I 

109TH CONGRESS 

1ST SESSION H. R. 1224 

To repeal the prohibition on the payment of interest on demand deposits, 

and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

MARCH 10, 2005 

Mrs. KELLY (for herself, Mr. KANJORSKI, Ms. VELA ́ZQUEZ, Mrs. MALONEY, 

Mr. SHERMAN, Mr. HINOJOSA, and Mr. MANZULLO) introduced the following bill; which was referred to the Committee on Financial Services 

A BILL 

To repeal the prohibition on the payment of interest on 

demand deposits, and for other purposes. 

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 ‘‘Business Checking 

5 Freedom Act of 2005’’. 

6 SEC. 2. INTEREST-BEARING TRANSACTION ACCOUNTS AU7 THORIZED FOR ALL BUSINESSES. 

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

9 is amended— 
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1 (1) by redesignating subsections (b) and (c) as 

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

3 (2) by inserting after subsection (a) the fol4 lowing: 

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

6 depository institution may permit the owner of any deposit 

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

8 or dividends are paid and is not a deposit or account de9 scribed in subsection (a)(2) to make up to 24 transfers 

10 per month (or such greater number as the Board of Gov11 ernors of the Federal Reserve System may determine by 

12 rule or order), for any purpose, to another account of the 

13 owner in the same institution. An account offered pursu14 ant to this subsection shall be considered a transaction 

15 account for purposes of section 19 of the Federal Reserve 

16 Act unless the Board of Governors of the Federal Reserve 

17 System determines otherwise.’’. 

18 SEC. 3. INTEREST-BEARING TRANSACTION ACCOUNTS AU19 THORIZED. 

20 (a) REPEAL OF PROHIBITION ON PAYMENT OF IN21 TEREST ON DEMAND DEPOSITS.— 

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

23 the Federal Reserve Act (12 U.S.C. 371a) is amend24 ed to read as follows: 

25 ‘‘(i) [Repealed]’’. 
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1 (2) HOME OWNERS’ LOAN ACT.—The first sen2 tence of section 5(b)(1)(B) of the Home Owners’ 

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

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

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

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

7 (3) FEDERAL DEPOSIT INSURANCE ACT.—Sec8 tion 18(g) of the Federal Deposit Insurance Act (12 

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

10 ‘‘(g) [Repealed]’’. 

11 (b) EFFECTIVE DATE.—The amendments made by 

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

13 period beginning on the date of the enactment of this Act. 

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

15 RESERVE BANKS. 

16 (a) IN GENERAL.—Section 19(b) of the Federal Re17 serve Act (12 U.S.C. 461(b)) is amended by adding at 

18 the end the following new paragraph: 

19 ‘‘(12) EARNINGS ON RESERVES.— 

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

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

22 depository institution may receive earnings to 

23 be paid by the Federal reserve bank at least 

24 once each calendar quarter at a rate or rates 
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1 not to exceed the general level of short-term in2 terest rates. 

3 ‘‘(B) REGULATIONS RELATING TO PAY4 MENTS AND DISTRIBUTION.—The Board may 

5 prescribe regulations concerning— 

6 ‘‘(i) the payment of earnings in ac7 cordance with this paragraph; 

8 ‘‘(ii) the distribution of such earnings 

9 to the depository institutions which main10 tain balances at such banks or on whose 

11 behalf such balances are maintained; and 

12 ‘‘(iii) the responsibilities of depository 

13 institutions, Federal home loan banks, and 

14 the National Credit Union Administration 

15 Central Liquidity Facility with respect to 

16 the crediting and distribution of earnings 

17 attributable to balances maintained, in ac18 cordance with subsection (c)(1)(A), in a 

19 Federal reserve bank by any such entity on 

20 behalf of depository institutions. 

21 ‘‘(C) DEPOSITORY INSTITUTIONS DE22 FINED.—For purposes of this paragraph, the 

23 term ‘depository institution’, in addition to the 

24 institutions described in paragraph (1)(A), in25 cludes any trust company, corporation orga-
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1 nized under section 25A or having an agree2 ment with the Board under section 25, or any 

3 branch or agency of a foreign bank (as defined 

4 in section 1(b) of the International Banking Act 

5 of 1978).’’. 

