Existing law provides for the formation and regulation of state-organized banks and state-certified credit unions by the Department of Business Oversight.

This bill would establish the Bank on California Program within the Department of Business Oversight. The bill would include findings declaring that the program is a voluntary collaborative that assists Californians in opening bank or credit union accounts. The bill would require the department to report annually to specified committees of the Legislature on the activities of the program.

Existing law provides for the formation and regulation of state-organized banks and state-certified credit unions by the Department of Business Oversight.

This bill would establish the Bank on California Program within the Department of Business Oversight. The bill would include findings declaring that the program is a voluntary collaborative that assists Californians in opening bank or credit union accounts. The bill would require the department to report annually to specified committees of the Legislature on the activities of the program.

Existing law provides for the formation and regulation of state-organized banks and state-certified credit unions by the Department of Business Oversight.

This bill would establish the Bank on California Program within the Department of Business Oversight. The bill would include findings declaring that the program is a voluntary collaborative that assists Californias in opening bank or credit accounts. The bill would require the department to report annually to specified committees of the Legislature on the activities of the program.

 THIRD READING  

Bill No: AB 1292

Author: Dababneh (D)

Introduced: 2/27/15

Vote: 21

SENATE BANKING & F.I. COMMITTEE: 7-0, 6/17/15

AYES: Block, Vidak, Galgiani, Hall, Hueso, Lara, Morrell

SENATE APPROPRIATIONS COMMITTEE: 7-0, 8/27/15

AYES: Lara, Bates, Beall, Hill, Leyva, Mendoza, Nielsen

ASSEMBLY FLOOR: 77-0, 4/30/15 (Consent) - See last page for vote

SUBJECT: Bank on California program

SOURCE: Author

DIGEST: This bill establishes the Bank on California Program within the Department of Business Oversight (DBO) and requires DBO 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 Bank On California Program.

ANALYSIS:

Existing law:

1. Authorizes DBO to administer provisions of the Financial Code regulating the activities of state-chartered banks and state-chartered credit unions (Divisions 1 and 5 of the Financial Code).

2. 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.).

This bill:

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. Requires, beginning in 2016, DBO 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 30^th of each year.

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 ultimately partnered with 14 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, the 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).

Comments

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 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.

Prior Legislation

AB 385 (Dickinson, 2013) would have housed the Bank On California Program within DBO, required DBO to coordinate with regional Bank On programs, and required financial institutions that chose to participate in Bank On California to adhere to several rules. AB 385 was held on the Senate Appropriations Committee Suspense File.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

According to the Senate Appropriations Committee, this bill will impose minor to potentially significant cost pressure on the Financial Institutions Fund, potentially in excess of $150,000 annually for DBO to provide general oversight and support of the Bank on California Program and prepare the report required by the bill.

SUPPORT: (Verified 8/27/15)

California Credit Union League

California Independent Bankers

San Francisco Office of Financial Empowerment

United Ways of California

OPPOSITION: (Verified 8/27/15)

None received

ARGUMENTS IN SUPPORT: The California Independent Bankers (CIB), California Credit Union League (CCUL), and the San Francisco OFE 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.”

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.”

The San Francisco 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.

ASSEMBLY FLOOR: 77-0, 4/30/15

AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Chang, Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Atkins

NO VOTE RECORDED: Campos, Chávez, Gomez

Prepared by: Eileen Newhall / B. & F.I. / (916) 651-4102

8/31/15 9:05:54

**** END ****

SENATE COMMITTEE ON APPROPRIATIONS

Senator Ricardo Lara, Chair

2015 - 2016 Regular Session

AB 1292 (Dababneh) - Bank on California program

This bill meets the criteria for referral to the Suspense File.

Bill Summary:

AB 1292 would establish the Bank on California Program within the Department of Business Oversight (DBO). This bill would require, by August 30, 2016, and annually thereafter, the DBO to report to the Legislature on the activities of the program.

Fiscal Impact:

Potentially minor to significant future cost pressure in excess of $150,000 (Special Fund*) to provide general oversight and support of the program, including the production of the legislative report, the costs of which would be dependent on the level of resources committed to, and material included in, the report.

Background:

“Bank On” programs are voluntary collaborative programs in which local agencies, typically municipalities and community partners, form coalitions with financial institutions to reduce barriers to banking among unbanked (no checking or savings account) and underbanked (checking and/or savings account but additional use of alternative financial services such as check-cashing services and payday loans) individuals, providing households with access to mainstream financial products and services, including low-cost checking and savings accounts and access to free financial education opportunities. 

In September 2006, the first Bank On program was launched in San Francisco. It was the first comprehensive program in the country to work collaboratively with financial institutions, local government, financial regulators, and community-based organizations to bank the unbanked.

