BILL ANALYSIS Ó
AB 1784
Page 1
Date of Hearing: March 14, 2016
ASSEMBLY COMMITTEE ON BANKING AND FINANCE
Matthew Dababneh, Chair
AB 1784
(Dababneh) - As Amended March 3, 2016
SUBJECT: State banks
SUMMARY: Allows state chartered banks to participate in
school-based savings programs (Programs). Specifically, this
bill:
1)Permits the Programs to receive deposits or pay withdrawals on
the premises of, or at a facility used by, a school.
2)Specifies that the school premises or facility will not be
considered a branch office if:
a) The bank does not establish and operate the school
premises or facility in which the program is conducted;
b) Bank employees work at the site only to participate in the
Program;
c) The Program is provided at the discretion of the school;
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d) The principal purpose of the Program is financial
education; and,
e) No services are provided to the general public.
EXISTING LAW allows a savings association to contract with the
authorities of any public or nonpublic elementary, secondary
school or institution of higher learning, or any public or
charitable institution caring for minors, for the participation
and implementation by the association in any school or
institutional thrift or savings plan, and it may accept savings
accounts at the school or institution, either by its own collector
or by any representative of the school or institution that becomes
the agent of the association for that purpose. [Financial Code,
Section 6700]
FISCAL EFFECT: Unknown.
COMMENTS:
Need for the bill:
These Programs are a collaborative effort between banks and
elementary, middle and high school administrators and teachers
that provide financial education activities through presentations,
classes and curriculum development. The Programs are often
structured as in-school credit union or bank programs that offer
students basic savings accounts. These Programs range from "mini
banks" that offer student savings accounts to more complex
programs that offer career-oriented banker training. The Programs
help students understand the value of saving by opening and
managing savings accounts. The Programs may also include banker
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classroom presentations on saving and other financial education
topics and field trips to banks so students can observe how banks
operate. Typically, bank staff is available to answer financial
education and banking-related questions that students, faculty,
parents, and school administrations ask.
Additionally, the Programs teach students about the importance of
savings and financial management. Research indicates that these
Programs may be effective in helping improve long-term financial
and education outcomes, such as completing college.
These programs provide a valuable service to the community and
assist banks in meeting their federally mandated Community
Reinvestment Act obligations. National banks and California
savings associations are already authorized to participate in the
Programs; however, a gap exists in California law that prevents
state-chartered banks from engaging in these Programs because a
branch license and related operations are presently required at
each participating school. AB 1784 will close this gap so that
state-chartered banks can provide these educational services.
Background:
On February 24, 2015, the Board of Governors of the Federal
Reserve System, the Federal Deposit Insurance Corporation (FDIC),
the National Credit Union Administration, and the Office of the
Comptroller of the Currency, as members of the Financial Literacy
and Education Commission together with the Financial Crimes
Enforcement Network of the U.S. Department of the Treasury issued
guidance to encourage financial institutions to develop youth
savings programs. The purpose of the guidance was to encourage
financial institutions to develop and implement programs to expand
the financial capability of youth and build opportunities for
financial inclusion for more families.
The federal guidance stated that the school is not considered a
bank branch when the following conditions are met:
1) The bank does not establish and operate the school
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premises or facility on which the financial literacy program
is conducted.
2) Bank employees work at the site only to participate in the
program.
3) No services are provided to the general public.
4) The principal purpose of the financial literacy program is
educational. For example, a program is educational if it is
designed to teach students the principles of personal
economics or the benefits of saving for the future and is not
designed for the purpose of profit-making.
In addition, Texas recently took action. The Texas Administrative
Code now provides a similar provision in Rule § 1544 in Title 7,
Part 2, Chapter 15, Subchapter C. It provides that a state bank's
school-based savings program is not considered a branch if the
program meets certain conditions similar to those in AB 1784.
