CHICAGO – Signed by Governor Pritzker HB 5194, the Illinois Banking Development Districts Act, went into effect Friday. Sponsored by State Senator Doris Turner (D-Springfield) and State Representative La Shawn Ford (D-Chicago), this legislation creates a new incentive program for opening bank branches in underserved communities. The program uses public linked deposits and Community Reinvestment Act (CRA) auditing standards to attract bank branches to underserved communities, similar to a program in New York
As with the New York program, Illinois banks and local government will work together to create a plan for a new banking development district in a need area. The Illinois Department of Financial and Professional Regulation, in consultation with the Illinois State Treasurer, will evaluate these plans and approve plans that create consumer-friendly banking options in underserved areas.
The number of bank branch closures has increased significantly since the start of the COVID-19 pandemic. In 2021, 2,927 bank branches were closed nationwide, a 38% increase from 2020. 153 of these branch closures occurred in Illinois, mostly by large commercial banks.
“There are millions of people across the country and in Illinois who don’t have a reliable bank because of balance barriers and minimum deposit requirements.” said State Senator Doris Turner (D-Springfield). “This law will allow communities to take a stand and create the conditions that enable a fairer banking experience.”
“When residents do not have adequate access to banking services, they often turn to payday loans, pawn shops and predatory lenders, which can affect their financial stability,” said State Representative La Shawn Ford (D-Chicago). “Therefore, this measure is an important step to encourage the establishment of needed bank branches and financial services in areas with severe population shortages.”
“We’ve seen what happens when households don’t have access to basic secure banking products,” said Chasse Rehwinkel, director of the banking division. “Unbanked people who don’t use a prepaid card that allows direct deposit pay about $180 a year just to access their own money — an unacceptable price for people living paycheck to paycheck.” The creation of Banking Development Districts in Illinois will provide policymakers with another tool to improve financial equity in underserved communities across the state.”
Active since 1997, the New York Banking Development Districts program has resulted in over 30 new banking development districts, over 60,000 new bank accounts and generated over $500 million in new loans to underserved households.