A bill to amend Federal banking law to permit the payment of interest on business checking accounts in certain circumstances, and for other purposes.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Interest on Business Checking Act of 
2001''.

SEC. 2. AMENDMENTS RELATING TO DEMAND DEPOSIT ACCOUNTS AT DEPOSITORY 
              INSTITUTIONS.

    (a) Interest-Bearing Transaction Accounts Authorized.--
            (1) Federal reserve act.--Section 19(i) of the Federal 
        Reserve Act (12 U.S.C. 371a) is amended by adding at the end 
        the following: ``Notwithstanding any other provision of this 
        section, a member bank may permit the owner of any deposit, any 
        account which is a deposit, or any account on which interest or 
        dividends are paid, to make not more than 24 transfers per 
        month (or such greater number as the Board may determine by 
        rule or order), for any purpose, to a demand deposit account of 
        the owner in the same institution. With respect to an escrow 
        account maintained in connection with a loan, a lender or 
        servicer shall pay interest on such account only if such 
        payments are required by contract between the lender or 
        servicer and the borrower, or a specific statutory provision of 
        the law of the State in which the security property is located 
        requires the lender or servicer to make such payments. Nothing 
        in this subsection shall be construed to prevent an account 
        offered pursuant to this subsection from being considered a 
        transaction account for purposes of this Act.''.
            (2) Home owners' loan act.--Section 5(b)(1) of the Home 
        Owners' Loan Act (12 U.S.C. 1464 (b)(1)) is amended by adding 
        at the end the following:
                    ``(G) Transfers.--
                            ``(i) In general.--Notwithstanding any 
                        other provision of this paragraph, a Federal 
                        savings association may permit the owner of any 
                        deposit or share, any account which is a 
                        deposit or share, or any account on which 
                        interest or dividends are paid, to make not 
                        more than 24 transfers per month (or such 
                        greater number as the Board of Governors of the 
Federal Reserve System may determine by rule or order under section 
19(i) of the Federal Reserve Act to be permissible for member banks), 
for any purpose, to a demand deposit account of the owner in the same 
institution.
                            ``(ii) Escrow accounts.--With respect to an 
                        escrow account maintained in connection with a 
                        loan, a lender or servicer shall pay interest 
                        on such account only if--
                                    ``(I) such payments are required by 
                                contract between the lender or servicer 
                                and the borrower; or
                                    ``(II) a specific statutory 
                                provision of the law of the State in 
                                which the security property is located 
                                requires the lender or servicer to make 
                                such payments.
                            ``(iii) Limitation.--Nothing in this 
                        subsection shall be construed to prevent an 
                        account offered pursuant to this subsection 
                        from being considered a transaction account (as 
                        defined in section 19(b) of the Federal Reserve 
                        Act) for purposes of the Federal Reserve 
                        Act.''.
            (3) Federal deposit insurance act.--Section 18(g) of the 
        Federal Deposit Insurance Act (12 U.S.C. 1828(g)) is amended by 
        adding at the end the following:
            ``(3) Transfers.--
                    ``(A) In general.--Notwithstanding any other 
                provision of this subsection, an insured nonmember bank 
                or insured State savings association may permit the 
                owner of any deposit or share, any account which is a 
                deposit or share, or any account on which interest or 
                dividends are paid to make not more than 24 transfers 
                per month (or such greater number as the Board of 
                Governors of the Federal Reserve System may determine 
                by rule or order under section 19(i) of the Federal 
                Reserve Act to be permissible for member banks), for 
                any purpose, to a demand deposit account of the owner 
                in the same institution.
                    ``(B) Escrow accounts.--With respect to an escrow 
                account maintained in connection with a loan, a lender 
                or servicer shall pay interest on such account only 
                if--
                            ``(i) such payments are required by 
                        contract between the lender or servicer and the 
                        borrower; or
                            ``(ii) a specific statutory provision of 
                        the law of the State in which the security 
                        property is located requires the lender or 
                        servicer to make such payments.
                    ``(C) Limitation.--Nothing in this subsection shall 
                be construed to prevent an account offered pursuant to 
                this subsection from being considered a transaction 
                account (as defined in section 19(b) of the Federal 
                Reserve Act) for purposes of the Federal Reserve 
                Act.''.
    (b) Repeal of Prohibition on Payment of Interest on Demand 
Deposits.--
            (1) Federal reserve act.--Section 19(i) of the Federal 
        Reserve Act (12 U.S.C. 371a) is amended to read as follows:
    ``(i) [Repealed].''.
            (2) Home owners' loan act.--Section 5(b)(1) of the Home 
        Owners' Loan Act (12 U.S.C. 1464(b)(1)) is amended--
                    (A) in subparagraph (B), by striking ``savings 
                association may not--'' and all that follows through 
                ``(ii) permit any'' and inserting ``savings association 
                may not permit any''; and
                    (B) by striking subparagraph (G).
            (3) Federal deposit insurance act.--Section 18(g) of the 
        Federal Deposit Insurance Act (12 U.S.C. 1828(g)) is amended to 
        read as follows:
    ``(g) [Repealed].''.
            (4) Effective date.--The amendments made by this subsection 
        shall take effect at the end of the 2-year period beginning on 
        the date of enactment of this Act.