To set up a program on school premises, a bank works with school
administrators and teachers who are interested in providing
financial education to their students. In cooperation with school
administration and faculty, a bank determines where the program is
to be located on school premises; what the days and hours of
operation will be; which financial services are to be offered; and
how students, faculty, school administration, and parents will
participate in the program.
In addition, on August 4, 2014, the FDIC announced a two-year FDIC
Youth Savings Pilot Program aimed at identifying and highlighting
promising approaches to offering financial education tied to the
opening of safe, low-cost savings accounts for school-aged
children. The first phase of the Pilot was open to institutions
currently working with schools or nonprofit organizations that
help students open savings accounts in conjunction with financial
education programs during the 2014-15 school year. Phase I
started with the 2014-15 school year and will conclude at the end
of the 2015-16 school year. Only one program in California is
part of the pilot program currently.
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Summary of the Phase I Participants:
Athol Savings Bank, a $335 million state nonmember bank
headquartered in Athol, Massachusetts. The bank's Save$um Banking
program has operated in five elementary schools for 12 years.
These in-school bank branches are operated by students, with
oversight from parents, teachers, and bank employees. Students
receive small incentives from the bank when they open and continue
saving in the account.
Bank of Hawaii, a $14 billion state member bank headquartered in
Honolulu, Hawaii. The bank targets 10th graders at two high
schools in Leeward Oahu, HI, in collaboration with Hawaiian
Community Assets (a non-profit). The bank provides the largely
low- and moderate-income, native Hawaiian student population with
age and culturally appropriate financial education and then offers
to open a no fee, no minimum balance savings account.
Capital One, National Association, a $255 billion national bank
headquartered in McLean, Virginia. The bank has four
student-operated bank branches on low- and moderate-income school
campuses in Bronx, New York, Harlem, New York, Newark, New Jersey
and Riverdale, Maryland. Students need $1.00, their school ID,
and their Social Security number to open a savings account at the
school. Students are hired into teller positions at the end of
their junior year. The student bankers provide financial
education to their peers.
First Bank of Highland Park, a $1.2 billion state nonmember bank
headquartered in Highland Park, Illinois. The bank works with a
private school and non-profits. A minor receives a $25 bonus from
the bank when opening a new savings account and another $10 bonus
after the tenth deposit. The bank's financial education
activities (which are based on Money Smart) are delivered monthly
between October and April.
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First Metro Bank, a $532 million state nonmember bank
headquartered in Muscle Shoals, Alabama. The bank implemented two
student-run bank branches in local high schools in 2013. Students
can open a savings account at the school without an adult
custodian at the age of 15. The account has a $1 minimum balance
with no minimum balance or maintenance fees. Teachers and bank
staff provide financial education.
Montecito Bank & Trust, a $1.1 billion state nonmember bank
headquartered in Santa Barbara, California. The bank provides
financial education through several predominately low- and
moderate-income schools in Santa Barbara and Ventura Counties.
Students can open a savings account with a $5 deposit, and the
bank provides an incentive to students for regularly saving.
Treynor State Bank, a $307 million state nonmember bank
headquartered in Treynor, Iowa. The bank facilitates three
in-school banking programs-they are in two elementary schools (one
of which is low- and moderate-income) and one high school (also a
low- and moderate-income school). Teachers and bank staff provide
financial education. The bank provides small incentives to
students for opening an account and then for continuing to save in
it. Students, with supervision from bank employees, operate the
school bank branches.
Young Americans Bank, a $15 million state nonmember bank
headquartered in Denver, Colorado. Young Americans opened a
branch in January 2013 on a Denver Public Schools campus that
serves 1,700 students in grades K-12. This branch is in one of
the poorer areas of Colorado. The bank modified its policies in
response to the identified needs of the student population, such
as allowing youth under age 18 to open accounts with a parent's
consent because many parents served by this school lack a
state-issued ID. Bank staff provides financial education through
the school.
