HB 2256

HOUSE BILL REPORT
HB 2256

This analysis was prepared by non-partisan legislative staff for the use of legislative members in their deliberations. This analysis is not a part of the legislation nor does it constitute a statement of legislative intent.

As Reported by House Committee On:
Community & Economic Development & Trade

Sponsors: Representatives Darneille, Haler, Morrell, Walsh, Pettigrew, Dickerson, Kenney, Schual-Berke, Kagi, P. Sullivan, Lantz, Hinkle, Upthegrove, Appleton, Williams, Seaquist, O'Brien, Hasegawa, Green, Linville, Simpson, Ormsby and Santos.

Majority Report: The substitute bill be substituted therefor and the substitute bill do pass. Signed by 6 members: Representatives Kenney, Chair; Pettigrew, Vice Chair; Chase, Darneille, Rolfes and P. Sullivan.

Minority Report: Do not pass. Signed by 3 members: Representatives Bailey, Ranking Minority Member; McDonald, Assistant Ranking Minority Member and Haler.

Background:

Department of Community, Trade and Economic Development

The Department of Community, Trade and Economic Development (Department) provides assistance to Washington's communities, businesses and families. The Department is organized into several different divisions, one of which is the Community Services Division. This division works to build community partnerships to provide service and advocacy for individuals and families. The Community Services Division administers federal and state funds for anti-poverty programs including but not limited to the Community Services Block Grant Program, the Low-Income Home Energy Assistance Program, and the federal Department of Energy Weatherization Program.

Asset Building Programs

According to the U.S. Department of Health and Human Services, asset building is an anti-poverty strategy that helps low-income people move toward greater self-sufficiency by accumulating savings and purchasing long-term assets. Examples of long-term assets include a home, higher education and training, and a business.

Asset building strategies incorporate many different approaches and use a variety of methods to help achieve the goal of creating asset wealth for low-income people. Some of the most common tools for asset building include the following:

During the 2005 and 2006 legislative sessions, bills were enacted and funding allocated to assist low-income families to accumulate assets. As a result, one statewide asset building coalition and local asset building coalitions in 12 regions have emerged along with the Department to promote savings and banking, financial literacy, credit repair, the earned income tax credit and home ownership and business start-ups.

In addition, 200 individual development accounts have been created, with another 100 to be added in the first quarter of 2007. Funded by the state at $1 million through the 2005-07 budget, the state matches personal savings dollar for dollar, up to a maximum of $4,000. According to the Department, the state's investment has leveraged $579,000 in personal savings and $1.5 million in additional federal and private funds into these accounts. Eligibility is limited to those whose income is 80 percent of the area's median income or 200 percent of the federal poverty rate. The state match is held in trust by a bank until all requirements are met, at which time the match is paid to the entity from whom the asset is being purchased (for example, to a bank for a home mortgage, to a post-secondary institution for education or training, or a car dealer to buy an automobile for school or work).

Summary of Substitute Bill:

The Washington Asset Building Coalition (Coalition) is created to provide statewide leadership on initiatives that foster financial self-sufficiency and economic security for low-income working families. The Coalition is directed to work with the Department, local asset building coalitions and other partners to identify and promote approaches that help low-income working families build and manage their assets including:

For 2007-09, the Department and other partners are directed to design, implement, and fund a statewide public education and outreach campaign that includes activities such as a website, a telephone-based call-in assistance and referral system, public service announcements and other educational outreach to target groups.

The Department is also directed to:

The Department of Social and Health Services is directed to encourage recipients of Temporary Assistance for Need Families to learn about and participate in asset-building programs.

An additional 1 percent is levied for the business and occupation (B&O) tax on businesses that make small loans under chapter 31.45 RCW. Thirty-five percent of the tax proceeds shall be deposited into the Family Prosperity Account and the remainder into the Individual Development Account.

The Family Prosperity Account is created in the State Treasury. Expenditures may only be made, after appropriation, to support initiatives that foster financial self-sufficiency and economic security for low-income working families.

