PUBLIC BANKING OPTION ACT

Illinois General Assembly - Full Text of HB3560

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104TH GENERAL ASSEMBLY
State of Illinois
2025 and 2026
HB3560

Introduced 2/18/2025, by Rep. Kevin John Olickal

SYNOPSIS AS INTRODUCED:

New Act

Creates the Public Banking Option Act. Establishes the Illinois Bank
Account Board under the Department of Financial and Professional
Regulation for the purpose of protecting consumers who lack access to
traditional banking services from predatory, discriminatory, and costly
alternatives. Sets forth provisions concerning the actions required by the
Board to create the Illinois Bank Account Program, including establishing
a process by which an individual may open an Illinois Bank Account, which
shall be designed to maximize Program participation; the mechanisms by
which an account holder may deposit funds into an Illinois Bank Account for
no fee; a process through which an account holder may elect to have a
portion, up to the entirety, of the account holder's paycheck or earnings
due for labor or services performed directly deposited by electronic fund
transfer into the account holder's Illinois Bank Account; a process
through which employers and hiring entities shall be required to remit
through a payroll direct deposit arrangement each worker's elected payroll
contribution to the worker's Illinois Bank Account in accordance with the
worker's election; and mechanisms by which an account holder can withdraw
funds from an Illinois Bank Account using an Illinois Bank Account debit
card for no fee; a process, available to all account holders for no fee,
through which an account holder may arrange for payment to a registered
payee using a preauthorized electronic fund transfer from an Illinois Bank
Account; a process and terms and conditions for becoming a registered
payee; voluntary automatic disbursement rules to assist an account holder
in managing automated payments to registered payees based on the
availability of funds in the account holder's account; and other specified
actions. Establishes duties concerning the Program for employers with more
than 25 employees, hiring entities with more than 25 independent
contractors performing the same or similar labor or service, and landlords
or a landlord's agent. Grants the Department rulemaking authority to
implement the provisions of the Act. Effective immediately.
LRB104 10432 BAB 20507 b

A BILL FOR

HB3560
LRB104 10432 BAB 20507 b
1

AN ACT concerning regulation.

2

Be it enacted by the People of the State of Illinois,
3
represented in the General Assembly:

4

Section 1.
Short title.
This Act may be cited as the
Public
5
Banking Option Act.

6

Section 2.
Findings.
The General Assembly finds that:
7

(1) Due to high unemployment rates, homelessness
8

rising, and an unprecedented wave of evictions looming as
9

a result of the COVID-19 pandemic, the financial stability
10

of the State's most vulnerable residents has become a
11

matter of particularly urgent concern, not only to those
12

individuals, themselves, but to the economic health of the
13

State as a whole.
14

(2) Access to basic financial services, including
15

demand deposit (checking) and savings accounts, is a
16

critical component of financial stability. 1/5 of Illinois
17

households are unbanked or underbanked. Underbanked
18

households are defined as those that have a bank account
19

but have used alternative financial services (AFS) for
20

transactions, including check cashing and money orders,
21

and for credit, including payday loans. Among underbanked
22

households, AFS transaction use is 3 times more prevalent
23

than the use of AFS for credit. Around 17% of United States

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1

households use AFS transactions. These transaction
2

services can be a significant expense for low-income
3

Illinoisans. For example, check cashers charge as much as
4

10% of the cost of the check being cashed. In 2018, AFS
5

costs for unbanked and underbanked Americans totaled
6

$189,000,000,000 in fees and interest, which means the
7

average annual cost per person for using AFS was $3,000.
8

(3) Predatory banking practices, including expensive
9

overdraft fees, create a vicious cycle leading to the
10

lasting exclusion of Illinois residents from traditional
11

and affordable financial services and disproportionately
12

harm low-income people and people of color. Banking
13

options that target the poor generate significant revenue
14

through these exploitative practices. In 2019, 84% of
15

those fees were paid by 9% of account holders, and those
16

customers typically carried low balances averaging less
17

than $350.
18

(4) Unbanked households pay proportionally more for
19

their financial services, lack secure means of saving,
20

have fewer opportunities to build credit, and are rejected
21

for loans at far higher rates. Basic financial
22

transactions, including the payment of rent, utilities,
23

and other recurring bills or charitable contributions, are
24

a particularly formidable challenge for households lacking
25

access to important tools, including automated bill pay,
26

or whose monthly income fluctuates too much to make

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automated processes viable. Because they have fewer
2

