California Executives Offer Nation’s First Public Banking Option

Five California lawmakers attempt to establish nation’s first public bank option that would offer free, no-penalty bank accounts to all California residents.

the California Public Banking Option Act, also known as BankCal, seeks to bridge the growing racial wealth gap by offering financial services at no cost.

These services include a no-fee, no-penalty debit account that requires employees to facilitate direct deposit into the account upon request. It also includes automatic bill payment capability and free access to participating bank ATMs, essential services for asset building and wealth creation.

It would also have an infrastructure that would allow direct deposit of public benefit payments, such as federal stimulus checks.

“I am very excited about the opportunity that BankCal offers to address some (these inequalities and the racial wealth gap) and extend essential financial services to all Californians, especially working people,” said Ash Kalra. , Assembly member D-San Jose, who co-authored the bill, said Tuesday at a press conference.

Almost a quarter of Californians are either unbanked or underbanked, which means they either don’t have a bank account or pay a high price for basic financial transactions like cashing their money. paycheck.

That rate is even higher for black and Latinx households, where nearly half are unbanked or underbanked, representing 78% of the state’s unbanked population, according to the law.

The bill also found that California households earning less than $ 30,000 per year, or just under $ 15 an hour for a full-time worker, accounted for 80.7% of the unbanked in the state. .

Just under half of California’s disabled population is also unbanked.

“We know that $ 15 an hour means a lot less when that person is actually getting cash proceeds, and that’s unfair,” said senior author of Legislative Assembly Miguel Santiago, D-Los Angeles. “It doesn’t make sense that someone is making $ 15 an hour and after every charge, after every trade, after everything they do, after the overdraft fee, that $ 15 an hour is the same. declined because financial institutions continue to make huge profits. ”

Those fees could cost an average of 10% of an hourly-paid worker’s take-home pay, Santiago said.

Sofia Lima, a San Francisco resident who works at McDonald’s and Carl’s Jr. to support her two young daughters, said she could attest to that.

“I cash my paychecks in a store half an hour from my house where I have to take a bus to get to me,” Lima said in Spanish. “I spend $ 12 for every check I cash, other than travel expenses, and that quickly adds up to having lost over $ 500 in check cashing over the past two years, travel no. including.”

She said she lost even more money paying money orders and using public transportation to pay her bills.

“If I could save more of my money, maybe child care would be an option,” Lima said.

By offering these banking services for free, BankCal would level the playing field, enabling low- and middle-income residents to save money, build credit, access their money and pay their bills without having to to use “predatory financial services” like the no credit check loans, mandate fees or overdraft fees, Kalra said.

To be clear, this bill would not create a new bank, but rather a statewide retail banking option.

If passed, the legislation would create a Board of Directors of BankCal, made up of the state treasurer’s office, which would be the oversight body, ensuring that the program reflects the priorities of the legislation.

It would also have a program administrator who would facilitate partnerships with government agencies and non-profit organizations as well as a network administrator who would coordinate with financial institutions and debit / credit card networks.

The banking service would be self-sufficient thanks to the revenue generated from merchant fees on debit card purchases, the donors said.

“It’s a direct solution to traditional commercial banks that operate without real motivation to help affected communities,” said Trinity Tran, co-founder and lead organizer of the California Public Banking Alliance.

BankCal would also eliminate the possibility of overdraft fees by ensuring that all payments are made by debit card and not by check.

Tran noted that low-income people are twice as likely to pay overdraft fees, adding that 80% of bank charges are paid by just 20% of U.S. bank customers.

At present, BankCal is not supposed to have the capacity to issue loans, but the legislation indicates that the board may review and add other services in the future.

So far, the legislation has garnered a lot of support from progressive organizations and representatives, including Ro Khanna Congressman D-Santa Clara, who called BankCal an “incredibly innovative,” transformative and moral proposition.

“He says if you’re a Californian you’re going to now have a bank account, and it won’t cost you anything,” Khanna said. “It’s actually giving financial security and financial dignity to so many Californians who don’t have it.”

The California Public Banking Option Act will be heard before the Assembly’s Banking and Finance Committee on April 29, 2021.

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Kristina McManus

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