BILL ANALYSIS Ó
AB 1784
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB
1784 (Dababneh)
As Amended August 1, 2016
Majority vote
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|ASSEMBLY: |76-0 |(April 14, |SENATE: | 37-0 |(August 11, |
| | |2016) | | |2016) |
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Original Committee Reference: B. & F.
SUMMARY: Allows state chartered banks to participate in
school-based financial education 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
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the Program;
c) The Program is provided at the discretion of the school;
d) The principal purpose of the Program is financial
education;
e) No services are provided to the general public; and,
f) The program is conducted in a manner that is consistent
with safe and sound banking practices and complies with
applicable law.
3)Provides that a state chartered bank that participates in a
program shall be liable for all deposits made on the premises
of, or at a facility used by, a school as if the deposit was
made directly at a branch office of the bank.
The Senate amendments:
1)Reorganize the measure by taking out the provisions from the
definition of a "branch" and creating a new section.
2)Add two provisions that specify:
a) A program must be conducted in a manner that is
consistent with safe and sound banking practices; and,
b) A bank that participates in the program shall be liable
for all deposits.
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EXISTING LAW:
1)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 (FC) 6700]
2)Defines a branch office as any office at which core banking
business is conducted, as specified, and defines core banking
business as the business of receiving deposits, paying checks,
making loans, and other activities that the Commissioner of
Business Oversight may specify by order or regulation. [FC
1070]
3)Requires a bank to file a notice with the commissioner within
10 days of establishing, relocating, or redesignating an
office and to pay an appropriate fee. [FC 1076]
4)Authorizes a bank to close or discontinue the operation of any
branch office if, before the closing or discontinuance, the
bank files a notice with the commissioner containing detailed
information supporting the decision to close or discontinue
the office. A branch office closure is deemed acceptable, if
the commissioner issues a "no objection" letter or does not
issue a written objection to the bank's notice. [FC 1078]
FISCAL EFFECT: According to the Assembly Appropriations
Committee, negligible state costs.
COMMENTS:
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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 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. This bill will close
this gap so that state-chartered banks can provide these
educational services.
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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 United States 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 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
Section 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
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similar to those in this bill.
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.
Analysis Prepared by:
Kathleen OMalley / B. & F. / (916) 319-3081 FN:
0003681