IB

Union Calendar No. 27

107TH CONGRESS

1ST SESSION H. R. 974

[Report No. 107–38]

To increase the number of interaccount transfers which may be made from

business accounts at depository institutions, to authorize the Board of

Governors of the Federal Reserve System to pay interest on reserves,

and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

MARCH 13, 2001

Mrs. KELLY (for herself, Mrs. CAPITO, and Mr. CANTOR) introduced the

following bill; which was referred to the Committee on Financial Services

APRIL 3, 2001

Additional sponsor: Mr. SHERMAN

APRIL 3, 2001

Reported with amendments, committed to the Committee of the Whole House

on the State of the Union, and ordered to be printed

[Strike out all after the enacting clause and insert the part printed in italic]

[For text of introduced bill, see copy of bill as introduced on March 13, 2001]

A BILL

To increase the number of interaccount transfers which may

be made from business accounts at depository institutions, to authorize the Board of Governors of the Federal

Reserve System to pay interest on reserves, and for

other purposes.
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1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Small Business Interest

5 Checking Act of 2001’’.

6 SEC. 2. INTEREST-BEARING TRANSACTION ACCOUNTS AU7 THORIZED.

8 (a) REPEAL OF PROHIBITION ON PAYMENT OF INTER9 EST ON DEMAND DEPOSITS.—

10 (1) FEDERAL RESERVE ACT.—Section 19(i) of

11 the Federal Reserve Act (12 U.S.C. 371a) is amended

12 to read as follows:

13 ‘‘(i) [Repealed]’’.

14 (2) HOME OWNERS’ LOAN ACT.—The first sen15 tence of section 5(b)(1)(B) of the Home Owners’ Loan

16 Act (12 U.S.C. 1464(b)(1)(B)) is amended by striking

17 ‘‘savings association may not—’’ and all that follows

18 through ‘‘(ii) permit any’’ and inserting ‘‘savings as19 sociation may not permit any’’.

20 (3) FEDERAL DEPOSIT INSURANCE ACT.—Section

21 18(g) of the Federal Deposit Insurance Act (12 U.S.C.

22 1828(g)) is amended to read as follows:

23 ‘‘(g) [Repealed]’’.
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1 (b) EFFECTIVE DATE.—The amendments made by sub2 section (a) shall take effect at the end of the 2-year period

3 beginning on the date of the enactment of this Act.

4 SEC. 3. INTEREST-BEARING TRANSACTION ACCOUNTS AU5 THORIZED FOR ALL BUSINESSES.

6 Section 2 of Public Law 93–100 (12 U.S.C. 1832) is

7 amended—

8 (1) in subsection (a)(2), by striking ‘‘Para9 graph’’ and inserting ‘‘Except in the case of any de10 pository institution which is prohibited by the appli11 cable law of any State from offering demand deposits,

12 paragraph’’;

13 (2) by redesignating subsections (b) and (c) as

14 subsections (c) and (d), respectively; and

15 (3) by inserting after subsection (a) the fol16 lowing:

17 ‘‘(b) Notwithstanding any other provision of law, any

18 depository institution may permit the owner of any deposit

19 or account which is a deposit or account on which interest

20 or dividends are paid and is not a deposit or account de21 scribed in subsection (a)(2) to make up to 24 transfers per

22 month (or such greater number as the Board may determine

23 by rule or order), for any purpose, to another account of

24 the owner in the same institution. Nothing in this sub25 section shall be construed to prevent an account offered pur-
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1 suant to this subsection from being considered a transaction

2 account (as defined in section 19(b) of the Federal Reserve

3 Act for purposes of such Act).’’.

4 SEC. 4. PAYMENT OF INTEREST ON RESERVES AT FEDERAL

5 RESERVE BANKS.

6 (a) IN GENERAL.—Section 19(b) of the Federal Re7 serve Act (12 U.S.C. 461(b)) is amended by adding at the

8 end the following new paragraph:

9 ‘‘(12) EARNINGS ON RESERVES.—

10 ‘‘(A) IN GENERAL.—Balances maintained

11 at a Federal reserve bank by or on behalf of a

12 depository institution may receive earnings to be

13 paid by the Federal reserve bank at least once

14 each calendar quarter at a rate or rates not to

15 exceed the general level of short-term interest

16 rates.