6 (b) AUTHORIZATION FOR PASS THROUGH RESERVES

7 FOR MEMBER BANKS.—Section 19(c)(1)(B) of the Fed8 eral Reserve Act (12 U.S.C. 461(c)(1)(B)) is amended by 

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

10 (c) CONSUMER BANKING COSTS ASSESSMENT.— 

11 (1) IN GENERAL.—The Federal Reserve Act 

12 (12 U.S.C. 221 et seq.) is amended— 

13 (A) by redesignating sections 30 and 31 as 

14 sections 31 and 32, respectively; and 

15 (B) by inserting after section 29 the fol16 lowing new section: 

17 ‘‘SEC. 30. SURVEY OF BANK FEES AND SERVICES. 

18 ‘‘(a) ANNUAL SURVEY REQUIRED.—The Board of 

19 Governors of the Federal Reserve System shall obtain an20 nually a sample, which is representative by type and size 

21 of the institution (including small institutions) and geo22 graphic location, of the following retail banking services 

23 and products provided by insured depository institutions 

24 and insured credit unions (along with related fees and 

25 minimum balances): 
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1 ‘‘(1) Checking and other transaction accounts. 

2 ‘‘(2) Negotiable order of withdrawal and sav3 ings accounts. 

4 ‘‘(3) Automated teller machine transactions. 

5 ‘‘(4) Other electronic transactions. 

6 ‘‘(b) MINIMUM SURVEY REQUIREMENT.—The annual 

7 survey described in subsection (a) shall meet the following 

8 minimum requirements: 

9 ‘‘(1) CHECKING AND OTHER TRANSACTION AC10 COUNTS.—Data on checking and transaction ac11 counts shall include, at a minimum, the following: 

12 ‘‘(A) Monthly and annual fees and min13 imum balances to avoid such fees. 

14 ‘‘(B) Minimum opening balances. 

15 ‘‘(C) Check processing fees. 

16 ‘‘(D) Check printing fees. 

17 ‘‘(E) Balance inquiry fees. 

18 ‘‘(F) Fees imposed for using a teller or 

19 other institution employee. 

20 ‘‘(G) Stop payment order fees. 

21 ‘‘(H) Nonsufficient fund fees. 

22 ‘‘(I) Overdraft fees. 

23 ‘‘(J) Deposit items returned fees. 
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1 ‘‘(K) Availability of no-cost or low-cost ac2 counts for consumers who maintain low bal3 ances. 

4 ‘‘(2) NEGOTIABLE ORDER OF WITHDRAWAL AC5 COUNTS AND SAVINGS ACCOUNTS.—Data on nego6 tiable order of withdrawal accounts and savings ac7 counts shall include, at a minimum, the following: 

8 ‘‘(A) Monthly and annual fees and min9 imum balances to avoid such fees. 

10 ‘‘(B) Minimum opening balances. 

11 ‘‘(C) Rate at which interest is paid to con12 sumers. 

13 ‘‘(D) Check processing fees for negotiable 

14 order of withdrawal accounts. 

15 ‘‘(E) Fees imposed for using a teller or 

16 other institution employee. 

17 ‘‘(F) Availability of no-cost or low-cost ac18 counts for consumers who maintain low bal19 ances. 

20 ‘‘(3) AUTOMATED TELLER TRANSACTIONS.— 

21 Data on automated teller machine transactions shall 

22 include, at a minimum, the following: 

23 ‘‘(A) Monthly and annual fees. 

24 ‘‘(B) Card fees. 
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1 ‘‘(C) Fees charged to customers for with2 drawals, deposits, and balance inquiries through 

3 institution-owned machines. 

4 ‘‘(D) Fees charged to customers for with5 drawals, deposits, and balance inquiries through 

6 machines owned by others. 

7 ‘‘(E) Fees charged to noncustomers for 

8 withdrawals, deposits, and balance inquiries 

9 through institution-owned machines. 

