Nearly 20 Democratic lawmakers on Tuesday introduced a bill to establish a state-wide public banking program that would partner with private sector financial institutions to provide low-income workers with access to transactions free cash and debit cards.
Labor advocates said the program could save households hundreds of dollars a year which not have a bank account or depend on alternative services such as money orders and payday loans,
“For a fair recovery, we cannot look to the same institutions, the Wall Street banks that have long laid the groundwork for the issues being exposed right now,” said Jyotswaroop Bawa, director of organization and campaigns at the California Reinvestment Coalition, which is co-sponsoring the bill.
Compared to previous attempts to create a public banking system, the bill will not actually create a new bank. The program, for example, is not intended to provide loans.
The new bill faces opposition from the California Bankers Association, which said it was impractical and premature.
“We would be remiss to ignore the news headlines regarding the $ 30 billion liability California is about to assume due to issues with outdated technology and (unemployed) fraud.” , the association said in a statement. “But somehow we should be supporting the idea of the state getting into the very complex area of banking?” “
The California Bankers Association, in its statement, said many banks already offer low-cost or no-fee bank account options. The association also noted that a recent study by the Federal Reserve found that only 6% of Americans do not have a bank account. A larger share of Americans, 16%, said they had a bank account but also used alternative services such as check cashing or payday lending.
Under Assembly Bill 1177, California would establish a nine-member council, including the state treasurer, who would oversee the program. The program would contract with existing financial institutions, which would provide services such as debit cards, direct deposits, and free automatic bill payments.
All Californians would be eligible to be part of the voluntary program if the bill passes. Participants could use existing ATMs, local stores or a smartphone app to access their account, said Cecille Isidro, spokesperson for SEIU California, which is sponsoring the bill.
The program would be funded initially by government money. Once launched, the program is designed to become self-sustaining primarily through debit card purchase fees, said Rene Bayardo, a lobbyist for SEIU California.
Lawmakers pushing for the bill have said it would provide financial security for low-income Californians, especially black and Latino households who make up nearly 80% of those without bank accounts in California.
“If a rich person makes money, that money makes money,” said MP Miguel Santiago, D-Los Angeles. “When a poor person makes money, that money is ripped off in every area, in every corner where you could possibly get it.”
Sofia Lima, a fast food restaurant worker in San Francisco, can understand. She said she had to take a 30-minute bus ride each way to cash paychecks at a store and pay $ 12 in fees. She estimates that she has lost over $ 500 in fee collection through paychecks over the past two years.
“Workers like me can’t save money because banks don’t make it easy for us to open accounts,” Lima said at the press conference through a translator.
The idea of governments getting directly involved in the banking sector has gained traction across the country. Legislators of six other states have proposed bills to facilitate the creation of public banks, according to the Public Banking Institute, which campaigns for this policy. Governor Gavin Newsom in 2019 signed a bill authorizing cities to create their own public banks, but none of them have yet.
The bill is expected to be considered by a California assembly committee in about a month.