17 ‘‘(B) REGULATIONS RELATING TO PAY18 MENTS AND DISTRIBUTION.—The Board may

19 prescribe regulations concerning—

20 ‘‘(i) the payment of earnings in ac21 cordance with this paragraph;

22 ‘‘(ii) the distribution of such earnings

23 to the depository institutions which main24 tain balances at such banks or on whose be25 half such balances are maintained; and
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1 ‘‘(iii) the responsibilities of depository

2 institutions, Federal home loan banks, and

3 the National Credit Union Administration

4 Central Liquidity Facility with respect to

5 the crediting and distribution of earnings

6 attributable to balances maintained, in ac7 cordance with subsection (c)(1)(B), in a

8 Federal reserve bank by any such entity on

9 behalf of depository institutions.’’.

10 (b) AUTHORIZATION FOR PASS THROUGH RESERVES

11 FOR MEMBER BANKS.—Section 19(c)(1)(B) of the Federal

12 Reserve Act (12 U.S.C. 461(c)(1)(B)) is amended by strik13 ing ‘‘which is not a member bank’’.

14 (c) SURVEY OF BANK FEES AND SERVICES.—Section

15 19 of the Federal Reserve Act (as amended by subsections

16 (a) and (b) of this section) is amended by adding at the

17 end the following new subsection:

18 ‘‘(n) SURVEY OF BANK FEES AND SERVICES.—

19 ‘‘(1) ANNUAL SURVEY REQUIRED.—The Board

20 shall obtain annually a sample, which is representa21 tive by type and size of the institution and geographic

22 location, of the following retail banking services and

23 products provided by insured depository institutions

24 and insured credit unions (along with related fees

25 and minimum balances):
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1 ‘‘(A) Checking and other transaction ac2 counts.

3 ‘‘(B) Negotiable order of withdrawal and

4 savings accounts.

5 ‘‘(C) Automated teller machine transactions.

6 ‘‘(D) Other electronic transactions.

7 ‘‘(E) Credit Cards.

8 ‘‘(2) MINIMUM SURVEY REQUIREMENT.—The an9 nual survey described in paragraph (1) shall meet the

10 following minimum requirements:

11 ‘‘(A) CHECKING AND OTHER TRANSACTION

12 ACCOUNTS.—Data on checking and transaction

13 accounts shall include, at a minimum, the fol14 lowing:

15 ‘‘(i) Monthly and annual fees and

16 minimum balances to avoid such fees.

17 ‘‘(ii) Minimum opening balances.

18 ‘‘(iii) Check processing fees.

19 ‘‘(iv) Check printing fees.

20 ‘‘(v) Balance inquiry fees.

21 ‘‘(vi) Fees imposed for using a teller or

22 other institution employee.

23 ‘‘(vii) Stop payment order fees.

24 ‘‘(viii) Nonsufficient fund fees.

25 ‘‘(ix) Overdraft fees.
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1 ‘‘(x) Deposit items returned fees.

2 ‘‘(xi) Availability of no-cost or low-cost

3 accounts for consumers who maintain low

4 balances.

5 ‘‘(B) NEGOTIABLE ORDER OF WITHDRAWAL

6 ACCOUNTS AND SAVINGS ACCOUNTS.—Data on

7 negotiable order of withdrawal accounts and sav8 ings accounts shall include, at a minimum, the

9 following:

10 ‘‘(i) Monthly and annual fees and

11 minimum balances to avoid such fees.

12 ‘‘(ii) Minimum opening balances.

13 ‘‘(iii) Rate at which interest is paid to

14 consumers.

15 ‘‘(iv) Check processing fees for nego16 tiable order of withdrawal accounts.

17 ‘‘(v) Check printing fees for negotiable

18 order of withdrawal accounts.

19 ‘‘(vi) Balance inquiry fees.

20 ‘‘(vii) Fees imposed for using a teller

21 or other institution employee.

22 ‘‘(viii) Stop payment order fees for ne23 gotiable order of withdrawal accounts.

24 ‘‘(ix) Nonsufficient fund fees for nego25 tiable order of withdrawal accounts.
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1 ‘‘(x) Overdraft fees for negotiable order

2 of withdrawal accounts.

3 ‘‘(xi) Deposit items returned fees.

4 ‘‘(xii) Availability of no-cost or low5 cost accounts for consumers who maintain

6 low balances.

7 ‘‘(C) AUTOMATED TELLER TRANS8 ACTIONS.—Data on automated teller machine

9 transactions shall include, at a minimum, the

10 following:

11 ‘‘(i) Annual and monthly fees.