An employer may not procure a consumer report on a job applicant unless the contents of the report are substantially job-related and the employer has disclosed to the applicant in writing the reasons for checking the applicant's credit report. In addition, before taking adverse action based on the consumer report, an employer must provide an applicant or current employee with a description of their rights under this chapter, the reporting agency's contact information, and a reasonable opportunity to dispute information in the report.

Substitute Bill Compared to Original Bill:

Under the substitute bill, an employer may not procure a consumer report on a job applicant unless the contents of the report are substantially job related and the employer has disclosed to the applicant in writing the reasons for checking the applicant's credit report. In the original bill, a prospective employer was not authorized to procure a report on a job applicant unless the employer was a public safety entity or a financial institution, and no explicit, individualized written disclosure was mandated. Under the substitute bill, it is clarified that before taking adverse action based on the consumer report, an employer must provide either a job applicant or a current employee with a description of their rights under this chapter, the reporting agency's contact information, and a reasonable opportunity to dispute information in the report. The emergency clause is removed.

Effective Date of Substitute Bill: The bill takes effect 90 days after adjournment of session in which bill is passed.

Staff Summary of Public Testimony:

(In support) Low-income working families need more than a paycheck to sustain themselves financially. Any financial crisis can prove dire for people without savings. Services that focus on asset building and financial self-sufficiency help maximize a family's income and teach them how to save a portion of the income for assets such as a higher education or a home. The controversial part of this bill is the funding source-- an additional B&O tax on "payday lenders." Should funding come from general taxpayers? There is a nexus between the services of the payday lenders and the money management needs of low-income working families. The role of the state is crucial in the Family Prosperity Act as a coordinator of the local and state asset-building coalitions; as a funder that can leverage other resources; as a regulator in limiting the procurement and use of credit reporting; and as an Earned Income Tax Credit (EITC) marketer. Last year, Washington residents left between $70-$100 million unclaimed in the EITC. I am a former Individual Development Account (IDA) holder whose family was living on $15,000/year. I opened an IDA initially for a home down payment, but decided to apply it instead to post-secondary education. I now have a Bachelor's degree. I am 19 and live in transitional housing with my 4-year-old son. I am on the wait list for an IDA, as are many of my peers and friends. I am excited to start saving for a down payment on a home or for higher education. We have an IDA wait list of 48 families, without advertising. Twenty-one of our families made first time home purchases within four years of opening an IDA. The cost to the state of $110,000 will be recouped within three years in taxes paid. We support the consumer report procurement restrictions because often the report does not reveal the full picture or the reasons for poor credit history.

(With concerns) We support the policy objectives of the bill but we oppose the B&O tax increase that appears to be punitively imposed on a single, small industry. We are opposed to the consumer report restrictions imposed in the bill. There are very legitimate reasons why employers need to find out if a prospective employee can be trusted. Embezzlement is rampant in small businesses. Consider exempting auto dealers and consumer loan companies as you have financial institutions and public safety entities from the procurement restrictions. Banks are not the only employers that need consumer report information. Applicants who will be handling money or other assets, or working with vulnerable adults, should be subject to consumer report checks.

(Opposed) I own a payday lending company that employs 600 people at living-wage jobs and with benefits. Our company practices community-based philanthropy including financial self-sufficiency training.

Persons Testifying: (In support) Representative Darneille, prime sponsor; Dave Sieminski and Fitsum Abraha, United Way of King County; Lindsay Roberts, Voices for Opportunity, Income, Child Care, Education and Support (VOICES); Elizabeth Myntli, Lower Columbia Community Action Program; Bonnie White, Olympic Community Action Programs; Kim Justice, Statewide Poverty Action Network; Linda Malanchuk-Finnan, Thurston County National Organization for Women; Tim Strege, William Factory Small Business Incubator; Paul Benz, Lutheran Public Policy and Washington Association of Churches; and Jeffrey Carrol, VOICES, Martin Luther King Family Outreach and Children's Alliance.

(With concerns) Carolyn Logue, National Federation of Independent Business; Scott Hazelgrove, Washington State Auto Dealers Association and Washington State Consumer Finance Companies; and Cliff Webster, Consumer Data Industry Association.

(Opposed) Dennis Bassford, Money Tree, Incorporated.