10 ‘‘(F) Point-of-sale transaction fees. 

11 ‘‘(4) OTHER ELECTRONIC TRANSACTIONS.— 

12 Data on other electronic transactions shall include, 

13 at a minimum, the following: 

14 ‘‘(A) Wire transfer fees. 

15 ‘‘(B) Fees related to payments made over 

16 the Internet or through other electronic means. 

17 ‘‘(5) OTHER FEES AND CHARGES.—Data on 

18 any other fees and charges that the Board of Gov19 ernors of the Federal Reserve System determines to 

20 be appropriate to meet the purposes of this section. 

21 ‘‘(6) FEDERAL RESERVE BOARD AUTHORITY.— 

22 The Board of Governors of the Federal Reserve Sys23 tem may cease the collection of information with re24 gard to any particular fee or charge specified in this 

25 subsection if the Board makes a determination that, 
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1 on the basis of changing practices in the financial 

2 services industry, the collection of such information 

3 is no longer necessary to accomplish the purposes of 

4 this section. 

5 ‘‘(c) ANNUAL REPORT TO CONGRESS REQUIRED.— 

6 ‘‘(1) PREPARATION.—The Board of Governors 

7 of the Federal Reserve System shall prepare a report 

8 of the results of each survey conducted pursuant to 

9 subsections (a) and (b) of this section and section 

10 136(b)(1) of the Consumer Credit Protection Act. 

11 ‘‘(2) CONTENTS OF THE REPORT.—In addition 

12 to the data required to be collected pursuant to sub13 sections (a) and (b), each report prepared pursuant 

14 to paragraph (1) shall include a description of any 

15 discernible trend, in the Nation as a whole, in a rep16 resentative sample of the 50 States (selected with 

17 due regard for regional differences), and in each 

18 consolidated metropolitan statistical area (as defined 

19 by 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 sub22 sections (a) and (b) (including related fees and min23 imum balances), that delineates differences between 

24 institutions on the basis of the type of institution 

25 and the size of the institution, between large and 
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1 small institutions of the same type, and any engage2 ment of the institution in multistate activity. 

3 ‘‘(3) SUBMISSION TO CONGRESS.—The Board 

4 of Governors of the Federal Reserve System shall 

5 submit an annual report to the Congress not later 

6 than June 1, 2006, and not later than June 1 of 

7 each subsequent year. 

8 ‘‘(d) DEFINITIONS.—For purposes of this section, the 

9 term ‘insured depository institution’ has the meaning 

10 given such term in section 3 of the Federal Deposit Insur11 ance Act, and the term ‘insured credit union’ has the 

12 meaning given such term in section 101 of the Federal 

13 Credit Union Act.’’. 

14 (2) CONFORMING AMENDMENT.— 

15 (A) IN GENERAL.—Paragraph (1) of sec16 tion 136(b) of the Truth in Lending Act (15 

17 U.S.C. 1646(b)(1)) is amended to read as fol18 lows: 

19 ‘‘(1) COLLECTION REQUIRED.—The Board shall 

20 collect, on a semiannual basis, from a broad sample 

21 of financial institutions which offer credit card serv22 ices, credit card price and availability information 

23 including— 

24 ‘‘(A) the information required to be dis25 closed under section 127(c) of this chapter; 
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1 ‘‘(B) the average total amount of finance 

2 charges paid by consumers; and 

3 ‘‘(C) the following credit card rates and 

4 fees: 

5 ‘‘(i) Application fees. 

6 ‘‘(ii) Annual percentage rates for cash 

7 advances and balance transfers. 

8 ‘‘(iii) Maximum annual percentage 

9 rate that may be charged when an account 

10 is in default. 

11 ‘‘(iv) Fees for the use of convenience 

12 checks. 

13 ‘‘(v) Fees for balance transfers. 

14 ‘‘(vi) Fees for foreign currency con15 versions.’’. 

