BILL ANALYSIS Ó
SENATE BANKING & FINANCIAL INSTITUTIONS COMMITTEE
Senator Lou Correa, Chair
2013-2014 Regular Session
AB 385 (Dickinson) Hearing Date: June 19, 2013
As Amended: May 24, 2013
Fiscal: Yes
Urgency: No
SUMMARY Would house the Bank On California Program within the
Department of Business Oversight.
DESCRIPTION
1. Would make findings and declarations that define and
describe the Bank on California Program.
2. Would statutorily house the Bank on California Program
within the Department of Business Oversight, and would
require the Commissioner of Business Oversight to do all of
the following, in coordination with regional Bank On
programs:
a. Request the following information from participating
financial institutions on a quarterly basis, and share
this information with regional Bank On programs, as
necessary: the total number of program accounts opened,
the total number of program accounts closed, the zip
codes of program accountholders, and the median and
average account balances of open program accounts.
b. Report annually to appropriate policy and fiscal
committees of the Legislature on all of the following
information, using information collected from
participating financial institutions and from regional
programs: data on program account opening, closing,
account balance, and customer zip codes by location and
quarter, and cumulatively; adherence by participating
financial institutions to negotiated account features;
and activities conducted by participating financial
institutions in support of regional programs.
c. Pursue voluntary agreements with financial
AB 385 (Dickinson), Page 2
institutions with a presence throughout California.
d. Identify geographic localities with a high density
of unbanked individuals and households and no existing
Bank On program, and work with local leaders in these
locations to support the establishment of new programs.
e. Provide support to regional programs in coordination
with regional program leadership, as specified.
3. Would provide that regional programs shall be voluntary,
public-private initiatives led by local government, in
partnership with financial institutions and community-based
organizations.
4. Would require regional programs to negotiate with financial
institutions to provide unbanked, low- to moderate-income
individuals with access to free or low-cost banked accounts
and promote financial education.
5. Would require 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 of Business
oversight, as specified.
f. Train branch staff on program policies and
procedures.
g. Participate in outreach activities to promote the
program to low-income communities.
EXISTING LAW
AB 385 (Dickinson), Page 3
6. Authorizes the Department of Financial Institutions (DFI)
to administer provisions of the Financial Code regulating
the activities of state-chartered banks and industrial loan
companies, state-chartered credit unions, money
transmitters, trust companies, and insurance premium finance
companies (Divisions 1 through 7 of the Financial Code).
7. Effective July 1, 2013, reorganizes DFI and the Department
of Corporations as divisions within a new Department of
Business Oversight (Government Reorganization Plan Number
2).
8. Provides for the California Financial Literacy Fund,
administered by the State Controller, to enable partnerships
with the financial services community and governmental and
nongovernmental stakeholders to improve Californians'
financial literacy (Financial Code Section 70000 et seq.).
AB 385 (Dickinson), Page 4
COMMENTS
1. Purpose: This bill is intended to create long-term
stability and guidance to both Bank On California and to the
growing number of regional Bank On programs in California,
by providing a permanent home for the Bank On California
program.
2. Background: The Bank On California Program is an outgrowth
of Bank on San Francisco, which, in turn, was created in
response to results of a survey performed by officials of
the City and County of San Francisco in 2005. That survey
identified approximately 50,000 unbanked households in the
City and County, many of which housed people of color. When
San Francisco officials reviewed the data, they determined
that San Francisco had a compelling interest in helping the
unbanked open accounts, as a first step toward financial
empowerment and a stronger community.
In December 2005, a committee comprising the San Francisco
Treasurer's Office, the New America Foundation, the Federal
Reserve Bank of San Francisco, and the nonprofit
organization EARN worked with local community organizations,
banks, and credit unions to develop a new program to bank
the unbanked. This coalition eventually became Bank on San
Francisco. It began with four goals: 1) create more
opportunities for lower-income clients to enter the
financial mainstream; 2) create products without high fees
or minimum balances; 3) help unbanked people learn about the
benefits of keeping their money in checking and savings
accounts; and 4) help San Franciscans learn more about how
to use, manage, and save money. Bank on San Francisco
ultimately partnered with fourteen banks and credit unions.
The group set an initial goal of banking 10,000 unbanked San
Franciscans in two years.
Results have been strong: Bank On San Francisco has helped bank
an average of 10,000 people per year since launch
(http://sfofe.org/programs/bank-on). According to the San
Francisco Office of Financial Empowerment (OFE), Bank on San
Francisco is the first comprehensive program in the United
States dedicated to helping people without access to
mainstream financial institutions. It has become a model
for similar programs across the nation.