12 ‘‘(ii) Card fees.

13 ‘‘(iii) Fees charged to customers for

14 withdrawals, deposits, transfers between ac15 counts, balance inquiries through institu16 tion-owned machines.

17 ‘‘(iv) Fees charged to customers for

18 withdrawals, deposits, transfers between ac19 counts, balance inquiries through machines

20 owned by others.

21 ‘‘(v) Fees charged to noncustomers for

22 withdrawals, deposits, transfers between ac23 counts, balance inquiries through institu24 tion-owned machines.

25 ‘‘(vi) Point-of-sale transaction fees.
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1 ‘‘(vii) Surcharges.

2 ‘‘(D) OTHER ELECTRONIC TRANSACTIONS.—

3 Data on other electronic transactions shall in4 clude, at a minimum, the following:

5 ‘‘(i) Wire transfer fees.

6 ‘‘(ii) Fees related to payments made

7 over the Internet or through other electronic

8 means.

9 ‘‘(E) CREDIT CARD CHARGES AND FEES.—

10 Data related to credit cards shall include, at a

11 minimum, the following:

12 ‘‘(i) Application fees.

13 ‘‘(ii) Annual and monthly fees.

14 ‘‘(iii) Rates of interest charged for pur15 chases and cash advances, when an account

16 is not in default.

17 ‘‘(iv) Rates of interest charged for pur18 chases and cash advances, when an account

19 is in default.

20 ‘‘(v) Average annual finance charges

21 paid by customers.

22 ‘‘(vi) Late payment fees.

23 ‘‘(vii) Cash advance and convenience

24 check fees.

25 ‘‘(viii) Balance transfer fees.
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1 ‘‘(ix) Over-the-credit-limit fees.

2 ‘‘(x) Foreign currency conversion fees.

3 ‘‘(F) OTHER FEES AND CHARGES.—Data on

4 any other fees and charges that the Board deter5 mines to be appropriate to meet the purposes of

6 this section.

7 ‘‘(3) ANNUAL REPORT TO CONGRESS RE8 QUIRED.—

9 ‘‘(A) PREPARATION.—The Board shall pre10 pare a report of the results of each survey con11 ducted pursuant to paragraph (1) and (2).

12 ‘‘(B) CONTENTS OF THE REPORT.—In addi13 tion to the data required to be collected pursuant

14 to paragraphs (1) and (2), each report prepared

15 pursuant to subparagraph (A) shall include a

16 description of any discernible trend, in the Na17 tion as a whole, in each of the 50 States, and in

18 each metropolitan statistical area (as defined by

19 the Director of the Office of Management and

20 Budget), in the cost and availability of the retail

21 banking services, including those described in

22 paragraphs (1) and (2) (including related fees

23 and minimum balances), that delineates dif24 ferences between institutions on the basis of the

25 type of institution, the size of the institution and
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1 any engagement of the institution in multistate

2 activity.

3 ‘‘(C) SUBMISSION TO CONGRESS.—The

4 Board shall submit an annual report to the Con5 gress under this paragraph not later than June

6 1, 2002, and not later than June 1 of each subse7 quent year.

8 ‘‘(4) DEFINITIONS.—For purposes of this sub9 section, the terms ‘insured depository institution’ and

10 ‘insured credit union’ mean any depository institu11 tion (as defined in subsection (b)(1)(A)) the deposits

12 or shares in which are insured under the Federal De13 posit Insurance Act or the Federal Credit Union

14 Act.’’.

15 (d) TECHNICAL AND CONFORMING AMENDMENTS.—

16 Section 19 of the Federal Reserve Act (12 U.S.C. 461) is

17 amended—

18 (1) in subsection (b)(4) (12 U.S.C. 461(b)(4)), by

19 striking subparagraph (C) and redesignating sub20 paragraphs (D) and (E) as subparagraphs (C) and

21 (D), respectively; and

22 (2) in subsection (c)(1)(A) (12 U.S.C.