options when their money runs short, unbanked households
3

face a far more destructive cycle of punitive action when
4

they default on their recurring bills, which leads to
5

compounding interest and further debt. For all these
6

reasons, exclusion from traditional financial services
7

significantly increases the risk of poverty and
8

homelessness and places an unnecessary burden on the
9

entire economy.
10

(5) Limited access to affordable financial services is
11

a problem that disproportionately impacts low-income
12

communities and communities of color. The racial disparity
13

in banking access in Illinois is stark. The most recent
14

5-year estimate from 2017 through 2021 shows 2.4% of white
15

households were unbanked, whereas 20.4% of black
16

households were unbanked. Hispanic households face similar
17

disparities, with 10.9% of Hispanic households unbanked.
18

Despite improvements as Illinosians recover from the
19

pandemic, the racial gap remains pronounced, with black
20

households having a significantly higher unbanked rate
21

than their white counterparts. In Chicago, where the
22

disparities are amplified, the number of unbanked white
23

households held evenly with the rate across the State at
24

2.5% while black households maintained a persistently high
25

23.7% unbanked rate.
26

(6) Providing Illinois residents with a zero-fee,

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zero-penalty, zero-minimum-balance requirement public
2

option for basic financial services would empower
3

Illinoisans by providing a stable, affordable financial
4

platform for all Illinois residents, especially the
5

unbanked and underbanked who currently rely on expensive
6

AFS transactions. The Illinois Bank Account Program would
7

mitigate the demand for exploitative alternatives to
8

banking services with respect to which upselling and
9

cross-selling into expensive accounts and products is the
10

norm. A market analysis of the proposed Illinois Bank
11

Account Program and any modifications that may be
12

necessary for its successful and cost-effective
13

implementation will enhance the State's ability to serve
14

the financial services needs of unbanked and underbanked
15

Illinois residents.

16

Section 5.
Definitions.
As used in this Act:
17

"Board" means the Illinois Bank Account Board created
18
under this Act.
19

"Department" means the Department of Financial and
20
Professional Regulation.
21

"Electronic fund transfer" means a transfer of funds,
22
other than a transaction originated by check, draft, or
23
similar paper instrument, that is initiated through an
24
electronic device for the purpose of ordering, instructing, or
25
authorizing a financial institution to debit or credit an

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1
account.
2

"Financial institution" means any bank subject to the
3
Illinois Banking Act, including a branch of an out-of-state
4
bank as defined in Section 2 of the Illinois Banking Act, any
5
savings bank subject to the Savings Bank Act, and any
6
federally chartered commercial bank, savings bank, or savings
7
and loan association organized and operated in this State
8
under the laws of the United States.
9

"Illinois Bank Account" means a bank account opened
10
through a process established by the Illinois Bank Account
11
Board.
12

"Program" means the Illinois Bank Account Program created
13
under this Act.

