Bill Text: IL HB5503 | 2023-2024 | 103rd General Assembly | Introduced

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Bill Title: Creates the Illinois Public Banking Option Act. Establishes the Illinois Bank Account Board. Sets forth provisions concerning the membership and duties of the Board. Provides that the Board shall establish the Illinois Bank Account Program, including establishing the mechanisms by which an account holder may deposit funds into an Illinois Bank Account for no fee, establishing mechanism for direct deposits, selecting a program administrator, and establishing other terms, policies, and rules. Requires the Board to contract with an independent entity to conduct a market analysis. Sets forth the requirements of the market analysis. Requires the Board to make a determination as to whether the Illinois Bank Account Program can be implemented as described in the Act and to make a determination as to whether Illinois Bank Account Program revenue is more likely than not to be sufficient to pay for Illinois Bank Account Program costs within 6 years of the Illinois Bank Account Program's implementation and what the State's investment will need to be in order to cover the costs.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Introduced) 2024-04-05 - Rule 19(a) / Re-referred to Rules Committee [HB5503 Detail]

Download: Illinois-2023-HB5503-Introduced.html

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103RD GENERAL ASSEMBLY State of Illinois 2023 and 2024 HB5503 Introduced , by Rep. Kevin John Olickal SYNOPSIS AS INTRODUCED:
New Act
Creates the Illinois Public Banking Option Act. Establishes the Illinois Bank Account Board. Sets forth provisions concerning the membership and duties of the Board. Provides that the Board shall establish the Illinois Bank Account Program, including establishing the mechanisms by which an account holder may deposit funds into an Illinois Bank Account for no fee, establishing mechanism for direct deposits, selecting a program administrator, and establishing other terms, policies, and rules. Requires the Board to contract with an independent entity to conduct a market analysis. Sets forth the requirements of the market analysis. Requires the Board to make a determination as to whether the Illinois Bank Account Program can be implemented as described in the Act and to make a determination as to whether Illinois Bank Account Program revenue is more likely than not to be sufficient to pay for Illinois Bank Account Program costs within 6 years of the Illinois Bank Account Program's implementation and what the State's investment will need to be in order to cover the costs.
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A BILL FOR
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AN ACT concerning State government.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 1. Short title. This Act may be cited as the
Illinois Public Banking Option Act.
Section 3. Findings. The General Assembly finds the
following:
(1) With high unemployment rates, homelessness rising,
and an unprecedented wave of evictions looming as a result
of the COVID-19 pandemic, the financial stability of the
State's most vulnerable residents have become a matter of
particularly urgent concern, not only to those individuals
themselves but to the economic health of the State as a
whole.
(2) Access to basic financial services, including
demand deposit (checking) and savings accounts, is a
critical component of financial stability. One in 5
Illinois households are unbanked or underbanked.
Underbanked households are defined as those that have a
bank account but have used alternative financial services
(AFS) for transactions, including check cashing and money
orders, and for credit, including payday loans. Among
underbanked households, AFS transaction use is 3 times

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more prevalent than the use of AFS for credit. Around 17%
of United States households use AFS transactions. These
transaction services can be a significant expense for
low-income Illinoisans. For example, check cashers charge
as much as 10% of the cost of the check being cashed. In
2018, AFS costs for unbanked and underbanked Americans
totaled $189,000,000,000 in fees and interest, which means
the average annual cost per person for using AFS was
$3,000.
(3) Predatory banking practices, including expensive
overdraft fees, create a vicious cycle leading to the
lasting exclusion of Illinois residents from traditional
and affordable financial services and disproportionately
harm low-income people and people of color. Banking
options that target the poor generate significant revenue
through these exploitative practices. In 2019, 84% of
those fees were paid by 9% of account holders, and those
customers typically carried low balances averaging less
than $350.
(4) Unbanked households pay proportionally more for
their financial services, lack secure means of saving,
have fewer opportunities to build credit, and are rejected
for loans at far higher rates. Basic financial
transactions, including the payment of rent, utilities,
and other recurring bills or charitable contributions, are
a particularly formidable challenge for households lacking