23 461(c)(1)(A)), by striking ‘‘subsection (b)(4)(C)’’ and

24 inserting ‘‘subsection (b)’’.
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1 SEC. 5. INCREASED FEDERAL RESERVE BOARD FLEXIBILITY

2 IN SETTING RESERVE REQUIREMENTS.

3 Section 19(b)(2)(A) of the Federal Reserve Act (12

4 U.S.C. 461(b)(2)(A)) is amended—

5 (1) in clause (i), by striking ‘‘the ratio of 3 per

6 centum’’ and inserting ‘‘a ratio not greater than 3

7 percent (and which may be zero)’’; and

8 (2) in clause (ii), by striking ‘‘and not less than

9 8 per centum,’’ and inserting ‘‘(and which may be

10 zero),’’.

11 SEC. 6. TRANSFER OF FEDERAL RESERVE SURPLUSES.

12 (a) IN GENERAL.—Section 7(b) of the Federal Reserve

13 Act (12 U.S.C. 289(b)) is amended by adding at the end

14 the following new paragraph:

15 ‘‘(4) ADDITIONAL TRANSFERS TO COVER INTER16 EST PAYMENTS FOR FISCAL YEARS 2002 THROUGH

17 2006.—

18 ‘‘(A) IN GENERAL.—In addition to the

19 amounts required to be transferred from the sur20 plus funds of the Federal reserve banks pursuant

21 to subsection (a)(3), the Federal reserve banks

22 shall transfer from such surplus funds to the

23 Board of Governors of the Federal Reserve Sys24 tem for transfer to the Secretary of the Treasury

25 for deposit in the general fund of the Treasury,

26 such sums as are necessary to equal the net cost
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1 of section 19(b)(12), as estimated by the Office of

2 Management and Budget, in each of the fiscal

3 years 2002 through 2006.

4 ‘‘(B) ALLOCATION BY FEDERAL RESERVE

5 BOARD.—Of the total amount required to be paid

6 by the Federal reserve banks under subparagraph

7 (A) for fiscal years 2002 through 2006, the

8 Board of Governors of the Federal Reserve Sys9 tem shall determine the amount each such bank

10 shall pay in such fiscal year.

11 ‘‘(C) REPLENISHMENT OF SURPLUS FUND

12 PROHIBITED.—During fiscal years 2002 through

13 2006, no Federal reserve bank may replenish

14 such bank’s surplus fund by the amount of any

15 transfer by such bank under subparagraph (A).’’.

16 (b) TECHNICAL AND CONFORMING AMENDMENT.—Sec17 tion 7(a) of the Federal Reserve Act (12 U.S.C. 289(a)) is

18 amended by adding at the end the following new paragraph:

19 ‘‘(3) PAYMENT TO TREASURY.—During fiscal

20 years 2002 through 2006, any amount in the surplus

21 fund of any Federal reserve bank in excess of the

22 amount equal to 3 percent of the paid-in capital and

23 surplus of the member banks of such bank shall be

24 transferred to the Secretary of the Treasury for de25 posit in the general fund of the Treasury.’’.
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1 SEC. 7. RULE OF CONSTRUCTION.

2 No provision of this Act, or any amendment made by

3 this Act, shall be construed as creating any presumption

4 or implication that, in the case of an escrow account main5 tained at a depository institution in connection with a real

6 estate transaction—

7 (1) the absorption, by the depository institution,

8 of expenses incidental to providing a normal banking

9 function with respect to such escrow account;

10 (2) the forbearance, by the depository institution,

11 from charging a fee for providing any such banking

12 function; and

13 (3) any benefit which may accrue to the holder

14 or the beneficiary of such escrow account as a result

15 of an action of the depository institution described in

16 paragraph (1) or (2),

17 may be treated as the payment or receipt of interest for

18 purposes of any provision of Public Law 93–100, the Fed19 eral Reserve Act, the Home Owners’ Loan Act, or the Fed20 eral Deposit Insurance Act relating to the payment of inter21 est on accounts or deposits at depository institutions.

Amend the title so as to read ‘‘A bill to repeal the

prohibition on the payment of interest on demand deposits, to increase the number of interaccount transfers

which may be made from business accounts at depository

institutions, to authorize the Board of Governors of the
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Federal Reserve System to pay interest on reserves, and

for other purposes.’’.
Union Calendar No. 27

107TH CONGRESS

1ST SESSION H. R. 974

[Report No. 107–38]

A BILL

To increase the number of interaccount transfers

which may be made from business accounts atdepository institutions, to authorize the Board ofGovernors of the Federal Reserve System to payinterest on reserves, and for other purposes.

APRIL 3, 2001

Reported with amendments, committed to the Committee

of the Whole House on the State of the Union, and ordered to be printed