14

Section 10.
The Illinois Bank Account Board.
15

(a) The Illinois Bank Account Board is established by the
16
Department for the purpose of protecting consumers who lack
17
access to traditional banking services from predatory,
18
discriminatory, and costly alternatives and to administer the
19
Illinois Bank Account Program.
20

(b) The Board shall consist of all the following members:
21

(1) The State Treasurer or the State Treasurer's
22

designee.
23

(2) The Secretary of Financial and Professional
24

Regulation or the Secretary's designee.
25

(3) An individual with banking expertise, particularly

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1

expertise in transaction accounts and debit cards,
2

appointed by the President of the Senate.
3

(4) An individual with expertise in economic and
4

racial justice and cultural competence appointed by the
5

Speaker of the House of Representatives.
6

(5) An employee representative appointed by the
7

Governor.
8

(6) An individual with expertise in banking or
9

consumer financial services affiliated with an academic
10

institution appointed by the Governor.
11

(7) An individual with banking expertise appointed by
12

the Governor.
13

(8) A public banking advocate appointed by the Senate
14

President.
15

(9) A consumer representative or advocate with
16

expertise in banking access and financial empowerment,
17

including within historically unbanked and underbanked
18

communities, appointed by the Speaker of the House.
19

(c) In making appointments to the Board, the appointing
20
authorities shall take into consideration the cultural,
21
ethnic, and geographic diversity of the State so that the
22
Board's composition reflects the communities of Illinois.
23

(d)(1) Except as provided in paragraph (2), members of the
24
Board shall serve without compensation.
25

(2) Subject to appropriation, members of the Board
26

shall be reimbursed for necessary travel expenses incurred

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in connection with their Board duties.
2

(e)(1) Except for the members described in paragraphs (3)
3
and (9) of subsection (a), a Board member, or State
4
Treasurer's staff working with the Board, while serving in
5
that capacity shall not have a direct or indirect investment
6
or ownership interest in or be employed by, a consultant to, a
7
member of the Board of directors of, affiliated with, or
8
otherwise a representative of, a private bank or financial
9
services institution unless that position is an unpaid
10
volunteer position.
11

(2) The restrictions in paragraph (1) do not include
12

ownership of a share of a diversified mutual fund or
13

exchange-traded fund that holds shares of a private bank
14

or financial services institution.
15

(f) To the extent the State, to successfully implement the
16
Illinois Bank Account Program, contracts with entities to
17
provide administrative and financial services, the State has a
18
proprietary interest in ensuring that the entities with which
19
it contracts have not engaged in conduct that would undermine
20
the goals, efficiency, and reputation of the Illinois Bank
21
Account Program, including, but not limited to, by violating
22
banking, consumer protection, fair lending, or fair housing
23
laws.

24

Section 15.
The Illinois Bank Account Program.
The
25
Illinois Bank Account Program is hereby created to offer

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1
Illinoisans access to a voluntary, zero-fee, zero-penalty,
2
federally insured transaction account and related payment
3
services at no cost to account holders, including robust and
4
geographically diverse mechanisms for accessing account funds
5
and account management tools that facilitate the automation of
6
basic financial transactions designed to serve the needs of
7
individuals with low or fluctuating income. To administer the
8
Program, the Board shall establish within 12 months of
9
seating:
10

(1) A process by which an individual may open an
11

Illinois Bank Account, which shall be designed to maximize
12

Program participation.
13

(2) The mechanisms by which an account holder may
14

deposit funds into an Illinois Bank Account for no fee,
15

which mechanisms shall include, but not be limited to,
16

electronic fund transfers arranged through an employer's
17

or hiring entity's payroll direct deposit arrangement and
18

cash loading through in-network partners.
19

(3) A process through which an account holder may
20

elect to have a portion, up to the entirety, of the account
21

holder's paycheck or earnings due for labor or services
22

performed directly deposited by electronic fund transfer
23

into the account holder's Illinois Bank Account.
24

(4) A process through which employers and hiring
25

entities shall be required to remit through a payroll
26

direct deposit arrangement each worker's elected payroll

HB3560
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LRB104 10432 BAB 20507 b
1

