
does not partner/participate with that Bank On program.
The measure requires the DBO to submit a report on an annual
basis to specified committees of the legislature to ensure the
program is successful and meets the needs of the Bank on
programs at the local level. AB 385 clarifies the state's role
in ensuring the success of the Bank On program. The information
required to be collected is information participating local
governments and financial institutions are asked to collect when
creating a Bank On.
AB 385 gets to the detrimental issue in California, the obscene
amount of Californians who are financially illiterate and
unbanked or underbanked. The goal of AB 385 is to encourage
voluntary collaborative partnerships that work together to lower
the number of unbanked and to get more Californians to enter the
financial mainstream. With a bank account, unbanked
Californians can achieve financial security, start to save for
the future, and establish a credit history. The unbanked, or
those without an account with a financial institution,
constitute approximately 22 million, or 20% of Americans.
The Bank on California Program should be a role model to other
states and stand as the umbrella to local city and county Bank
On Programs. AB 385 raises the bar and gives the Bank on
California Program the star status that it deserves.
REGISTERED SUPPORT / OPPOSITION :
AB 385
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Support
Bank on San Jose (BoSJ)
Bill Lockyer, California State Treasurer
California Credit Union League (CCUL)
California Independent Bankers (CIB)
The City and County of San Francisco
United Way of Fresno County
United Way of Stanislaus County
United Ways of California (UWCA)
Opposition
None on file.
Analysis Prepared by : Kathleen O'Malley / B. & F. / (916)
319-3081