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access to important tools, including automated bill pay,
or whose monthly income fluctuates too much to make
automated processes viable. Because they have fewer
options when their money runs short, unbanked households
face a far more destructive cycle of punitive action when
they default on their recurring bills, which leads to
compounding interest and further debt. For all these
reasons, exclusion from traditional financial services
significantly increases the risk of poverty and
homelessness and places an unnecessary burden on the
entire economy.
(5) Limited access to affordable financial services is
a problem that disproportionately impacts low-income
communities and communities of color. The racial disparity
in banking access in Illinois is stark: the most recent
five-year estimate from 2017-2021 shows 2.4% of white
households were unbanked, whereas 20.4% of black
households were unbanked. Hispanic households face similar
disparities, with 10.9% of Hispanic households unbanked.
Despite improvements as Illinoisans recover from the
pandemic, the racial gap remains pronounced, with black
households having a significantly higher unbanked rate
than their white counterparts. In Chicago, where the
disparities are amplified, the number of unbanked white
households held evenly with the rate across the State at
2.5% while black households maintained a persistently high

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23.7% unbanked rate.
(6) Providing Illinois residents with a zero-fee,
zero-penalty, zero-minimum-balance requirement public
option for basic financial services would empower
Illinoisans by providing a stable, affordable financial
platform for all Illinois residents, especially the
unbanked and underbanked who currently rely on expensive
AFS transactions. The Illinois Bank Account Program would
mitigate the demand for exploitative alternatives to
banking services with respect to which upselling and
cross-selling into expensive accounts and products is the
norm. A market analysis of the proposed Illinois Bank
Account Program and any modifications that may be
necessary for its successful and cost-effective
implementation will enhance the State's ability to serve
the financial services needs of unbanked and underbanked
Illinois residents.
Section 4. Definitions. In this Act:
"Board" means the Illinois Bank Account Board.
"Illinois Bank Account Program" means the program
described in Section 10.
Section 5. The Illinois Bank Account Board.
(a) The Illinois Bank Account Board is established by the
State under the Department of Financial and Professional

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Regulation for the purpose of protecting consumers who lack
access to traditional banking services from predatory,
discriminatory, and costly alternatives, which offers
Illinoisans access to a voluntary, zero-fee, zero-penalty,
federally insured transaction account, known as an Illinois
Bank Account, and related payment services at no cost to
account holders, including robust and geographically diverse
mechanisms for accessing account funds and account management
tools that facilitate the automation of basic financial
transactions designed to serve the needs of individuals with
low or fluctuating income.
(b) The Board shall consist of all the following members:
(1) The State Treasurer or the State Treasurer's
designee.
(2) The Secretary of Financial and Professional
Regulation or the Secretary's designee.
(3) An individual with banking expertise, particularly
expertise in transaction accounts and debit cards,
appointed by the Senate President.
(4) An individual with expertise in economic and
racial justice and cultural competence appointed by the
Speaker of the House.
(5) An employee representative appointed by the
Governor.
(6) An individual with expertise in banking or
consumer financial services affiliated with an academic

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institution appointed by the Governor.
(7) An individual with banking expertise appointed by
the Governor.
(8) A public banking advocate appointed by the Senate
President.
(9) A consumer representative or advocate with
expertise in banking access and financial empowerment,
including within historically unbanked and underbanked
communities, appointed by the Speaker of the House.
(c) In making appointments to the Board, the appointing
authorities shall take into consideration the cultural,
ethnic, and geographic diversity of the State so that the
Board's composition reflects the communities of Illinois.
(d) Members of the Board shall serve without compensation;
however, members of the Board shall be reimbursed for
necessary travel expenses incurred in connection with their
Board duties.
(e) Except for the members described in paragraphs (3) and
(9) of subsection (b), a Board member, or State Treasurer's
staff working with the Board, while serving in that capacity
shall not have a direct or indirect investment or ownership
interest in or be employed by, a consultant to, a member of the
board of directors of, affiliated with, or otherwise a
representative of, a private bank or financial services
institution unless that position is an unpaid volunteer
position. The restrictions in this subsection do not include

