Is AB 1177 Necessary When Credit Unions Offer Similar Options?
Assembly Bill 1177 aims to provide a zero-fee/zero-penalty public banking option. However, many financial institutions offer something very close, if not identical, to the type of account envisioned in AB 1177.
“Why create a costly state-run banking system when the infrastructure for providing and delivering a consumer-friendly checking account product already exists?” says Daniel Rader, president/CEO of SCE Federal Credit Union. “Credit unions as not-for-profit cooperatives are specifically purposed to provide affordable financial services.”
Credit unions already provide that type of access with nearly 290 credit unions in the state, and more than 100 are low-income designated credit unions. The act also carves out a requirement that a landlord or landlord’s agent allows a tenant to pay rent and security deposit by an electronic funds transfer from a BankCal account. If the legislature believes such a mandate is necessary, it can pass a bill requiring acceptance of electronic funds transfers from any financial institution, says Rader.
“Shouldn’t the state spend some time to explore how existing financial institutions can help reduce the number of the unbanked before diving into the business of providing financial services?” asks Rader.