107TH CONGRESS

1ST SESSION H. R. 974

AN ACT

To repeal the prohibition on the payment of interest on demand deposits, to increase the number

of interaccount transfers which may be madefrom 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.

107TH CONGRESS

1ST SESSION H. R. 974

AN ACT

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 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 Inter5 est Checking Act of 2001’’.

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

8 (a) REPEAL OF PROHIBITION ON PAYMENT OF IN9 TEREST ON DEMAND DEPOSITS.—

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

11 the Federal Reserve Act (12 U.S.C. 371a) is amend12 ed 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13 ‘‘(i) [Repealed]’’.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’

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

17 striking ‘‘savings association may not—’’ and all

18 that follows through ‘‘(ii) permit any’’ and inserting

19 ‘‘savings association may not permit any’’.

20 (3) FEDERAL DEPOSIT INSURANCE ACT.—Sec21 tion 18(g) of the Federal Deposit Insurance Act (12

22 U.S.C. 1828(g)) is amended to read as follows:

23 ‘‘(g) [Repealed]’’.
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1 (b) EFFECTIVE DATE.—The amendments made by

2 subsection (a) shall take effect at the end of the 2-year

3 period 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)

7 is amended—

8 (1) in subsection (a), by adding at the end the

9 following new paragraph:

10 ‘‘(3) EXCEPTION FROM PARAGRAPH (2) LIMITA11 TION.—Paragraph (2) shall not apply to any deposi12 tory institution which is prohibited by the applicable

13 law of its chartering State from offering demand de14 posits and either—

15 ‘‘(A) does not engage in any lending activi16 ties; or

17 ‘‘(B) is not an affiliate of any company or

18 companies with assets that, in the aggregate,

19 represent more than 10 percent of the total as20 sets of the depository institution.’’;

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

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

23 (3) by inserting after subsection (a) the fol24 lowing:
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1 ‘‘(b) Notwithstanding any other provision of law, any

2 depository institution may permit the owner of any deposit

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

4 or dividends are paid and is not a deposit or account de5 scribed in subsection (a)(2) to make up to 24 transfers

6 per month (or such greater number as the Board may de7 termine by rule or order), for any purpose, to another ac8 count of the owner in the same institution. Nothing in this

9 subsection shall be construed to prevent an account of10 fered pursuant to this subsection from being considered

11 a transaction account (as defined in section 19(b) of the

12 Federal Reserve Act for purposes of such Act).’’.

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

14 RESERVE BANKS.

15 (a) IN GENERAL.—Section 19(b) of the Federal Re16 serve Act (12 U.S.C. 461(b)) is amended by adding at

17 the end the following new paragraph:

18 ‘‘(12) EARNINGS ON RESERVES.—

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

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

21 depository institution may receive earnings to

22 be paid by the Federal reserve bank at least

23 once each calendar quarter at a rate or rates

24 not to exceed the general level of short-term in25 terest rates.
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1 ‘‘(B) REGULATIONS RELATING TO PAY2 MENTS AND DISTRIBUTION.—The Board may

3 prescribe regulations concerning—

4 ‘‘(i) the payment of earnings in ac5 cordance with this paragraph;

6 ‘‘(ii) the distribution of such earnings

7 to the depository institutions which main8 tain balances at such banks or on whose

9 behalf such balances are maintained; and

10 ‘‘(iii) the responsibilities of depository

11 institutions, Federal home loan banks, and

12 the National Credit Union Administration

13 Central Liquidity Facility with respect to

14 the crediting and distribution of earnings

15 attributable to balances maintained, in ac16 cordance with subsection (c)(1)(B), in a

17 Federal reserve bank by any such entity on

18 behalf of depository institutions.’’.

19 (b) AUTHORIZATION FOR PASS THROUGH RESERVES

20 FOR MEMBER BANKS.—Section 19(c)(1)(B) of the Fed21 eral Reserve Act (12 U.S.C. 461(c)(1)(B)) is amended by

22 striking ‘‘which is not a member bank’’.

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

24 19 of the Federal Reserve Act (as amended by subsections
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1 (a) and (b) of this section) is amended by adding at the

2 end the following new subsection:

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

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

5 shall obtain annually a sample, which is representa6 tive by type and size of the institution and geo7 graphic location, of the following retail banking serv8 ices and products provided by insured depository in9 stitutions and insured credit unions (along with re10 lated fees and minimum balances):

11 ‘‘(A) Checking and other transaction ac12 counts.

13 ‘‘(B) Negotiable order of withdrawal and

14 savings accounts.

15 ‘‘(C) Automated teller machine trans16 actions.

17 ‘‘(D) Other electronic transactions.

18 ‘‘(E) Credit Cards.

