NJ passes bill to encourage banks to locate in underserved areas

A bill intended to encourage banks to locate in underserved communities received final legislative approval last week. If signed into law by Gov. Christie, the legislation would allow the creation of special districts in communities with few or no financial institutions.

Banks that locate in those districts would be eligible to hold State Treasury funds, and municipalities could choose such banks to hold their municipal deposits. Both steps would help to boost profitability and thereby serve as an incentive to locate in the districts.

"In many urban areas, residents are relegated to using check-cashing stores for their banking needs and forced to pay service fees that are disproportionately higher than those at established financial institutions," said Sen. Donald Norcross (D., Camden), a sponsor of the bill. "By providing incentives for banks to open in underserved communities, we will help provide fairer access to the banking services that residents depend on and prevent people from having to pay unnecessary and burdensome costs for basic financial transactions."

Modeled on a program in New York, the New Jersey legislation was created after the sudden closure of a Bank of America branch in Jersey City that left many residents without access to a local bank.