BILL ANALYSIS Ó AB 1292 Page 1 Date of Hearing: April 22, 2015 ASSEMBLY COMMITTEE ON APPROPRIATIONS Jimmy Gomez, Chair AB 1292 (Dababneh) - As Introduced February 27, 2015 ----------------------------------------------------------------- |Policy |Banking and Finance |Vote:|11 - 0 | |Committee: | | | | | | | | | | | | | | ----------------------------------------------------------------- Urgency: No State Mandated Local Program: NoReimbursable: No SUMMARY: This bill establishes the Bank On California Program in statute and places the program within the Department of Business Oversight (DBO). The bill requires DBO, beginning 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 of activities of the program. FISCAL EFFECT: AB 1292 Page 2 As the state currently provides no funding for activities, minor and absorbable costs to DBO for codification of the program and producing the summary report. COMMENTS: 1)Purpose. According to the author, Bank On California is needed to make it easier for lower income consumers to establish affordable bank accounts, raise awareness among "unbanked" consumers, meaning those without bank accounts, about the benefits of account ownership, and make money management education more accessible. According to data from a 2013 survey by the Federal Deposit Insurance Corporation, 7.7% of households in the United States were unbanked in 2013, and 20.0% were "underbanked," meaning those households had a bank account but used alternative financial services outside the banking system. Assuming California's banking participation rates mirror the national rates, approximately 1.0 million California households are unbanked and 2.8 million are underbanked. 2)Bank On Future Funding? This bill does not provide any funding for the Bank On California program, and previous funding has been completely exhausted. Establishing the program in statute may result in future budget pressure to fund activities. DBO estimates that it will need at least $175,000 a year to conduct meaningful activities. Without funding, the report required by this bill may simply indicate DBO has not undertaken any activity. 3)The Bank On Movement. The "Bank On" movement began in San Francisco in 2006, and Governor Schwarzenegger launched Bank On California, the first state-wide program of its type, from AB 1292 Page 3 his office in 2008. Currently, there are four active local Bank On programs in the state: San Francisco, Los Angeles, Oakland, and Sacramento. To date, the Bank On California program has lacked statutory oversight and moved among several different state departments before settling within DBO in 2012. As a result, the state program has struggled with inconsistent leadership and resources. Patterned off the success of Bank On San Francisco, Bank On California is intended to increase the supply of starter account products through voluntary partnerships with financial institutions and raise awareness of the benefits of account ownership and sound money management. Bank On California provides technical assistance to local programs, leveraging connections with statewide partners, assisting local programs in understanding financial regulations, and sharing best practices. The state currently provides no funding for the Bank On California program, and most activities are operated with local government and private funding. In September, 2013, the Cities for Financial Empowerment Fund announced the creation of "Bank On 2.0," a new effort to create a unified, national approach to delivering affordable banking products and services to low-income and underbanked people through local programs. Bank On 2.0 is intended to build on the grassroots successes of current Bank On and related banking access programs, developing a comprehensive, national model for Bank On movements in communities across the country. AB 1292 Page 4 Analysis Prepared by:Joel Tashjian / APPR. / (916) 319-2081