SEC. 3. PAYMENT OF INTEREST ON RESERVES AT FEDERAL RESERVE BANKS.

    (a) In general.--Section 19(b) of the Federal Reserve Act (12 
U.S.C. 461(b)) is amended by adding at the end the following:
            ``(12) Earnings on reserves.--
                    ``(A) In general.--Balances maintained at a Federal 
                reserve bank by or on behalf of a depository 
                institution to meet the reserve requirements of this 
                subsection applicable with respect to such depository 
                institution shall receive earnings to be paid by the 
                Federal reserve bank at least once each calendar 
                quarter at a rate or rates not to exceed the general 
                level of short term interest rates.
                    ``(B) Regulations relating to payments and 
                distribution.--The Board may prescribe regulations 
                concerning--
                            ``(i) the payment of earnings in accordance 
                        with this paragraph;
                            ``(ii) the distribution of such earnings to 
                        the depository institutions which maintain 
                        balances at such banks or on whose behalf such 
                        balances are maintained; and
                            ``(iii) the responsibilities of depository 
                        institutions, Federal home loan banks, and the 
                        National Credit Union Administration Central 
                        Liquidity Facility with respect to the 
                        crediting and distribution of earnings 
                        attributable to balances maintained, in 
                        accordance with subsection (c)(1)(B), in a 
                        Federal reserve bank by any such entity on 
                        behalf of depository institutions which are not 
                        member banks.''.
    (b) Technical and Conforming Amendments.--
            (1) Section 19(b) of federal reserve act.--Section 19(b)(4) 
        of the Federal Reserve Act (12 U.S.C. 461(b)(4)) is amended--
                    (A) by striking subparagraph (C); and
                    (B) by redesignating subparagraphs (D) and (E) as 
                subparagraphs (C) and (D), respectively.
            (2) Section 19(c) of federal reserve act.--Section 
        19(c)(1)(A) of the Federal Reserve Act (12 U.S.C. 461(c)(1)(A)) 
        is amended by striking ``subsection (b)(4)(C)'' and inserting 
        ``subsection (b)''.

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Summary: Interest on Business Checking Act of 2001 - Amends the Federal Reserve Act, the Home Owners' Loan Act, and the Federal Deposit Insurance Act to: (1) provide that a depository institution may permit owners of interest or dividend paying accounts to make up to 24 transfers monthly for any purpose to their other demand deposits in the same institution. And (2) repeal the proscription against the payment of interest on demand deposits. Prescribes conditions for interest payments on escrow accounts. Amends the Federal Reserve Act to require a Federal reserve bank to pay interest at least quarterly on any balance maintained by a depository institution at the reserve bank to meet its reserve requirements.