The American Bankers Association joined a coalition of nine other trade associations in a letter opposing a bill introduced in the California State Assembly that would create a public banking program, BankCal, within the state treasurer’s office that would provide financial services to California residents. The bill also creates a mandate for all employers with five or more employees, even if they do not already offer direct deposit, to provide direct deposit into the BankCal fund as an option for payment of wages.
The groups pointed to several alternative solutions to help bring unbanked and underbanked consumers into the banking system, including banks and credit unions offering BankOn certified accounts—something ABA has called on all member banks to do. “Building a strong, collaborative California BankOn coalition would be enormously consequential, and the legislature could play a supporting role in helping to promote both bank and consumer adoption of BankOn accounts by supporting development of a strong coalition,” the groups wrote. “Doing so will invariably be less expensive and risky than the proposed banking structure contemplated by AB 1177.”
In addition, the groups noted that the measure is premature, as local municipalities are ill-prepared to apply for public bank charters, and poses significant risks to California taxpayers.
