By: Dave Roughton | Special to The Observer

OPINION – California financial institutions see it as their mission to help all who live in the state access quality banking services. As they work to reach into more diverse communities, the conversation has turned to finding new and creative ways to support unbanked and underbanked Californians.

Credit unions in particular follow this philosophy. The nearly 300 credit unions in the state are leading the way in supporting financial inclusivity by offering affordable products and no-cost education to prevent the vulnerable from falling victim to predatory products. Of these credit unions, more than 100 have a low-income designation, meaning more than 50% of their members are considered to be low income Californians. As not for profit, cooperative financial institutions, credit unions have always focused on serving the underserved.

There’s certainly more work to be done, but a recent bill (AB 1177) introduced in the Legislature to create a new program, BankCal, would not only undermine the important work being done by credit unions but is fundamentally flawed and would end up being a nightmare for taxpayers already doing their best to recover from the impacts of the COVID-19 pandemic.

AB 1177 promises to offer no-fee and penalty-free, federally insured accounts, and debit card services by partnering with an “existing financial institution.” It would be run by a nine-member board appointed by the state treasurer, governor, and legislators.

Advocates of this legislation say the program would eventually be “self-sustaining” from the interchange fees generated through BankCal customers’ debit and credit card purchases and by direct, private donations to the program. It is unclear if the legislation’s advocates understand the federal laws that limit debit and credit interchange as financial institutions grow.

What is clear, is many California financial institutions already participate in nonprofit programs that serve unbanked and underbanked residents. One such program, BankOn, ensures all residents have access to a safe and affordable savings or checking account. Key account features include low costs, no overdraft or hidden fees, and robust transaction capabilities. All major banks and credit unions in California participate in the BankOn program and offer an expansive network of free ATMs.

Instead of hastily propping up yet another bureaucratic state program, the Legislature could instead support the BankOn program with an appropriation potentially subsidizing an expanded product and service set and encouraging more bank and credit union participants. Doing so will invariably be less expensive and risky than the proposed banking structure contemplated in AB 1177.

While financial institutions understand the importance of expanding banking services to communities who lack them, the Legislature should hit the pause button and use existing tools in the marketplace, such as credit unions and BankOn, to help achieve their goals.

Dave Roughton is Chair of the Sacramento Metro Chamber of Commerce and President and CEO of SAFE Credit Union. He can be reached at