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ownership of a share of a diversified mutual fund or
exchange-traded fund that holds shares of a private bank or
financial services.
(f) To the extent the State, to successfully implement the
Illinois Bank Account Program, contracts with entities to
provide administrative and financial services, the State has a
proprietary interest in ensuring that the entities with which
it contracts have not engaged in conduct that would undermine
the goals, efficiency, and reputation of the Illinois Bank
Account Program, including, but not limited to, by violating
banking, consumer protection, fair lending, or fair housing
laws.
Section 10. Duties of the Board. Within 12 months after
receiving a market analysis as described in Section 15, the
Board:
(a) Shall establish a process by which an individual may
open an Illinois Bank Account, which shall be designed to
maximize program participation.
(b) Shall establish the mechanisms by which an account
holder may deposit funds into an Illinois Bank Account for no
fee, which mechanisms shall include, but not be limited to,
electronic fund transfers arranged through an employer's or
hiring entity's payroll direct deposit arrangement and cash
loading through in-network partners.
(c) Shall establish the process through which an account

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holder may elect to have a portion, up to the entirety, of the
account holder's paycheck or earnings due for labor or
services performed directly deposited by electronic fund
transfer into the account holder's Illinois Bank Account.
(d) Shall establish the process through which employers
and hiring entities shall be required to remit through a
payroll direct deposit arrangement each worker's elected
payroll contribution to the worker's Illinois Bank Account in
accordance with the worker's election.
(e) Shall establish mechanisms by which an account holder
can withdraw funds from an Illinois Bank Account using an
Illinois Bank Account debit card for no fee, which mechanisms
shall include, but not be limited to, withdrawals through
point-of-sale purchases using an Illinois Bank Account debit
card and through cash withdrawals at a robust and
geographically expansive network of participating ATMs, bank
or credit union branches, and other in-network partners of
designated financial institution partners.
(f) Shall establish a process, available to all account
holders for no fee, through which an account holder may
arrange for payment to a registered payee using a
preauthorized electronic fund transfer from an Illinois Bank
Account.
(g) Shall establish the process and terms and conditions
for becoming a registered payee, which shall at a minimum
require the payee's agreement to specified terms and

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conditions to be established by the board in exchange for the
benefits of transparency and accountability afforded by
participation in an automated payment system and which shall
be designed to incentivize account holders' preauthorized
electronic fund transfers to registered payees and application
of voluntary automatic disbursement rules by limiting the late
payment fees and penalties that registered payees can impose
on account holders who pay them using preauthorized electronic
fund transfers from their Illinois Bank Accounts.
(h) Shall establish voluntary automatic disbursement rules
to assist an account holder in managing automated payments to
registered payees based on the availability of funds in the
account holder's account, which an account holder may
voluntarily elect to apply or to stop applying to the account
holder's Illinois Bank Account at any time, and which shall be
designed to maximize consumer protection and may include, but
not be limited to, rules governing the prioritization and
timing of payments, rules limiting payments to a percentage of
funds available in the Illinois Bank Account, and rules
limiting disbursement to designated registered payees only
upon satisfaction of specified conditions of the Illinois Bank
Account.
(i) Shall facilitate the opening of an Illinois Bank
Account by individuals who may not have federal or state
government-issued photo identification while taking all
reasonable steps to maintain the confidentiality of personal

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information consistent with all applicable laws.
(j) Shall design and establish rules governing the
enrollment and participation in the program of individuals who
do not have permanent housing.
(k) May design and establish rules governing the
enrollment and participation in the program of individuals who
are under 18 years of age, including rules governing the
opening of an Illinois Bank Account by a person who is at least
14 years of age without a co-signer or guarantor on the account
consistent with all applicable law.
(l) Shall select a program administrator, which may
consist of one or more contractors or program staff or a
combination thereof, whose duties shall include, but not be
limited to, all of the following:
(1) Providing a secure internet web-based portal and
mobile application through which individuals can enroll in
the program and entities can become registered payees and
through which account holders can access and manage their
Illinois Bank Accounts, including their direct deposits,
preauthorized electronic fund transfers to registered
payees, and automatic disbursement rule elections.
(2) Providing a method that enables employers and
hiring entities to remit each worker participant's elected
direct deposit payroll contribution to the worker's
Illinois Bank Account in accordance with the worker's
election.