In 2008, the Schwarzenegger Administration launched Bank On
AB 385 (Dickinson), Page 5
California, to build on Bank On San Francisco, and encourage
other local governments to launch and maintain regional
"Bank On" programs of their own. Initially, Bank On
California was housed within the Governor's Office of
Planning and Research. A few years later, Bank On
California was shifted to the State and Consumer Services
Agency. Last year, the program was moved to DFI.
To date, within California, Bank On Programs have been
established in American Canyon, Fresno, Los Angeles,
Oakland, Napa Valley, Sacramento, Orange County, San
Francisco, San Jose, and Stanislaus. According to the Bank
On California web site ( www.bankoncalifornia.ca.gov ), Bank
on Programs in Monterey, Salinas, Santa Cruz, and
Watsonville are coming soon.
3. Discussion: If this bill is enacted, the Department of
Business Oversight would join the U.S. Department of the
Treasury and the National League of Cities as a repository
for information about state and regional Bank On programs.
According to the San Francisco OFE, "Bank On San Francisco's
success attracted national attention. To help other cities
start their own programs, the National League of Cities
created "Bank on Cities" and the U.S. Department of the
Treasury has begun work on a national "Bank on USA" program.
More than 100 cities have launched, or started planning, a
Bank On program. To provide technical assistance to support
these efforts, the San Francisco Office of Financial
Empowerment partnered with the National League of Cities and
the James Irvine Foundation to create joinbankon.org, a web
portal offering tools and resources for other cities
planning Bank On programs."
A significant amount of information about the philosophy behind
Bank On, how to find an existing Bank On program, and how to
start a new Bank On program is available at
www.joinbankon.org .
4. Summary of Arguments in Support:
a. United Ways of California and United Way of Silicon
Valley (whose Vice President of Community Building &
Impact serves as program manager for Bank On San Jose)
AB 385 (Dickinson), Page 6
both sent letters of support, stressing United Way's
support of Bank On program across California. United Way
supports a full range of asset-building and economic
self-sufficiency strategies. United Ways view AB 385 as
important for ensuring the continuity of Bank On
California and providing needed assistance to California
cities and counties as they work to provide access to the
financial mainstream for their residents.
b. The City and County of San Francisco and the City of
Los Angeles also support the bill. "AB 385 ensures the
continuation of Bank On California by providing it with a
permanent home in the Department of Business Oversight
and requiring an annual report to the Legislature." The
bill will ensure the consistent monitoring of outcomes,
by measuring how financial institutions are providing
low-income Californians access to the financial
mainstream.
c. EARN, an active nonprofit partner in Bank On San
Francisco, deeply believes in the program's core vision
of ensuring that customers, particularly those who are
unbanked and underbanked, have access to quality and
affordable banking products.
5. Summary of Arguments in Opposition: The California Bankers
Association (CBA) is opposed to the bill, unless it is
amended to delete the requirement that the Department of
Business Oversight collect and report specific data from
participating banks on a quarterly basis. The collection
and segregation of the data that the Department would be
required to collect would impose significant costs on
participating banks, which will discourage participation in
Bank On programs. CBA also observes that several of the
banks that would be required to submit data to the
Department are federally-chartered. Under a dual-banking
system, federally-chartered banks report to federal (not
state) regulators.
CBA is also opposed to the mandatory nature of program
requirements, which this bill would impose on banks that
voluntarily agree to participate in Bank On programs. "In
order to have a successful program, it is important to allow
banks to be innovative in how they establish accounts for
hard to reach communities. Requiring all participating
banks to offer a one-size-fits-all approach may result in
AB 385 (Dickinson), Page 7
banks opting out of the program, because their account
packages to not meet the requirements set forth in the
bill."
6. Amendments: No agreement had been reached on compromise
amendments intended to remove opposition at the time this
analysis was prepared.
7. Prior and Related Legislation: All of the following bills
were attempts to involve DFI in programs focused on banking
both unbanked and underbanked individuals.
a. AB 38 (Bradford), 2011-12 Legislative Session:
Would have required DFI to work with local agencies to
compile a list of underserved communities or regions that
lack a concentration of depository institutions and
financial services. Vetoed by Governor Brown.
b. AB 2581 (Bradford), 2009-10 Legislative Session:
Would have established a Banking Development District
(BDD) program within DFI, and directed DFI to share
specified information about the BDD program with the
State Treasurer for the Treasurer's use in promoting his
Time Deposit Program. Vetoed by Governor Schwarzenegger.
c. AB 1502 (Lieu), 2007-2008 Legislative Session:
Would have established a BDD program, jointly
administered by DFI and the State Treasurer. Passed the
Assembly, but was gutted and amended prior to being sent
to the Governor.
LIST OF REGISTERED SUPPORT/OPPOSITION
Support
City and County of San Francisco
City of Los Angeles
EARN
United Way of Silicon Valley
United Ways of California
AB 385 (Dickinson), Page 8
Opposition
California Bankers Association
Consultant: Eileen Newhall (916) 651-4102