In 2008, Bank on California was established and housed within the Governor’s Office of Planning and Research. Subsequently, the program was shifted to the State and Consumer Services Agency, and in 2012 was moved to the Department of Financial Institutions (DFI). Finally, oversight of the program was shifted to the DBO in 2013 when the DBO was formed through the merger of the DFI and the Department of Corporations.

To date, within California, local Bank On programs have been established in American Canyon, California Central Coast (including Monterey, Santa Cruz, Salinas, and San Benito), Fresno, Los Angeles, Oakland, Orange County, Napa Valley, Sacramento (including Sacramento, Amador, El Dorado, Placer, and Yolo), San Francisco, San Jose, and Stanislaus.

Proposed Law:

This bill would establish the Bank on California Program within the DBO. Specifically, this bill:

• Includes legislative findings declaring that the program is a voluntary collaborative initiative that assists Californians in opening a bank or credit union account and saving for the future.

• Requires the DBO to report annually no later than August 30^th of each year to specified committees of the Legislature on the activities of the program.

Related Legislation:

AB 385 (Dickinson) 2013 would have housed the Bank on California Program within DBO. This bill would have required DBO to coordinate with regional programs to collect and report specified program data, as well as provide support to regional programs by establishing guidelines and best practices for programs, provide information and guidance on regulatory and other banking issues, intervening on behalf of regional programs if a participating financial institution is not adhering to program commitments, and hosting one convening per year for all programs, including local leadership and participating financial institutions. This bill was held on the Suspense File of this Committee.

Staff Comments:

The DBO has indicated that currently, the costs of this bill are minor and absorbable. While AB 1292 does not expressly provide the DBO authority to administer or implement the Bank On Program, requiring the DBO to produce a report could potentially result in the DBO undertaking activities to produce a meaningful report.

To produce a more substantial report, the DBO anticipates potential costs in excess of $150,000 annually. This estimate includes costs for resources to manage and oversee the program, to include activities such as website hosting, printed materials, travel, overhead, and one-time costs.

-- END --

SENATE COMMITTEE ON

BANKING AND FINANCIAL INSTITUTIONS

Senator Marty Block, Chair

2015 - 2016 Regular

Bill No: AB 1292 Hearing Date: June 17, 2015

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 30^th of each year.
   
   

EXISTING LAW

1. Authorizes DBO to administer provisions of the Financial Code regulating the activities of state-chartered banks and state-chartered credit unions (Divisions 1 and 5 of the Financial Code).
   
   

2. 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 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 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:
   
   

   1. 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.
      
      

   2. 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.”
      
      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.
   
   

   1. 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.
      
      

   2. 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.
      
      

   3. 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.
      
      

   4. 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.

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

-- END --

Date of Hearing: April 22, 2015

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Jimmy Gomez, Chair

ABPCA Bill Id:AB 1292

Author:(Dababneh) – As Introduced Ver:February 27, 2015

Urgency: No State Mandated Local Program: No Reimbursable: 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:

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 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.

Analysis Prepared by: Joel Tashjian / APPR. / (916) 319-2081

Date of Hearing: April 13, 2015

ASSEMBLY COMMITTEE ON BANKING AND FINANCE

Matthew Dababneh, Chair

ABPCA Bill Id:AB 1292

Author:(Dababneh) – As Introduced Ver:February 27, 2015

SUBJECT: Bank on California program

SUMMARY: Establishes the Bank on California Program within the Department of Business Oversight (DBO). Specifically, this bill:

1. Requires DBO, starting 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 on the activities of the program.

2. Declares Bank on California as a voluntary collaborative initiative that assists Californians in opening a bank or credit union account and saving for the future.

EXISTING LAW:

1. Currently has no statutory requirements regarding the Bank on California Program. The Bank on California Program was launched as an initiative by Governor Schwarzenegger in 2008.
   
   

2. Gives DBO the responsibility to oversee the operations of state-licensed financial institutions, including banks, credit unions, industrial banks, savings associations, trust companies, foreign banking organizations, business and industrial development corporations, money transmitters, issuers of payment instruments and travelers checks, and premium finance companies.

FISCAL EFFECT: Unknown.

COMMENTS:

BANK ON CALIFORNIA:

The Bank On movement started in San Francisco in 2006 with the launch of Bank on San Francisco. In 2008, California launched Bank on California from the office of former Governor Arnold Schwarzenegger. Most Bank On programs in California are led by the municipal government or the local United Way.

Currently, only four local Bank On programs remain active which include: Bank on Sacramento, Bank on Oakland, Bank on Los Angeles, and Bank on San Francisco.

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 found a home in the Department of Financial Institutions now known as DBO in 2012. Due to the program's history of inconsistent resources and leadership prior to DBO, it is difficult to determine the success of the program and whether it appropriately serves the needs statewide and at the local Bank On level. The program has thrived predominantly due to the local level programs and the large-scale recognition of Bank on San Francisco. AB 1292 is needed to create long-term stability and guidance to the Bank On programs. The state provides no funding for the Bank on California program and most activities are operated by regional coalitions using local government and non-public funding from nonprofits and private companies.  