Wesbanco Bank, Inc. a $6.3 billion state nonmember bank
headquartered in Wheeling, West Virginia. Bank staff uses an
array of financial education tools (including Money Smart). Their
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school-based savings program requires a $10 minimum opening
deposit and parental consent. After three months, the bank
deposits $10 into the minor's account. Students participating in
financial education classes also receive a bonus of another $10.
Phase II of the FDIC Youth Savings Pilot Program consists of a
group of 12 banks that are carrying out a new or expanded program
during the 2015-2016 school year. The FDIC selected these banks
from the group of banks that submitted an expression of interest
in participating in Phase II.
These 12 banks joined the nine banks that are participating in
Phase I of the FDIC Youth Savings Pilot.
Summary of Phase II Participants
Beneficial Bank, a $4.8 billion state nonmember bank headquartered
in Philadelphia, Pennsylvania. The bank has an established
program in eight high schools and non-profits in greater
Philadelphia and south New Jersey. The bank plans to expand the
program to several additional low- and moderate-income schools.
Caldwell Bank & Trust Company, a $165 million state nonmember bank
headquartered in Columbia, Louisiana. The bank has an established
savings program for 5th graders in four elementary schools in low-
and moderate-income areas. The bank will expand this program by
providing teachers with financial education lesson materials and
working with them to teach about money.
Commercial Bank, an $818 million state member bank headquartered
in Harrogate, Tennessee. The bank entered into a partnership with
the Harlan, Kentucky Board of Education to start a new program
beginning in August, 2015.
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Fidelity Bank, an $812 million state non-member bank headquartered
in New Orleans, Louisiana. The bank plans to launch a new program
at several schools that will feature regular "banking days" and
monthly financial education lessons provided by bank staff.
International Bank of Commerce, a $10 billion state nonmember bank
headquartered in Laredo, Texas. The bank plans to add a savings
component to its existing well-established financial education
program offered in various K-12 schools in low- and
moderate-income areas.
Passumpsic Savings Bank, a $577 million state nonmember bank
headquartered in St. Johnsbury, Vermont. The bank, in partnership
with AHEAD Homeownership Center, plans to introduce a new program
for students in grades 1-3 at seven elementary schools in Coos
County, New Hampshire.
PNC Bank, National Association, a $340 billion national bank
headquartered in Wilmington, Delaware. The bank operates
in-school banks at 83 low- to moderate-income schools that include
offering financial education to both students and educators. They
plan to expand their program at the beginning of the school year
to include additional low- to moderate-income schools.
Reading Co-operative Bank, a $477 million state member bank
headquartered in Reading, Massachusetts. The bank currently has a
full-service branch in a local high school. The bank plans to
expand their savings program to a neighboring community, which is
a predominately low- and moderate-income area.
ServisFirst Bank, a $4.4 billion state nonmember bank
headquartered in Birmingham, Alabama. The Bank plans to initiate a
new savings program targeted to low- and moderate-income schools
by collaborating with them to offer a "banking" day, while
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providing for account opening activities within PTA meetings, back
to school nights and other similar events.
Southwest Capital Bank, a $317 million state nonmember bank
headquartered in Albuquerque, New Mexico. The bank will partner
with a local non-profit organization to launch a new program to a
group of low-income, underserved students at a predominately low-
and moderate-income middle school.
The Hastings City Bank, a $306 million state nonmember bank
headquartered in Hastings Michigan. The bank plans to partner with
a community foundation and all school districts in Barry County,
Michigan to implement a new savings program. The community
foundation will open a savings account at the bank for every
kindergartner in the county starting in January of 2016.
The Huntington National Bank, a $69 billion national bank
headquartered in Columbus, Ohio. The bank plans to expand its
existing Huntington Kids Club savings program from serving five
elementary schools to ten schools this fall, primarily in low- and
moderate-income areas.
REGISTERED SUPPORT / OPPOSITION:
Support
California Bankers Association (CBA) - Sponsor
California Community Banking Network (CCBN)
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Opposition
None on file.
Analysis Prepared by:Kathleen O'Malley / B. & F. / (916) 319-3081