BILL ANALYSIS Ó
SENATE COMMITTEE ON
BANKING AND FINANCIAL INSTITUTIONS
Senator Marty Block, Chair
2015 - 2016 Regular
Bill No: AB 1292 Hearing Date: June 17,
2015
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|Author: |Dababneh |
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|Version: |February 27, 2015 Introduced |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Eileen Newhall |
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Subject: Bank on California program.
SUMMARY Establishes the Bank on California Program (program) within
the Department of Business Oversight (DBO; the Department) and
requires the Department to report annually to the chairpersons
of the Senate Committee on Banking and Financial Institutions
and Assembly Committee on Banking and Finance regarding the
activities of the program.
DESCRIPTION
1. Contains findings and declarations stating that "Bank On
California" is a voluntary collaborative initiative that
assists Californians in opening a bank or credit union
account and saving for the future.
2. Establishes the Bank on California Program within DBO.
3. Beginning in 2016, requires the Department to provide the
respective 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 no later than August 30th of each
year.
EXISTING LAW
4. Authorizes DBO to administer provisions of the Financial
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Code regulating the activities of state-chartered banks and
state-chartered credit unions (Divisions 1 and 5 of the
Financial Code).
5. 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.).
COMMENTS
1. Purpose: AB 1292 is intended to ensure that the program has
a permanent home within DBO and to update the Legislature
annually regarding the progress the program is making.
2. Background: "Bank On" programs are voluntary programs in
which local agencies, typically municipalities and community
partners, form coalitions with banks and credit unions to
reduce barriers to banking among unbanked and underbanked
individuals.
The first Bank On program was created in San Francisco in 2005,
in response to a survey that identified approximately 50,000
unbanked households in that jurisdiction, 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 including 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
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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 to date 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
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. In 2012, the program was moved to the Department of
Financial Institutions (DFI), then moved to DBO in 2013,
when DBO was formed through the merger of DFI and the
Department of Corporations.
To date, within California, Bank On Programs have been
established in American Canyon, Central Coast (including
Monterey, Santa Cruz, Salinas, and San Benito Counties),
Fresno, Los Angeles, Oakland, Orange County, Napa Valley,
Sacramento (including Sacramento, Amador, El Dorado, Placer,
and Yolo Counties), San Francisco, San Jose, and Stanislaus
( www.bankoncalifornia.ca.gov ).
3. Discussion: If this bill is enacted, DBO would join the
U.S. Department of the Treasury and the National League of
Cities as a repository of 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
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On program. To provide technical assistance to support
these efforts, the San Francisco OFE 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. The author observes that 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 (since 2012) DFI/ DBO.
Because the program was moved from department to
department, it has been difficult to determine the
success of the program and whether it appropriately
serves the needs of local Bank On programs. "AB 1292
places the program in statute and will ensure
indefinitely that this program has a standing home at the
Department of Business Oversight. The measure also
requires the Department 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." United Ways of
California supports the bill for those reasons.
b. The California Independent Bankers (CIB), California
Credit Union League (CCUL), and the SF OFE also support
the bill. CCUL believes that too many Californians are
disconnected from the financial mainstream. Federal
Deposit Insurance Corporation survey data indicates that
3.1 million adults are unbanked, and 6.6 million are
unbanked in California. Recent market research
indicates that Fresno and Los Angeles, respectively, have
the highest and third highest percentages of unbanked
residents in the country. CCUL supports AB 1292, because
it "intends to increase and enhance banking services in
underserved communities and stimulate greater financial
inclusion by identifying areas that need expanded
service."
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CIB writes, "With millions of Americans unbanked and
underbanked (1 in 13 households in 2013), it is critical
to take steps to help these individuals gain access to
financial services, including checking and savings
accounts."
SF OFE believes that the most successful model for Bank On
is one in which regional coalitions lead and state
agencies provide needed support and coordination.
5. Summary of Arguments in Opposition: None received.
6. Prior and Related Legislation: All of the following bills
were attempts to involve DBO or its predecessor department,
DFI in programs focused on banking unbanked and underbanked
individuals.
a. AB 385 (Dickinson), 2013-14 Legislative Session:
Would have housed the Bank On California Program within
DBO, and required DBO to coordinate with regional Bank On
programs on several specific activities, and required
financial institutions that chose to participate in Bank
On California to adhere to several rules. Held on the
Senate Appropriations Committee Suspense File.
b. 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.
c. 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.
d. 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 not taken up in the Senate.
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LIST OF REGISTERED SUPPORT/OPPOSITION
Support
California Credit Union League
California Independent Bankers
San Francisco Office of Financial Empowerment
United Ways of California
Opposition
None received
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