BILL ANALYSIS Ó
AB 385
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ASSEMBLY THIRD READING
AB 385 (Dickinson)
As Amended May 24, 2013
Majority vote
BANKING & FINANCE 10-0 APPROPRIATIONS 13-4
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|Ayes:|Dickinson, Achadjian, |Ayes:|Gatto, Bocanegra, |
| |Blumenfield, Bonta, Chau, | |Bradford, |
| |Gatto, Linder, Perea, | |Ian Calderon, Campos, |
| |Torres, Weber | |Eggman, Gomez, Hall, |
| | | |Ammiano, Linder, Pan, |
| | | |Quirk, Weber |
| | | | |
|-----+--------------------------+-----+--------------------------|
| | |Nays:|Harkey, Bigelow, |
| | | |Donnelly, Wagner |
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SUMMARY : Establishes the Bank on California Program (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
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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; and,
g) Participate in outreach activities to promote the program to
low-income communities.
4)Requires the Commissioner in coordination with regional 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 regional 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 the appropriate Assembly and Senate
policy and fiscal committees with the following:
i) Allows the Commissioner to request information from
regional 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
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regional programs, including branch trainings, data
reporting, participation in meetings and activities, and
other program outcomes reported by regional programs.
c) Pursue voluntary agreements with financial institutions with
a presence through California to offer program-style products.
d) Identify geographic regions 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 regional 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)Makes findings and declarations.
EXISTING LAW :
1)Lacks 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 : According to the Assembly Appropriations Committee,
estimated cost of this legislation will be approximately $250,000
annually (special funds) for the ongoing administrative costs of
DBO, with an additional $65,000 in one-time costs.
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: San Francisco, Los Angeles, Oakland,
San Jose, Fresno, Sacramento (Sacramento City and County, Yolo
County, Placer County, El Dorado County and Amador County), Orange
County, Stanislaus, American Canyon, Napa Valley, 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 four 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 programs and the large-scale recognition of Bank on San
Francisco. This bill is needed to create long-term stability and
guidance to the Bank On programs. Due to the shuffling, concrete
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data on the success of the statewide program and the local programs
are 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:
1)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.
2)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.
3)The Bank on California Program raises awareness amongst unbanked
consumers about the benefits of account ownership and spurs
Californians to open accounts.
4)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.
5)An estimated 7.8 % of Californians are unbanked and an additional
18% are considered underbanked.
6)The average unbanked Californian pays $1,000 to cash a year's
worth of paychecks.
7)Californians with bank accounts are more likely to save, have
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higher credit scores, and get better priced car and home loans.
Data from the 2011 Federal Deposit Insurance Corporation (FDIC)
"National Survey of Unbanked and Underbanked Households" :
1)8.2 % of US households are unbanked. This represents 1 in 12
households in the nation, or nearly 10 million in total.
2)20.1 % of US households are underbanked. This represents one in
five households, or 24 million households.
3)An estimated 7.8% of Californians are unbanked and an additional
18% are considered underbanked.
4)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 regional 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 the programs.
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AB 385 sets up minimal requirements of what a regional 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 regional 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 or 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
regional level. This bill clarifies the state's role in ensuring
the success of the Bank On program. The information required to be
collected is information participating regional 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 this bill 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 regional city and county Bank On
Programs. AB 385 raises the bar and gives the Bank on California
Program the star status that it deserves.
Analysis Prepared by : Mark Farouk / B. & F. / (916) 319-3081
AB 385
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