California Banker Issue 2 2025

Costly CalAccount Proposal Could Compete with Banks for Accounts and Deposits

By Chris Shultz, Vice President, Government Relations, California Bankers Association A proposal pending in the Cal ifornia legislature would of fer voluntary, zero-fee, zero penalty, federally-insured, households “not interested” in hav ing a bank account.

of potential CalAccount consumers would be truly unbanked. To achieve sufficient enrollment, the feasibil ity study would necessitate moving 467,000 to 631,000 households — representing $31 to $92 million in revenue — away from their current banks and credit unions. CalAccount would require a 10 year subsidy The feasibility study identified state general fund costs of $121 to $201 million over 10 years, but the poten tial fraud costs, and whether those costs would be borne by the state or the financial services provider, were not addressed in the feasibil ity study. The feasibility study also found that it costs credit unions and banks $175 to $400 per year to maintain a bank account while each CalAccount would require an oper ating subsidy.

Since the Blue Ribbon Commission report, the Federal Deposit Insur ance Corporation released an up dated study documenting the steady decline of unbanked households in California: from 5.6 percent in 2019 to 5.0 percent in 2021, and further reducing to 4.3 percent by 2023. The feasibility assessment confirmed low interest in CalAccount: only 10 percent of unbanked households were “very interested” — while ap proximately 50 percent remained “not interested” in having a bank account. (See chart.) Takes customers and deposits out of banks and credit unions Hidden in the report, enrollment es timates reveal that merely 30 percent

no-cost accounts to all Califor nians. While California banks gen erally agree with the public policy goal of providing all Californians access to safe, affordable banking products at insured depository in stitutions, this 2025 proposal goes far beyond serving the truly un banked. Low interest, small target In 2021, the Legislature created a CalAccount Blue Ribbon Com mission under the State Treasurer, with SoFi Bank’s Virginia Varela and Legacy Bank’s James D. Hicken representing banking interests. The July 2024 report revealed that 5.1 percent of California households are unbanked, with half of those

Of the 5.1% Unbanked (study), real target in 2026 only 1.9 percent

Newly banked per 2023 FDIC study

.8 percent

CalAccount target

1.9 percent

Not interested

2.4 percent

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CaliforniaBanker | Issue 2 2025