California Governor Gavin Newsom has signed the California Banking Act into law.
The legislation establishes the BankCal Program (BankCal) to provide Californians with zero-fee and zero-penalty transaction accounts and debit card services.
HISTORIC! Today Governor @GavinNewsom signed #AB1177, the California Public Banking Option Act, which sets into motion the creation of the CalAccount program guaranteeing basic banking services to all Californians without fees or penalties. pic.twitter.com/JGIJBuu2j6
— California Public Banking Alliance (@calpba) October 4, 2021
The legislation (AB 1177) establishes a nine-member board with members including public officials and staffed by employees of the State Treasurers Office.
According to the bill, California citizens are losing “hundreds of millions” in fees to payday lenders and check cashing operations.
“With BankCal, more families will be able to keep the money they’ve earned, put food on the table, and build their savings. Creating a public option for banking and closing the racial wealth gap isn’t only a moral imperative, but it also creates greater financial security for all of our communities. This bill is a much-needed step to addressing the needs of the unbanked and underbanked and takes us one step closer to building more equitably after the pandemic.”
The legislation also mentions Fintechs or neo-banks – Chime is mentioned by name as the document highlights the need to serve the sector of the community that remains under or unbanked.
The bill was opposed by the American Bankers Association, the California Chamber of Commerce, the Independent Bankers Association, and others.
The legislation was part of a series of bills that address financial services including strengthening consumer protection from the financial services sector.
AB 390 streamlines cancellation of automatic renewal and increases notice for continuous service subscriptions and AB 1405 and SB 531 expand consumer rights and notification requirements related to debt settlement and collection.
Last year, Governor Newsom signed legislation establishing the Department of Financial Protection and Innovation, bringing on additional investigators and attorneys to supervise financial institutions and crackdown on financial predators. The agency is modeled on the federal Consumer Financial Protection Bureau (CFPB).
The creation of federal banking services for consumers has gained interest in Washington, DC following the appointment by President Biden of Saule Omarova to become Comptroller of the Currency – the top bank regulator. Omarova is an advocate of eliminating private bank accounts in favor of enabling accounts held by the government.