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(3) Facilitating enrollment of account holders in the
program through coordination with government, employers
and hiring entities, and nonprofit partners.
(4) Facilitating and managing connectivity with other
state and local government programs providing individuals
with financial accounts to enable program account holders
to transfer funds between their Illinois Bank Accounts and
their other state-managed or locally managed accounts, as
authorized by the Board and in accordance with all
applicable laws and regulations.
(5) Facilitating and managing connectivity with other
State and local government agencies and entities to enable
and streamline remittance of local, State, and federal
benefit and public assistance payments and other
disbursements to account holders who are entitled to those
payments and who authorize those payments to be directly
deposited by electronic fund transfer into an Illinois
Bank Account, as authorized by the board and in accordance
with all applicable laws and regulations.
(m) Shall contract with a financial services network
administrator whose duties may include, but not be limited to,
all of the following:
(1) Contracting with, managing, and coordinating the
financial services vendors for the program, which shall
provide account holders access to their Illinois Bank
Accounts and services provided in concert with at least

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one qualifying participating depository financial
institution that meets the requirements established by the
board.
(2) Adding additional participating depository
financial institutions meeting the requirements
established by the Board, especially including qualifying
credit unions and other local financial institutions, as
program scope and scale permits, in accordance with the
board's specifications as set forth in the contract
between the board and the financial services network
administrator.
(3) Issuing to each account holder a secure debit
card, or other secure means of access to the account
holder's Illinois Bank Account, which shall utilize
current security and antifraud technology consistent with
industry standards.
(4) Providing a robust and geographically expansive
financial services network of partners through which an
account holder can load or withdraw funds from an Illinois
Bank Account using an Illinois Bank Account debit card, or
other secure means of access to an Illinois Bank Account,
for no fee, including ATMs, bank or credit union branches,
and other in-network partners, minimize or eliminate
out-of-network fees for account holders, and ensure that
account holders are not charged out-of-network fees that
are not reasonable and actually incurred by the program

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vendor.
(n) Shall develop and negotiate a fair and equitable
program fee and program revenue sharing structure between the
State and the financial services network administrator in
furtherance of attaining a financially self-sustaining
program, which agreement shall be reevaluated annually and
renegotiated as appropriate based on program scope and scale.
(o) Shall require an employer with more than 25 employees
and a hiring entity with more than 25 independent contractors
performing the same or similar labor or service, excluding the
federal government, to do all of the following:
(1) Have and maintain a payroll direct deposit
arrangement that enables voluntary worker participation in
the program.
(2) Deposit all wages and other payments due to a
worker that the worker has authorized to be directly
deposited by electronic fund transfer into the worker's
Illinois Bank Account in accordance with the worker's
authorization.
(3) Coordinate its payroll process with the program
administrator's application program interface to
facilitate accurate and seamless payment by direct deposit
in accordance with the authorization of each worker
participant.
(4) Cooperate with the program administrator in
providing all requested information available to the

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employer or hiring entity necessary for the opening and
administration of a worker's Illinois Bank Account.
(5) Upon request of the administrator, provide
additional forms or notifications to a worker.
(6) Refrain from discharging, disciplining,
threatening to discharge or discipline, or in any other
manner retaliating or taking an adverse action against a
worker or applicant because of the individual's
participation or manner of participation in the Illinois
Bank Account Program.
(p) Shall require a landlord or a landlord's agent to
allow a tenant to pay rent and deposit of security by an
electronic funds transfer from an Illinois Bank Account and
provide that a landlord's, or a landlord's agent's, receipt of
payment from an Illinois Bank Account pursuant to the
requirements of the Illinois Bank Account Program shall not be
considered a waiver of any right the landlord or landlord's
agent may otherwise have to establish the base rent on, or to
raise rent for, the rental unit.
Section 15. Market analysis.
(a) The market analysis required by this Section shall
include whether or not Illinois Bank Account Program revenue
is more likely than not to be sufficient to pay for Illinois
Bank Account Program costs within 6 years of the Illinois Bank
Account Program's implementation.