19 ‘‘(2) MINIMUM SURVEY REQUIREMENT.—The

20 annual survey described in paragraph (1) shall meet

21 the following minimum requirements:

22 ‘‘(A) CHECKING AND OTHER TRANSACTION

23 ACCOUNTS.—Data on checking and transaction

24 accounts shall include, at a minimum, the fol25 lowing:
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1 ‘‘(i) Monthly and annual fees and

2 minimum balances to avoid such fees.

3 ‘‘(ii) Minimum opening balances.

4 ‘‘(iii) Check processing fees.

5 ‘‘(iv) Check printing fees.

6 ‘‘(v) Balance inquiry fees.

7 ‘‘(vi) Fees imposed for using a teller

8 or other institution employee.

9 ‘‘(vii) Stop payment order fees.

10 ‘‘(viii) Nonsufficient fund fees.

11 ‘‘(ix) Overdraft fees.

12 ‘‘(x) Deposit items returned fees.

13 ‘‘(xi) Availability of no-cost or low14 cost accounts for consumers who maintain

15 low balances.

16 ‘‘(B) NEGOTIABLE ORDER OF WITH17 DRAWAL ACCOUNTS AND SAVINGS ACCOUNTS.—

18 Data on negotiable order of withdrawal ac19 counts and savings accounts shall include, at a

20 minimum, the following:

21 ‘‘(i) Monthly and annual fees and

22 minimum balances to avoid such fees.

23 ‘‘(ii) Minimum opening balances.

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

25 consumers.
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1 ‘‘(iv) Check processing fees for nego2 tiable order of withdrawal accounts.

3 ‘‘(v) Check printing fees for negotiable

4 order of withdrawal accounts.

5 ‘‘(vi) Balance inquiry fees.

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

7 or other institution employee.

8 ‘‘(viii) Stop payment order fees for ne9 gotiable order of withdrawal accounts.

10 ‘‘(ix) Nonsufficient fund fees for nego11 tiable order of withdrawal accounts.

12 ‘‘(x) Overdraft fees for negotiable

13 order of withdrawal accounts.

14 ‘‘(xi) Deposit items returned fees.

15 ‘‘(xii) Availability of no-cost or low16 cost accounts for consumers who maintain

17 low balances.

18 ‘‘(C) AUTOMATED TELLER TRANS19 ACTIONS.—Data on automated teller machine

20 transactions shall include, at a minimum, the

21 following:

22 ‘‘(i) Annual and monthly fees.

23 ‘‘(ii) Card fees.

24 ‘‘(iii) Fees charged to customers for

25 withdrawals, deposits, transfers between
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1 accounts, balance inquiries through institu2 tion-owned machines.

3 ‘‘(iv) Fees charged to customers for

4 withdrawals, deposits, transfers between

5 accounts, balance inquiries through ma6 chines owned by others.

7 ‘‘(v) Fees charged to noncustomers

8 for withdrawals, deposits, transfers be9 tween accounts, balance inquiries through

10 institution-owned machines.

11 ‘‘(vi) Point-of-sale transaction fees.

12 ‘‘(vii) Surcharges.

13 ‘‘(D) OTHER ELECTRONIC TRANS14 ACTIONS.—Data on other electronic trans15 actions shall include, at a minimum, the fol16 lowing:

17 ‘‘(i) Wire transfer fees.

18 ‘‘(ii) Fees related to payments made

19 over the Internet or through other elec20 tronic means.

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

22 Data related to credit cards shall include, at a

23 minimum, the following:

24 ‘‘(i) Application fees.

25 ‘‘(ii) Annual and monthly fees.
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1 ‘‘(iii) Rates of interest charged for

2 purchases and cash advances, when an ac3 count is not in default.

4 ‘‘(iv) Rates of interest charged for

5 purchases and cash advances, when an ac6 count is in default.

7 ‘‘(v) Average annual finance charges

8 paid by customers.

9 ‘‘(vi) Late payment fees.

10 ‘‘(vii) Cash advance and convenience

11 check fees.

12 ‘‘(viii) Balance transfer fees.

13 ‘‘(ix) Over-the-credit-limit fees.

14 ‘‘(x) Foreign currency conversion fees.

15 ‘‘(F) OTHER FEES AND CHARGES.—Data

16 on any other fees and charges that the Board

17 determines to be appropriate to meet the pur18 poses of this section.

19 ‘‘(3) ANNUAL REPORT TO CONGRESS RE20 QUIRED.—

21 ‘‘(A) PREPARATION.—The Board shall pre22 pare a report of the results of each survey con23 ducted pursuant to paragraph (1) and (2).

