On October 4, 2021 Governor Gavin Newsom signed into law AB 1177, the California Public Banking Option Act co-sponsored by CPBA, SEIU CA, and the California Reinvestment Coalition. AB 1177 authorizes a commission of financial access experts, community members, and representatives from the Treasurer’s office and the Department of Financial Protection and Innovation (DFPI) to oversee a market analysis for implementing the CalAccount program.
The program, once approved by the legislature, will create a state-sponsored retail banking option for every Californian, offering a zero-fee, zero-penalty debit account and debit card enabling direct deposit from employers and public benefits, automatic bill pay to registered payees, recurring payments and donations to account holders’ organizations or charities of choice, and an infrastructure to support account holders in building credit.
Nearly 1 in 4 Californians are unbanked, meaning they lack a bank account altogether, or are underbanked, having a bank account, yet still relying on predatory financial services such as payday lenders, pink slip loans, and pawn shops. Unbanked or underbanked households pay proportionally more for financial services, lack savings accounts, have fewer opportunities to build credit, and face increased rates of loan rejection.
Limited access to financial services is a problem disproportionately impacting low-income communities and communities of color. Californians earning less than $15 per hour comprise 80.7% of the unbanked in the state. Nearly half of all Black-identifying households in California and 41.1% of all Hispanic-identifying households are unbanked or underbanked.
Providing Californians with a public option for essential financial services will help close the racial wealth gap, eliminate the need for exploitative alternatives to traditional banking, and reduce Californians’ risk of falling into catastrophic debt. According to a study conducted by HR&A Advisors, universal access to essential financial services will result in approximately $3.3 billion in cumulative savings to California’s neediest households. By redirecting household spending away from costly interest and fees, AB 1177 will result in the creation of over 22,000 jobs while boosting the California economy by $4.2 billion.
Read our Medium article to learn more about the monumental grassroots support behind the nation’s first public banking option bill.
California Public Banking Option Act (AB 1177) Passes the State Legislature