Update on AB 1177: ‘CalAccount’ Market Analysis Released

In 2021, the California Credit Union League spent significant time working on Assembly Bill 1177 (Santiago), referred to as the California Public Banking Act. As introduced, AB 1177 aimed to establish the “BankCal” program, designed to provide Californians with a zero-fee and zero-penalty transaction account and accompanying debit card service.

While it was viewed as a public banking bill, AB 1177 took a different approach. The program would depend on a network administrator to coordinate participating financial institutions with the account holders.

The League advocated against AB 1177 because many credit unions were already offering low or no-cost checking accounts. This advocacy contributed to the establishment of BankOn programs, which promote financial inclusion by connecting consumers with safe and affordable banking services. The existence of these BankOn programs and other low or no-cost checking accounts demonstrates that similar services to those proposed by the CalAccount program are already available and effective.

The League’s lobbying efforts led to the bill establishing a Blue Ribbon Commission to study the feasibility and necessity of this program through a market analysis. This market analysis echoes much of what we told legislators: CalAccount will be costly, and there is a trust issue with the unbanked and any financial services.

According to the market analysis, the viability of the program hinges on enrollment:

• “The feasibility of the CalAccount Program is highly dependent on enrollment. Figure 4.1 provides a sensitivity analysis across the three policy options using the low-end, midpoint, and high-end enrollment estimates presented in this report. Since many of the program’s costs are fixed and its benefits are variable, under the low-enrollment projections we predict that the costs of the program will exceed its benefits and that the program will produce a negative return on investment. For the midpoint and high-end enrollment estimates, we estimate that the program’s benefits over its first 10 years will exceed the costs, producing a positive social return on investment. This finding highlights the importance of marketing and outreach, because enrollment will depend on generating awareness of the program” (page 46).

Under the final version of AB 1177, the commission will deliver the market analysis to the chairs of California’s Senate Banking and Financial Institutions Committee and the Assembly Banking and Finance Committee. The League expects hearings on the market analysis to be held in the fall or during the next legislative session.

Email Robert Wilson, senior vice president of state government affairs for the League, if you have any questions.