AB 1365 Legislation Brief
AB 1365 (Garcia), under consideration in the 2025-26 legislative session, builds on the California Public Banking Option Act (AB 1177, 2021) by moving the CalAccount Program from planning to implementation. While the 2021 legislation established the CalAccount Blue Ribbon Commission to study the feasibility of a state-sponsored banking option, AB 1365 creates the program and outlines its operational framework, marking a significant step toward delivering tangible financial services to Californians.
The CalAccount Program will offer no-fee, no-penalty, federally-insured transaction accounts with debit cards, direct deposit, automatic bill pay, and recurring payment options. It also includes credit-building tools to help users establish or improve their credit history.
When implemented, CalAccount will become the first state-administered universal banking program in the U.S., positioning California as a national leader in financial inclusion. The programâs success could inspire similar initiatives nationwide, addressing systemic financial inequities on a broader scale.
Financial Services Network Administrator
The CalAccount Commission will solicit proposals and select a financial services network administrator to manage the program. The administrator will coordinate with participating financial institutions to provide CalAccounts and ensure account holders have access to fee-free services, including ATMs and debit cards.
Proposals will be evaluated based on their ability to meet program goals, such as financial inclusion, consumer protection, and accessibility, with priority given to institutions with a proven track record of serving low-income, racially diverse, and multilingual communities. The selected administrator must comply with all program requirements, including fee-free services, robust security measures, and accessibility for vulnerable populations, such as unhoused individuals and victims of domestic violence. The RFP process will also emphasize ethical banking practices and technical capabilities, ensuring the program delivers on its mission to provide equitable financial services to all Californians.
Program Funding
The CalAccount Program will be funded through the CalAccount Fund, established in the State Treasury. Funds will be available upon legislative appropriation and will support program operations, including outreach, customer service, and administrative costs. The program is designed to minimize financial liability for the state, with costs covered through partnerships with financial institutions and potential federal reimbursements.
Employer Requirements
AB 1365 mandates that all employers and hiring entities with 25 or more workers offer payroll direct deposit options for workers who choose to participate in the CalAccount Program. Employers must coordinate with the program to facilitate seamless direct deposits and cannot retaliate against employees who opt in. This requirement ensures that workers, especially those in low-wage jobs, can easily access their earnings without relying on costly check-cashing services.
Enforcement
The Labor Commissioner will enforce compliance, investigating complaints against employers who fail to adhere to the programâs requirements. Violations will result in civil penalties, with fines deposited into the CalAccount Fund to support the program.
Outreach and Education
AB 1365 includes a robust outreach and marketing component to ensure all Californians, particularly those in underserved communities, are aware of the program and its benefits. This includes financial empowerment resources to help users make the most of their accounts. The program will prioritize outreach to communities disproportionately impacted by financial exclusion, including Black, Latino, and immigrant households, as well as individuals experiencing homelessness or housing instability.
Market Analysis Findings
The 2024 RAND Corporation market analysis created for the CalAccount Blue Ribbon Commission confirmed the programâs feasibility and necessity. The report highlighted the significant financial burden faced by unbanked and underbanked Californians, who collectively spend billions annually on check-cashing fees, money orders, and other costly alternatives. AB 1365 incorporates insights from this analysis, ensuring the program is designed to meet the needs of its target population effectively. After it is implemented, the legislation requires the CalAccount Commission to submit an annual report to the Governor, Controller, State Auditor, and Legislature for accountability.Â
AB 1365 CalAccount Program Bill Text
CalAccount Fact Sheet
CalAccount Website
AB 1177 (CalAccount, 2021) Legislation Brief