California to examine feasibility of public banking
On October 4, the California governor signed AB 1177, which establishes the California Public Banking Option Act and requires the state treasurer to convene a commission to conduct a market analysis to determine the feasibility of establishing a program for California consumers who lack access to traditional banking services. The CalAccount Program, if implemented, would protect unbanked and underbanked consumers from predatory, discriminatory, and costly alternatives by providing “access to a voluntary, zero-fee, zero-penalty, federally insured transaction account . . . and related payment services at no cost to accountholders.”
Among other things, the Act would (i) require the establishment of a process for accountholders to deposit funds into a CalAccount for no fee; (ii) impose a mandate requiring employers and hiring entities to maintain payroll direct deposit arrangements to allow workers to voluntarily participate in the program; (iii) require landlords to allow tenants to pay rent and security deposits by electronic funds transfers from a CalAccount; (iv) require a board (established to administer the program) to contract with and coordinate financial services vendors for the program and build an expansive financial services network of participating ATMs, banks, credit union branches, and other in-network partners to allow account holders to load or withdraw funds from their CalAccount without paying fees; (v) require the board to establish a no-fee process to allow all account holders to arrange for payments to a registered payee using a preauthorized electronic fund transfer from a CalAccount; (vi) establish rules governing the participation of individuals under the age of 18; (vii) provide a secure web-based portal and mobile application to allow individuals access and management of their CalAccount; and (viii) facilitate connectivity with other state and local government agencies and entities so public assistance programs and other disbursements may be directly deposited by electronic fund transfer into a CalAccount. The Act requires the commission to be convened on or before September 1, 2022, with the market analysis due on or before July 1, 2024 to the Chair of the Senate Committee on Banking and Financial Institutions and the Chair of the Assembly Committee on Banking and Finance.