contribution to the worker's Illinois Bank Account in
2

accordance with the worker's election.
3

(5) Mechanisms by which an account holder can withdraw
4

funds from an Illinois Bank Account using an Illinois Bank
5

Account debit card for no fee, which mechanisms shall
6

include, but not be limited to, withdrawals through
7

point-of-sale purchases using an Illinois Bank Account
8

debit card and through cash withdrawals at a robust and
9

geographically expansive network of participating ATMs,
10

bank or credit union branches, and other in-network
11

partners of designated financial institution partners.
12

(6) A process, available to all account holders for no
13

fee, through which an account holder may arrange for
14

payment to a registered payee using a preauthorized
15

electronic fund transfer from an Illinois Bank Account.
16

(7) A process and terms and conditions for becoming a
17

registered payee, which shall, at a minimum, require the
18

payee's agreement to specified terms and conditions to be
19

established by the Board in exchange for the benefits of
20

transparency and accountability afforded by participation
21

in an automated payment system and which shall be designed
22

to incentivize account holders' preauthorized electronic
23

fund transfers to registered payees and application of
24

voluntary automatic disbursement rules by limiting the
25

late payment fees and penalties that registered payees can
26

impose on account holders who pay them using preauthorized

HB3560
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1

electronic fund transfers from the account holders'
2

Illinois Bank Accounts.
3

(8) Voluntary automatic disbursement rules to assist
4

an account holder in managing automated payments to
5

registered payees based on the availability of funds in
6

the account holder's account, which an account holder may
7

voluntarily elect to apply or to stop applying to the
8

account holder's Illinois Bank Account at any time, and
9

which shall be designed to maximize consumer protection
10

and may include, but not be limited to, rules governing
11

the prioritization and timing of payments, rules limiting
12

payments to a percentage of funds available in the
13

Illinois Bank Account, and rules limiting disbursement to
14

designated registered payees only upon satisfaction of
15

specified conditions of the Illinois Bank Account.
16

(9) The following enrollment processes: (i)
17

facilitating the opening of an Illinois Bank Account by
18

individuals who may not have federal or State
19

government-issued photo identification while taking all
20

reasonable steps to maintain the confidentiality of
21

personal information consistent with all applicable law;
22

(ii) designing and establishing rules governing the
23

enrollment and participation in the Program of individuals
24

who do not have permanent housing; and (iii) optionally
25

designing and establishing rules governing the enrollment
26

and participation in the Program of individuals who are

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1

under 18 years of age, including rules governing the
2

opening of an Illinois Bank Account by a person who is at
3

least 14 years of age without a co-signer or guarantor on
4

the account consistent with all applicable law.
5

(10) Select a Program administrator, which may consist
6

of one or more contractors or Program staff or a
7

combination, whose duties shall include, but not be
8

limited to, all of the following:
9

(A) Providing a secure Internet web-based portal
10

and mobile application through which individuals can
11

enroll in the Program and entities can become
12

registered payees and through which account holders
13

can access and manage the account holders' Illinois
14

Bank Accounts, including direct deposits,
15

preauthorized electronic fund transfers to registered
16

payees, and automatic disbursement rule elections.
17

(B) Providing a method that enables employers and
18

hiring entities to remit each worker participant's
19

elected direct deposit payroll contribution to the
20

worker's Illinois Bank Account in accordance with the
21

worker's election.
22

(C) Facilitating enrollment of account holders in
23

the Program through coordination with government,
24

employers and hiring entities, and nonprofit partners.
25

(D) Facilitating and managing connectivity with
26

other State and local government programs providing

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LRB104 10432 BAB 20507 b
1

individuals with financial accounts to enable Program
2

account holders to transfer funds between their
3

Illinois Bank Accounts and their other State-managed
4

or locally managed accounts, as authorized by the
5

Board and in accordance with all applicable laws and
6

regulations.
7

(E) Facilitating and managing connectivity with
8

other State and local government agencies and entities
9

to enable and streamline remittance of local, State,
10

and federal benefit and public assistance payments and
11

other disbursements to account holders who are
12

entitled to those payments and who authorize those
13

payments to be directly deposited by electronic fund
14

transfer into an Illinois Bank Account, as authorized
15

by the Board and in accordance with all applicable
16

laws and regulations.
17

(11) Contract with a financial services network
18

administrator whose duties may include, but not be limited
19

to, all of the following:
20

(A) Contracting with, managing, and coordinating
21

the financial services vendors for the Program that
22

shall provide account holders access to their Illinois
23

Bank Accounts and services provided in concert with at
24

least one qualifying participating depository
25

financial institution that meets the requirements
26

established by the Board.

