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HB 3560

PUBLIC BANKING OPTION ACT

104th Regular Session Introduced by Kevin Olickal

Illinois creates a state‑run basic bank account with fee‑free deposits, direct deposit, and payroll routing to boost banking access for unbanked residents.

Rule 19(a) / Re-referred to Rules Committee
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Bill Summary · HB 3560

Summary — HB 3560: Public Banking Option Act

Status (as of document): Enacted — signed by the Governor 5/29/2025; effective 9/1/2025. Sponsor: Rep. Kevin John Olickal.

Purpose / Intent

The Act creates a state‑run framework to expand low‑cost basic banking access for Illinois residents who are unbanked or underbanked. It is intended to reduce reliance on expensive alternative financial services (AFS) such as check‑cashers and payday lenders, curb predatory banking practices (overdrafts, upselling), and improve financial stability—especially for low‑income communities and communities of color.

Key provisions

  • Establishes the Illinois Bank Account Board (the Board) within the Department of Financial and Professional Regulation (DFPR).
  • Directs the Board to create and operate the Illinois Bank Account Program (the Program), including:
    • A zero‑minimum‑balance basic demand deposit (checking) account designed to maximize participation by unbanked and underbanked residents.
    • A streamlined, low‑barrier account opening process.
    • No‑fee mechanisms for depositing funds into the account.
    • A debit card for fee‑free cash withdrawal.
    • An option for account holders to elect direct deposit (electing some or all of a paycheck) by electronic funds transfer.
    • A requirement that employers (more than 25 employees) and certain hiring entities (more than 25 independent contractors performing similar work) implement payroll direct‑deposit arrangements to remit each worker’s elected payroll contribution to the worker’s Illinois Bank Account.
    • A fee‑free process for preauthorized electronic payments to registered payees, and a process/terms for payee registration.
    • Voluntary automatic disbursement rules to help account holders manage scheduled payments based on available funds.
  • Grants DFPR rulemaking authority to implement the Act.
  • Specifies duties for landlords or landlords’ agents (details in statute text) related to the Program.

Who is affected

  • Primary beneficiaries: unbanked and underbanked Illinois residents who currently use expensive AFS.
  • Obligated entities: employers with >25 employees; hiring entities with >25 independent contractors performing the same/similar work; landlords or landlord agents (as described in statute).
  • Regulated/implementing agency: Department of Financial and Professional Regulation and the newly created Illinois Bank Account Board.
  • Financial institutions are referenced in definitions for implementation and partnership; full definitions appear in the statute.

Timeline / Procedural status

  • Filed/introduced: February 18–28, 2025; passed both chambers May 19–20, 2025.
  • Sent to Governor and signed: May 29, 2025.
  • Effective date: September 1, 2025.

Potential impacts and considerations

  • Expected to reduce use of fee‑heavy AFS and lower annual fees paid by low‑income households.
  • Could increase direct deposit access and automated bill payment for people who previously lacked bank accounts.
  • Imposes administrative and technical requirements on mid‑sized and larger employers/hiring entities to enable payroll routing to the Program.
  • Implementation details (account features, enrollment procedures, payee registration, employer compliance timelines) will depend on DFPR rulemaking and Board actions.
  • The statute includes findings documenting racial and income disparities in banking access to justify the Program.

Note: This summary reflects provisions in the introduced/enrolled bill text; some statutory sections (definitions and detailed mechanics) were truncated in the excerpt and full statutory language should be consulted for implementation specifics.

Compiled from official sources — confirm details with the bill’s official record.

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