24 ‘‘(B) CONTENTS OF THE REPORT.—In ad25 dition to the data required to be collected pur-
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1 suant to paragraphs (1) and (2), each report

2 prepared pursuant to subparagraph (A) shall

3 include a description of any discernible trend, in

4 the Nation as a whole, in each of the 50 States,

5 and in each metropolitan statistical area (as de6 fined by the Director of the Office of Manage7 ment and Budget), in the cost and availability

8 of the retail banking services, including those

9 described in paragraphs (1) and (2) (including

10 related fees and minimum balances), that delin11 eates differences between institutions on the

12 basis of the type of institution, the size of the

13 institution and any engagement of the institu14 tion in multistate activity.

15 ‘‘(C) SUBMISSION TO CONGRESS.—The

16 Board shall submit an annual report to the

17 Congress under this paragraph not later than

18 June 1, 2002, and not later than June 1 of

19 each subsequent year.

20 ‘‘(4) DEFINITIONS.—For purposes of this sub21 section, the terms ‘insured depository institution’

22 and ‘insured credit union’ mean any depository insti23 tution (as defined in subsection (b)(1)(A)) the de24 posits or shares in which are insured under the Fed-
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1 eral Deposit Insurance Act or the Federal Credit

2 Union Act.’’.

3 (d) TECHNICAL AND CONFORMING AMENDMENTS.—

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

5 is amended—

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

7 by striking subparagraph (C) and redesignating sub8 paragraphs (D) and (E) as subparagraphs (C) and

9 (D), respectively; and

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

11 461(c)(1)(A)), by striking ‘‘subsection (b)(4)(C)’’

12 and inserting ‘‘subsection (b)’’.

13 SEC. 5. INCREASED FEDERAL RESERVE BOARD FLEXI14 BILITY IN SETTING RESERVE REQUIRE15 MENTS.

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

17 U.S.C. 461(b)(2)(A)) is amended—

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

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

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

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

22 8 per centum,’’ and inserting ‘‘(and which may be

23 zero),’’.
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1 SEC. 6. TRANSFER OF FEDERAL RESERVE SURPLUSES.

2 (a) IN GENERAL.—Section 7(b) of the Federal Re3 serve Act (12 U.S.C. 289(b)) is amended by adding at

4 the end the following new paragraph:

5 ‘‘(4) ADDITIONAL TRANSFERS TO COVER IN6 TEREST PAYMENTS FOR FISCAL YEARS 2002

7 THROUGH 2006.—

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

9 amounts required to be transferred from the

10 surplus funds of the Federal reserve banks pur11 suant to subsection (a)(3), the Federal reserve

12 banks shall transfer from such surplus funds to

13 the Board of Governors of the Federal Reserve

14 System for transfer to the Secretary of the

15 Treasury for deposit in the general fund of the

16 Treasury, such sums as are necessary to equal

17 the net cost of section 19(b)(12), as estimated

18 by the Office of Management and Budget, in

19 each of the fiscal years 2002 through 2006.

20 ‘‘(B) ALLOCATION BY FEDERAL RESERVE

21 BOARD.—Of the total amount required to be

22 paid by the Federal reserve banks under sub23 paragraph (A) for fiscal years 2002 through

24 2006, the Board of Governors of the Federal

25 Reserve System shall determine the amount

26 each such bank shall pay in such fiscal year.
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1 ‘‘(C) REPLENISHMENT OF SURPLUS FUND

2 PROHIBITED.—During fiscal years 2002

3 through 2006, no Federal reserve bank may re4 plenish such bank’s surplus fund by the amount

5 of any transfer by such bank under subpara6 graph (A).’’.

7 (b) TECHNICAL AND CONFORMING AMENDMENT.—

8 Section 7(a) of the Federal Reserve Act (12 U.S.C.

9 289(a)) is amended by adding at the end the following

10 new paragraph:

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

12 years 2002 through 2006, any amount in the sur13 plus fund of any Federal reserve bank in excess of

14 the amount equal to 3 percent of the paid-in capital

15 and surplus of the member banks of such bank shall

16 be transferred to the Secretary of the Treasury for

17 deposit in the general fund of the Treasury.’’.

18 SEC. 7. RULE OF CONSTRUCTION.

19 No provision of this Act, or any amendment made

20 by this Act, shall be construed as creating any presump21 tion or implication that, in the case of an escrow account

22 maintained at a depository institution in connection with

23 a real estate transaction—
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1 (1) the absorption, by the depository institution,

2 of expenses incidental to providing a normal banking

3 function with respect to such escrow account;

4 (2) the forbearance, by the depository institu5 tion, from charging a fee for providing any such

6 banking function; and

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

8 or the beneficiary of such escrow account as a result

9 of an action of the depository institution described

10 in paragraph (1) or (2),

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

12 purposes of any provision of Public Law 93–100, the Fed13 eral Reserve Act, the Home Owners’ Loan Act, or the

14 Federal Deposit Insurance Act relating to the payment of

15 interest on accounts or deposits at depository institutions.

Passed the House of Representatives April 3, 2001.

Attest:

Clerk.