BILL ANALYSIS Ó
AB 1292
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Date of Hearing: April 13, 2015
ASSEMBLY COMMITTEE ON BANKING AND FINANCE
Matthew Dababneh, Chair
AB 1292
(Dababneh) - As Introduced February 27, 2015
SUBJECT: Bank on California program
SUMMARY: Establishes the Bank on California Program within the
Department of Business Oversight (DBO). Specifically, this
bill:
1)Requires DBO, starting in 2016 and no later than August 30 of
each year, to provide the chairpersons of the Senate Committee
on Banking and Financial Institutions and the Assembly
Committee on Banking and Finance with a brief annual summary
on the activities of the program.
2)Declares Bank on California as a voluntary collaborative
initiative that assists Californians in opening a bank or
credit union account and saving for the future.
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)Gives DBO 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:
The Bank On movement started in San Francisco in 2006 with the
launch of Bank on San Francisco. In 2008, California launched
Bank on California from the office of former Governor Arnold
Schwarzenegger. Most Bank On programs in California are led by
the municipal government or the local United Way.
Currently, only four local Bank On programs remain active which
include: Bank on Sacramento, Bank on Oakland, Bank on Los
Angeles, and Bank on San Francisco.
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 found a
home in the Department of Financial Institutions now known as
DBO in 2012. Due to the program's history of inconsistent
resources and leadership prior to DBO, it is difficult to
determine the success of the program and whether it
appropriately serves the needs statewide and at the local Bank
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On level. The program has thrived predominantly due to the
local level programs and the large-scale recognition of Bank on
San Francisco. AB 1292 is needed to create long-term stability
and guidance to the Bank On programs. The state provides no
funding for the Bank on California program and most activities
are operated by regional coalitions using local government and
non-public funding from nonprofits and private companies.
The Role of Bank on California
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.
According to research conducted by the U.S. Treasury, statewide
initiatives have the opportunity to serve two important roles.
Bank on California "can help cultivate new local programs by
providing technical assistance, leveraging connections with
statewide partners and assisting local programs in understanding
financial regulations. Additionally, they can help leaders of
statewide Bank On programs share best practices and resources.
It is important that statewide programs clearly define their
role and their relationship with existing local Bank On
programs."
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Bank on California may "also be able to overcome financial
access challenges facing rural areas and smaller towns, which
often lack the resources and infrastructure necessary to get a
Bank On effort off the ground."
Bank on California is a leader, as the first established
state-wide program in the nation but the longevity of the
program remains unstable. Bank on California has the ability to
organize local programs, provide a clear and focused point of
contact for financial institutions participating in multiple
local programs, and provide technical assistance and other
support to reduce the burden on local programs and financial
institutions.
Under AB 1292, the Bank on California Program would be
established within the DBO. AB 1292 gives the program a much
needed permanent home at the state level and establishes the
important program in statute indefinitely. The measure requires
the DBO to submit a report on an annual basis to specified
committees of the legislature with the intention of keeping the
Legislature apprised of the Program on an ongoing basis.
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AB 1292 highlights and raises awareness towards an important
program that should be maintained permanently. Too many
Californians are financially illiterate and unbanked or
underbanked. The goal of the Bank on California Program 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 Bank on California Program is a role model to other states
and stands as the umbrella to other local city and county Bank
On Programs across the nation.
Bank on California is needed 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.
Increase 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.
Raise awareness amongst unbanked consumers about the benefits
of account ownership and spurs Californians to open accounts.
Make quality money management education more easily available
to low-income Californians and raises statewide awareness of
the unbanked problem and potential solutions.
Data from the 2013 FDIC "National Survey of Unbanked and
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Underbanked Households"
7.7 percent (1 in 13) of households in the United States were
unbanked in 2013. This proportion represented nearly 9.6
million households.
20.0 percent of U.S. households (24.8 million) were
underbanked in 2013, meaning that they had a bank account but
also used alternative financial services (AFS) outside of the
banking system.
The unbanked rate has varied from 7.6 percent in 2009 to 8.2
percent in 2011 and 7.7 percent in 2013.
o The 0.5 percentage point decrease in the unbanked
rate between 2011 and 2013 can be explained by
differences in the economic conditions and demographic
composition of households over this period.
o In particular, compared to 2011, households in 2013
had slightly higher levels of employment and income, and
were slightly older and better educated. These
characteristics are all associated with a higher
likelihood of having a bank account.
While relatively small proportions of U.S. households
experienced major life events in the past year, households
that transitioned in or out of the banking system were more
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likely to have experienced certain events:
o Among households that recently became unbanked, 34.1
percent experienced either a significant income loss or a
job loss that they said contributed to the household
becoming unbanked.
o Among households that recently became banked, 19.4
percent reported that a new job contributed to their
opening a bank account.
Bank on 2.0
In September, 2013, the Cities for Financial Empowerment Fund
announced the creation of Bank on 2.0. Bank on 2.0 is a new
effort to create a unified, national approach to delivering
safe, affordable banking products and services to low-income and
under-banked people through municipal programs across the
country. Bank on 2.0 will build on grassroots success of a
wide array of Bank On and related banking access programs. The
ultimate goal will be to create a national approach and
infrastructure that includes products, services, best practices,
resources and other technical assistance that will facilitate
local municipal efforts to connect unbanked and under-banked
residents to safe and affordable mainstream banking services.
By developing comprehensive, proven models, Bank On 2.0 will
help individuals successfully navigate the financial system,
enhancing their ability to build savings, assets and reach
overall financial stability.
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REGISTERED SUPPORT / OPPOSITION:
Support
California Credit Union League (CCUL)
California Independent Bankers (CIB)
San Francisco Treasurer & Tax Collector
United Ways of California
Opposition
None on file.
Analysis Prepared by:Kathleen O'Malley / B. & F. / (916)
319-3081
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