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LRB104 10432 BAB 20507 b
1

(B) Adding additional participating depository
2

financial institutions meeting the requirements
3

established by the Board, especially including
4

qualifying credit unions and other local financial
5

institutions, as Program scope and scale permits, in
6

accordance with the Board's specifications as set
7

forth in the contract between the Board and the
8

financial services network administrator.
9

(C) Issuing to each account holder a secure debit
10

card, or other secure means of access to the account
11

holder's Illinois Bank Account, which shall use
12

current security and anti-fraud technology consistent
13

with industry standards.
14

(D) Providing a robust and geographically
15

expansive financial services network of partners
16

through which an account holder can load or withdraw
17

funds from an Illinois Bank Account using an Illinois
18

Bank Account debit card, or other secure means of
19

access to an Illinois Bank Account, for no fee,
20

including ATMs, bank or credit union branches, and
21

other in-network partners; minimize or eliminate
22

out-of-network fees for account holders; and ensure
23

that account holders are not charged out-of-network
24

fees that are not reasonable and actually incurred by
25

the Program vendor.
26

(12) Develop and negotiate a fair and equitable

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1

Program fee and Program revenue sharing structure between
2

the State and the financial services network administrator
3

in furtherance of attaining a financially self-sustaining
4

Program, which agreement shall be reevaluated annually and
5

renegotiated as appropriate based on Program scope and
6

scale.

7

Section 20.
Duties of employers.
An employer with more
8
than 25 employees and a hiring entity with more than 25
9
independent contractors performing the same or similar labor
10
or service, excluding the federal government, shall:
11

(1) Have and maintain a payroll direct deposit
12

arrangement that enables voluntary worker participation in
13

the Program.
14

(2) Deposit all wages and other payments due a worker
15

that the worker has authorized to be directly deposited by
16

electronic fund transfer into the worker's Illinois Bank
17

Account in accordance with the worker's authorization.
18

(3) Coordinate the payroll process with the Program
19

administrator's application Program interface to
20

facilitate accurate and seamless payment by direct deposit
21

in accordance with the authorization of each worker
22

participant.
23

(4) Cooperate with the Program administrator in
24

providing all requested information available to the
25

employer or hiring entity necessary for the opening and

HB3560
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LRB104 10432 BAB 20507 b
1

administration of a worker's Illinois Bank Account.
2

(5) Upon request of the administrator, provide
3

additional forms or notifications to a worker.
4

(6) Refrain from discharging, disciplining,
5

threatening to discharge or discipline, or in any other
6

manner retaliating or taking an adverse action against a
7

worker or applicant because of the individual's
8

participation or manner of participation in the Program.

9

Section 25.
Duties of landlords.
10

(a) A landlord or a landlord's agent must allow a tenant to
11
pay rent and deposits of security by an electronic funds
12
transfer from an Illinois Bank Account.
13

(b) A landlord's, or a landlord's agent's, receipt of
14
payment from an Illinois Bank Account pursuant to the
15
requirements of the Program shall not be considered a waiver
16
of any right the landlord or landlord's agent may otherwise
17
have to establish the base rent on, or to raise rent for, the
18
rental unit.

19

Section 30.
Rulemaking.
The Department may adopt rules to
20
implement the provisions of this Act.

21

Section 99.
Effective date.
This Act takes effect upon
22
becoming law.

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