The Role of Bank on California

Bank on California involves a voluntary partnership between certain financial institutions and cities, is intended to increase the supply of starter account products offered by participating financial institutions, raise awareness among unbanked individuals about the benefits of account ownership, and make quality money management education more easily available to un- and underbanked individuals.

According to research conducted by the U.S. Treasury, statewide initiatives have the opportunity to serve two important roles.

Bank on California "can help cultivate new local programs by providing technical assistance, leveraging connections with statewide partners and assisting local programs in understanding financial regulations. Additionally, they can help leaders of statewide Bank On programs share best practices and resources. It is important that statewide programs clearly define their role and their relationship with existing local Bank On programs."

Bank on California may "also be able to overcome financial access challenges facing rural areas and smaller towns, which often lack the resources and infrastructure necessary to get a Bank On effort off the ground."

Bank on California is a leader, as the first established state-wide program in the nation but the longevity of the program remains unstable. Bank on California has the ability to organize local programs, provide a clear and focused point of contact for financial institutions participating in multiple local programs, and provide technical assistance and other support to reduce the burden on local programs and financial institutions.

Under AB 1292, the Bank on California Program would be established within the DBO. AB 1292 gives the program a much needed permanent home at the state level and establishes the important program in statute indefinitely. The measure requires the DBO to submit a report on an annual basis to specified committees of the legislature with the intention of keeping the Legislature apprised of the Program on an ongoing basis.

AB 1292 highlights and raises awareness towards an important program that should be maintained permanently. Too many Californians are financially illiterate and unbanked or underbanked. The goal of the Bank on California Program is to encourage voluntary collaborative partnerships that work together to lower the number of unbanked and to get more Californians to enter the financial mainstream. With a bank account, unbanked Californians can achieve financial security, start to save for the future, and establish a credit history.

The Bank on California Program is a role model to other states and stands as the umbrella to other local city and county Bank On Programs across the nation.

Bank on California is needed to:

• Financially empower lower income consumers by making it easier and more affordable for them to deposit their paychecks, pay their bills, and start saving.

• Increase the supply of starter account products that work for the low-income, unbanked Californians by developing baseline product criteria that must be offered by all participating financial institutions.
  
  

• Raise awareness amongst unbanked consumers about the benefits of account ownership and spurs Californians to open accounts.
  
  

• Make quality money management education more easily available to low-income Californians and raises statewide awareness of the unbanked problem and potential solutions.

Data from the 2013 FDIC “National Survey of Unbanked and Underbanked Households”

• 7.7 percent (1 in 13) of households in the United States were unbanked in 2013. This proportion represented nearly 9.6 million households.

• 20.0 percent of U.S. households (24.8 million) were underbanked in 2013, meaning that they had a bank account but also used alternative financial services (AFS) outside of the banking system.

• The unbanked rate has varied from 7.6 percent in 2009 to 8.2 percent in 2011 and 7.7 percent in 2013.

• The 0.5 percentage point decrease in the unbanked rate between 2011 and 2013 can be explained by differences in the economic conditions and demographic composition of households over this period.

• In particular, compared to 2011, households in 2013 had slightly higher levels of employment and income, and were slightly older and better educated. These characteristics are all associated with a higher likelihood of having a bank account.

• While relatively small proportions of U.S. households experienced major life events in the past year, households that transitioned in or out of the banking system were more likely to have experienced certain events:

• Among households that recently became unbanked, 34.1 percent experienced either a significant income loss or a job loss that they said contributed to the household becoming unbanked.

• Among households that recently became banked, 19.4 percent reported that a new job contributed to their opening a bank account.

Bank on 2.0

In September, 2013, the Cities for Financial Empowerment Fund announced the creation of Bank on 2.0. Bank on 2.0 is a new effort to create a unified, national approach to delivering safe, affordable banking products and services to low-income and under-banked people through municipal programs across the country. Bank on 2.0 will build on grassroots success of a wide array of Bank On and related banking access programs. The ultimate goal will be to create a national approach and infrastructure that includes products, services, best practices, resources and other technical assistance that will facilitate local municipal efforts to connect unbanked and under-banked residents to safe and affordable mainstream banking services. By developing comprehensive, proven models, Bank On 2.0 will help individuals successfully navigate the financial system, enhancing their ability to build savings, assets and reach overall financial stability.

REGISTERED SUPPORT / OPPOSITION:

Support

California Credit Union League (CCUL)

California Independent Bankers (CIB)

San Francisco Treasurer & Tax Collector

United Ways of California

Opposition

None on file.

Analysis Prepared by: Kathleen O'Malley / B. & F. / (916) 319-3081