Bill Text: CA AB2581 | 2009-2010 | Regular Session | Amended

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: Banking development districts.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Vetoed) 2010-09-30 - Vetoed by Governor. [AB2581 Detail]

Download: California-2009-AB2581-Amended.html

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BILL NUMBER: AB 2581	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  MAY 28, 2010
	AMENDED IN ASSEMBLY  APRIL 26, 2010

INTRODUCED BY   Assembly Member Bradford

                        FEBRUARY 19, 2010

   An act to add Division 18 (commencing with Section 40000) to the
Financial Code, relating to banking development districts.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 2581, as amended, Bradford. Banking development districts.
   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 create a Banking Development District Program,
within the Treasurer's office, that would encourage the establishment
of banking branches in designated geographic locations where there
is an underserved community, as defined. The bill would require the
Treasurer  and the Department of Financial Institutions
 to adopt rules and regulations for the establishment and
maintenance of banking development districts and to evaluate and
approve applications for designation of banking development
districts. The bill would require the Treasurer  and the
department  to develop and provide certain incentives to
banks  , as defined,  located in a banking development
district. The bill would also require the Treasurer  and the
department to collaborate to create   to establish 
a performance review process for the program, as specified.
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.


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 a 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 
path   and more expensive path,  going to pawn
shops, payday lenders, and rent-to-own stores  where the
interest rates can reach several hundred percent.   .

   (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.
   (h) It is the intent of the Legislature in enacting this act to
create a Banking Development District Program to spur increased and
enhanced banking services in underserved communities that will spur
greater financial inclusion and promote local economic development.
The desired outcome is that more Californians will enter the
financial mainstream and build savings and wealth through
participating banks' offerings and marketing of reasonably priced
transactional, loan, and credit products.
  SEC. 2.  Division 18 (commencing with Section 40000) is added to
the Financial Code, to read:

      DIVISION 18.  BANKING DEVELOPMENT DISTRICT PROGRAM


   40000.  The Banking Development District Program is hereby created
in order to encourage the establishment of banking branches that
provide needed products and services in specifically designated
geographic locations where there is an underserved community. These
designated locations shall be known as banking development districts.
Financial institutions may seek to participate in the program to do
either of the following:
   (a) Open a new outlet in an area designated as a banking
development district.
   (b) Develop and market a new product line or group of services in
an existing outlet in an area that is designated as a banking
development district.
   40001.  For purposes of this division, the following definitions
shall apply:
   (a) "Bank" refers to any commercial bank, savings bank, 
or  savings association  , or credit union  .
   (b) "Unbanked" refers to a person who lacks both a basic checking
account and a savings account.
   (c) "Underbanked" refers to a person who has a bank account but is
not fully integrated in the financial mainstream.
   (d) "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.
   (e) "Banking development district" is a specifically designated
geographic location comprising an underserved community that has been
designated as such by the Treasurer  and the Department of
Financial Institutions  pursuant to this division.
   (f) "Local agency" means a city, county, whether general law or
chartered, city and county, or town.
   40002.  (a) The Banking Development District Program shall be
established within the Treasurer's office.
   (b) The Treasurer  , the Department of Financial
Institutions,  and local agencies may 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.
   (c) In order to participate in the Banking Development District
Program, a local agency, in conjunction with a bank, shall submit an
application to the Treasurer  and the Department of Financial
Institutions  for the designation of an underserved
community as a banking development district.
   (d) The application shall include, but not be limited to, all of
the following components:
   (1) Clearly define the current and anticipated bank product and
service needs of the community.
   (2) Demonstrate that these needs are not currently being met by
existing institutions, including, in particular, their branches in
the community.
   (3) Demonstrate that by coming into the community, or introducing
and effectively marketing additional product lines or services suited
for lower income consumers in an existing branch, the bank in
question is prepared to specifically meet the community needs.
   40003.  The Treasurer  and the Department of Financial
Institutions  shall set forth the selection criteria to
evaluate a local agency's application. The selection criteria shall
aim to satisfy the following:
   (a) Result in needed and responsible bank products and marketing
of those products to local consumers.
   (b) Be flexible and allow for differences in local markets.
   (c) Encourage safety and soundness.
   40004.  The Treasurer  and the Department of Financial
Institutions  shall evaluate and approve applications and
designate banking development districts with an emphasis on
evaluating the extent to which the bank is prepared to offer and to
market products suited for lower income consumers, including those
products that accomplish the following:
   (a) Help unbanked Californians open starter accounts. These
accounts shall have features to help people overcome barriers that
prevent them from opening accounts that may include the following:
   (1) "Second Chance" type features for clients who are listed on
Chex Systems or similar databases.
   (2) No monthly balance requirements.
   (3) Limited low-cost overdraft protection plans.
   (b) Build financial literacy of community members.
   (c) Provide effective ways to help low-income consumers build
savings.
   (d) Provide effective ways to help low-income consumers build or
improve a credit record.
   (e) Provide competitively priced mortgages and auto loans.
   (f) Offer microloans and microlending products and services.
   (g) Provide a range of well-priced loans and other products for
small businesses.
   (h) Provide specialized marketing to inform community members
about the products.
   (i) Provide specialized training of staff, including both
frontline and customer service staff, to meet the needs of community
members.
   40005.  The Treasurer  and the Department of Financial
Institutions  shall develop and provide a range of
incentives to help banks overcome short-term costs that prevent them
from offering products and services that have long-term business
potential. The incentives shall be all of the following:
   (a) Valuable to banks.
   (b) Significant enough to encourage banks to locate in an
underserved community or develop new products and services within
existing branches but small enough that a branch's financial success
requires services to the community.
   (c) Require reauthorization every two years.
   40006.  Upon designation of a banking development district by the
Treasurer  and the Department of Financial Institutions
 , the bank located within the banking development district
shall be eligible for a range of incentives. The range of incentives
may include, but shall not be limited to, the following:
   (a) Access to priority of deposits of public funds and access to
 below  market-rate public funds as deemed
appropriate and approved by the Treasurer.
   (b) Incentives offered by local agencies as deemed appropriate by
the local agency and the Treasurer.
   40007.  The Treasurer may work with local agencies and economic
development officials to develop additional local incentives for
participating banks. These local incentives may include, but shall
not be limited to, the following:
   (a) Local agency deposits.
   (b) Local agencies may help banks locate suitable commercial space
for branches and may provide real estate assistance.
   (c) Local tax incentives. Banks may be eligible for additional
incentives if a banking development district overlaps with an
enterprise zone.
   (d) Workforce development. Customized training may be developed
for tellers, back-office or administrative staff, information
technology, security, and other select job categories.
   40008.  The Treasurer  and the Department of Financial
Institutions  shall adopt rules and regulations for the
establishment and maintenance of banking development districts, as
provided for in this division.
   40009.  The Treasurer  and the Department of Financial
Institutions shall collaborate to create   shall
establish  a performance review process to ensure that banks
taking part in the Banking Development District Program are meeting
their goals and initiatives and that their services are having a
recognizable impact on underserved communities. 
   40010.  Banks have an affirmative obligation to serve the
convenience and needs of the communities where they provide services
commensurate with the federal Community Reinvestment Act.