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(b) The analysis required by this Section shall include
detailed financial projections and key assumptions upon which
the determination required by this paragraph relies.
(c) The market analysis required by this Section shall
also include an analysis of the population of Illinois
residents who are unbanked and the reasons they are unbanked.
(d) The market analysis required by this Section shall
also include an analysis of the low-cost or no-cost options of
federally insured transaction accounts that are available or
marketed to unbanked Illinois residents.
(e) The market analysis required by this Section shall
also include an evaluation of all of the following:
(1) Alternatives to the Illinois Bank Account Program
that the State could implement or enact that would
accomplish the essential policy objectives.
(2) The estimated risks and costs of alternatives.
(3) The expected effectiveness and scalability of
alternatives.
(f) The market analysis required by this Section shall
also include recommendations for how the State can maximize
the number of unbanked Illinois residents who become banked at
the lowest cost and risk to the State.
(g) The market analysis required by this Section shall
also include an analysis of relative advantages and
disadvantages, compared to private sector alternatives, that
the State may have in identifying, reaching, or persuading

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unbanked Illinois residents to enroll in a State-administered
banking program.
(h) The market analysis required by this Section shall
also include recommendations related to the appropriate
governance structure for a public-private partnership such as
the Illinois Bank Account Program.
(i) The market analysis required by this Section shall
also include an analysis of costs, benefits, and impacts on
all affected parties, including, but not limited to,
landlords, employers, State government, low-wage workers, and
consumers.
(1) The Board shall contract with one or more
independent entities with the appropriate expertise to
conduct the market analysis required by this Section.
(2) A contract entered into pursuant to this Section
shall require any entity conducting the market analysis to
provide progress reports to, and receive feedback from,
the Board at regular intervals or by request and be
available to provide testimony and answer questions at any
legislative hearings held within 12 months of the delivery
of the market analysis to the General Assembly.
(A) The market analysis required by this Section
shall consider all of the following:
(i) The number of potential account holders.
(ii) The availability of qualified
participating depository financial institutions.

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(iii) Potential account holders' comfort with
various banking products.
(iv) How individuals without federal or state
photo identification can participate.
(v) Potential Illinois Bank Account Program
revenue streams.
(vi) The presence and effectiveness of private
sector or nonprofit competitors to the Illinois
Bank Account Program.
(vii) State fiscal risk from the Illinois Bank
Account Program during economic downturns or
economic shocks.
(viii) Any other factor the Board deems
relevant to implementing the Illinois Bank Account
program.
(ix) The risks and costs of the Illinois Bank
Account Program.
(x) The expected effectiveness and scalability
of the Illinois Bank Account Program.
(xi) The likely impact of the Illinois Bank
Account Program on existing Illinois depository
institutions.
(xii) The existence of possible financial
services network administrators. If any
possibilities include an out-of-state entity, the
anticipated impact on Illinois consumers,

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businesses, and financial institutions and how an
out-of-state financial services network
administrator could or should be regulated.
(B) Within 12 months after entering into a
contract for the market analysis required by Section
15, the Board shall hold at least one public hearing to
solicit input from members of the public. A hearing,
including input from members of the public, held
pursuant to this Section shall be recorded and made
available on the State Treasurer's website consistent
with the Freedom of Information Act.
(C) The Board shall hold a public hearing to
review the market analysis. After the public hearing
required by this paragraph, the Board may issue a
report to accompany the market analysis. The report
may include the Board's assessment of the market
analysis, feedback from the public hearing held
pursuant to this paragraph, and recommendations
related to the implementation of the Illinois Bank
Account Program.
(j) The Board shall make a determination as to whether the
Illinois Bank Account Program can be implemented as described
in Section 10 and, if not, what modifications to the Illinois
Bank Account Program could be made to implement it.
(k) The Board shall make a determination as to whether
Illinois Bank Account Program revenue is more likely than not

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