BILL ANALYSIS �
AB 38
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CONCURRENCE IN SENATE AMENDMENTS
AB 38 (Bradford)
As Amended June 27, 2011
Majority vote
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|ASSEMBLY: |57-20|(June 1, 2011) |SENATE: |25-12|(August 29, |
| | | | | |2011) |
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Original Committee Reference: B. & F.
SUMMARY : Requires the Department of Financial Institutions
(DFI) to work with local agencies to compile a list of
underserved communities or regions that lack a concentration of
banks and services. Specifically, this bill:
1)Makes findings and declarations regarding the status of
unbanked and underbanked consumers, as well as, the need for
banking services in underserved communities.
2)Defines "underserved community" as a remote location or
impoverished area that lacks banking services commensurate
with the services provided to higher income areas with a
population of similar size.
3)Defines "bank" as any commercial bank, savings bank, savings
association, or credit union.
4)Defines "local agency" as a city, county, whether general law
or chartered, city and county, or town.
The Senate amendments delete the creation of a Banking
Development District (BDD) Program; and, instead:
1)Require DFI to create a list of underserved communities.
2)Specify that the list should be used to provide banks with a
clear demonstration of those areas that are in the most need.
3)Require DFI to post the list on DFI's Internet Web site.
EXISTING LAW provides for the regulation of state banks and
credit unions by DFI.
AB 38
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AS PASSED BY THE ASSEMBLY , this bill established a BDD Program
within DFI, which would have encouraged the establishment of
bank or credit union branches and/or new bank services in
specially designated geographic locations where there is a need
for banking services.
FISCAL EFFECT : According to the Senate Appropriations
Committee, DFI indicates one-time costs of about $75,000 to work
with local agencies to compile a list of underserved communities
and post the list on its Internet Web site.
COMMENTS : The goal of this bill is to spur increased and
enhanced banking services in underserved communities that will
spur greater financial inclusion. The desired outcome is that
more Californians will enter the financial mainstream and build
savings and wealth through participating banks' offerings and
marketing of appropriate transactional, loan, and credit
products that can lead to long-term wealth building
opportunities.
In the modern financial arena consumers are faced with a
confusing myriad of choices and options. This confusion is
amplified by the financial illiteracy of most consumers, and
what has been a traditional lack of outreach by financial
institutions to certain communities. Recently, the untapped
market of those without a banking relationship has become an
intriguing opportunity for those offering financial services.
However, as many studies have shown, the unbanked and
underbanked often do not feel comfortable dealing with financial
institutions that are not located in their neighborhoods. In
October of 2009, the Los Angeles City Council approved a motion
to establish a local BDD program by requiring the City
Attorney and City Treasurer to draft an ordinance establishing
the program. Additionally, the City Treasurer must set up a
task force with department heads and council members to
determine what modifications may be needed to adapt the New York
BDD model program to Los Angeles.
Californians, now more than ever, may have more distrust towards
financial institutions due to the mortgage meltdown. Recent
statistics show, nationally, as many as 28 million people are
unbanked, one in five low-income Californians does not have a
checking account and nearly half of Californians do not have a
savings account.
AB 38
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On January 24, 2008, Governor Schwarzenegger announced an effort
to assist unbanked and underbanked Californians. This program,
called Bank on California, is built off of a pilot project in
the City of San Francisco, known as Bank on San Francisco. The
idea behind the Bank on California program is too increase the
availability of starter checking accounts through partnerships
with financial institutions. Additionally, this program creates
partnerships between local officials, banks and community groups
to raise awareness on the importance and benefit of entering the
financial mainstream. Currently, only seven cities in
California participate: Fresno; Los Angeles; Oakland;
Sacramento; Santa Ana; San Francisco; and, San Jose.
Previous legislation:
AB 2581 (Bradford) of 2009 would have established a BDD program
administered by DFI to encourage the establishment of banking
branches in and the provision of additional product lines or
services to, specified underserved areas. This bill was vetoed
by Governor Schwarzenegger.
AB 1502 (Lieu) of 2007 would have established a BDD program,
jointly administered by DFI and the State Treasurer's Office
This bill passed the Assembly, but was gutted and amended into a
financial literacy education bill.
Analysis Prepared by : Kathleen O'Malley / B. & F. / (916)
319-3081
FN:
0001783