Bill Text: CA AB38 | 2011-2012 | Regular Session | Enrolled

California Assembly Bill 38 (Prior Session Legislation)

Bill Title: Banking: underserved communities.

Sponsorship: Partisan Bill (Democrat 1)

Status: (Vetoed) 2011-10-09 - Vetoed by Governor. [AB38 Detail]

Download: California-2011-AB38-Enrolled.html

BILL NUMBER: AB 38	ENROLLED
	BILL TEXT

	PASSED THE SENATE  AUGUST 29, 2011
	PASSED THE ASSEMBLY  AUGUST 31, 2011
	AMENDED IN SENATE  JUNE 27, 2011
	AMENDED IN ASSEMBLY  MAY 27, 2011
	AMENDED IN ASSEMBLY  MARCH 21, 2011

INTRODUCED BY   Assembly Member Bradford

                        DECEMBER 6, 2010

   An act to add Division 18 (commencing with Section 40001) to the
Financial Code, relating to banking development districts.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 38, Bradford. Banking: underserved communities.
   Existing law provides for various programs and activities in the
development of economic opportunities for businesses in the state.
The California Small Business Financial Development Corporation Law
establishes small business financial development corporations and
provides for their regulation by the Business, Transportation and
Housing Agency. Existing law, the Banking Law, provides for the
regulation of banks by the Department of Financial Institutions.
   This bill would require the department to work with local agencies
to compile a list of underserved communities. The bill would require
the department to post that list on the department's Internet Web
site.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  The Legislature finds and declares all of the
following:
   (a) Too many Californians are disconnected from the financial
mainstream. National estimates show that 10 percent of households,
including nearly one-quarter of the minority population, are
"unbanked," meaning they lack a basic checking or savings account. In
California, 12 percent of adults do not have a checking or savings
account, according to the United States Census. Recent market
research indicates that Fresno and Los Angeles have the second and
third highest percentages of unbanked residents in the country. In
San Francisco, the Brookings Institution found that one in five
adults, and half the city's African Americans and Latinos, do not
have bank accounts. The unbanked are most likely to be people who are
less educated and have lower incomes.
   (b) The unbanked poor pay more to conduct their financial lives.
Utilizing check cashing outlets and money order services to pay bills
and expenses can have costly side effects as the result of fees and
service charges.
   (c) Families without accounts often do not have a safe place to
keep their money. They may walk around with large amounts of cash in
their pockets, or keep it at home in a coffee can. Robberies can be
more prevalent around check cashing outlets. A burglary or fire could
cost them their life's savings in a matter of moments.
   (d) Lower income households often pay more for financial services.
According to a recent Brookings Institution study, a full-time
worker without a checking account could potentially save as much as
$40,000 during his or her career by relying on a lower cost checking
account instead of check cashing services. As a result, without a
checking account or lower cost checking account, lower income
families have added difficulty saving for and investing in
wealth-building assets, the investments they do make are too often
not in their best financial interest, and business opportunities in
lower income markets are unduly depressed.
   (e) A bank account is also the first step to financial security
and asset building for many families. A bank account helps people
take the first step onto this path. Without an account, it is much
more difficult to get well-priced car loans, credit cards, or
mortgages, which are the exact financial tools needed to climb up the
economic ladder. Many families stay stuck on a different and more
expensive path, going to pawn shops, payday lenders, and rent-to-own
stores.
   (f) While financial institutions may see the long-term business
potential of underserved areas, they may have a short-term concern
that it would take a number of years before they can attract enough
retail deposits to become viable. Those concerns are magnified by the
fact that lower income workers often need to use banking services in
off-business hours because they work in multiple jobs, making it
more difficult for banks to attract customers with standard business
practices.
   (g) In 1999, the State of New York established a Banking
Development District Program and made available a range of state and
city incentives to participating financial institutions. The
incentives provided through the program aim to help banks get over
short-term obstacles to profitability, enabling them to branch into
neighborhoods with long-term business potential, and better serve
low-income consumers with existing bank branches.
  SEC. 2.  Division 18 (commencing with Section 40000) is added to
the Financial Code, to read:

      DIVISION 18.  BANKING IN UNDERSERVED COMMUNITIES


   40001.  For purposes of this division, the following definitions
shall apply:
   (a) "Bank" refers to any commercial bank, savings bank, savings
association, or credit union.
   (b) "Underserved community" is 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.
   (c) "Local agency" means a city, county, whether general law or
chartered, city and county, or town.
   (d) "Department" means the Department of Financial Institutions.
   40002.  (a) The department shall work with local agencies to
compile a list of underserved communities or regions that lack a
concentration of banks and services in order to provide banks with a
clear demonstration of those areas that are in the most need.
   (b) The department shall post the list compiled pursuant to
subdivision (a) on the department's Internet Web site.