16 (B) EFFECTIVE DATE.—The amendment 

17 made by subparagraph (A) shall take effect on 

18 January 1, 2006. 

19 (3) REPEAL OF OTHER REPORT PROVISIONS.— 

20 Section 1002 of Financial Institutions Reform, Re21 covery, and Enforcement Act of 1989 and section 

22 108 of the Riegle-Neal Interstate Banking and 

23 Branching Efficiency Act of 1994 are hereby re24 pealed. 
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1 (d) TECHNICAL AND CONFORMING AMENDMENTS.— 

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

3 is amended— 

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

5 by striking subparagraph (C) and redesignating sub6 paragraphs (D) and (E) as subparagraphs (C) and 

7 (D), respectively; and 

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

9 461(c)(1)(A)), by striking ‘‘subsection (b)(4)(C)’’ 

10 and inserting ‘‘subsection (b)’’. 

11 SEC. 5. INCREASED FEDERAL RESERVE BOARD FLEXI12 BILITY IN SETTING RESERVE REQUIRE13 MENTS. 

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

15 U.S.C. 461(b)(2)(A)) is amended— 

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

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

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

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

20 8 per centum,’’ and inserting ‘‘(and which may be 

21 zero),’’. 

22 SEC. 6. TRANSFER OF FEDERAL RESERVE SURPLUSES. 

23 (a) IN GENERAL.—Section 7(b) of the Federal Re24 serve Act (12 U.S.C. 289(b)) is amended by adding at 

25 the end the following new paragraph: 
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1 ‘‘(4) ADDITIONAL TRANSFERS TO COVER IN2 TEREST PAYMENTS FOR FISCAL YEARS 2005

3 THROUGH 2009.— 

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

5 amounts required to be transferred from the 

6 surplus funds of the Federal reserve banks pur7 suant to subsection (a)(3), the Federal reserve 

8 banks shall transfer from such surplus funds to 

9 the Board of Governors of the Federal Reserve 

10 System for transfer to the Secretary of the 

11 Treasury for deposit in the general fund of the 

12 Treasury, such sums as are necessary to equal 

13 the net cost of section 19(b)(12) in each of the 

14 fiscal years 2005 through 2009. 

15 ‘‘(B) ALLOCATION BY FEDERAL RESERVE

16 BOARD.—Of the total amount required to be 

17 paid by the Federal reserve banks under sub18 paragraph (A) for fiscal years 2005 through 

19 2009, the Board of Governors of the Federal 

20 Reserve System shall determine the amount 

21 each such bank shall pay in such fiscal year. 

22 ‘‘(C) REPLENISHMENT OF SURPLUS FUND

23 PROHIBITED.—During fiscal years 2005 

24 through 2009, no Federal reserve bank may re25 plenish such bank’s surplus fund by the amount 
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1 of any transfer by such bank under subpara2 graph (A).’’. 

3 (b) TECHNICAL AND CONFORMING AMENDMENT.— 

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

5 289(a)) is amended by adding at the end the following 

6 new paragraph: 

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

8 years 2005 through 2009, any amount in the sur9 plus fund of any Federal reserve bank in excess of 

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

11 and surplus of the member banks of such bank shall 

12 be transferred to the Secretary of the Treasury for 

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

14 SEC. 7. RULES OF CONSTRUCTION. 

15 In the case of an escrow account maintained at a de16 pository institution in connection with a real estate trans17 action— 

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

19 of expenses incidental to providing a normal banking 

20 service with respect to such escrow account; 

21 (2) the forbearance, by the depository institu22 tion, from charging a fee for providing any such 

23 banking function; and 

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

25 or the beneficiary of such escrow account as a result 
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1 of an action of the depository institution described 

2 in subparagraph (1) or (2) or similar in nature to 

3 such action, 

4 shall not be treated as the payment or receipt of interest 

5 for purposes of this Act and any provision of Public Law 

6 93–100, the Federal Reserve Act, the Home Owners’ Loan 

7 Act, or the Federal Deposit Insurance Act relating to the 

8 payment of interest on accounts or deposits at depository 

9 institutions. No provision of this Act shall be construed 

10 so as to require a depository institution that maintains 

11 an escrow account in connection with a real estate trans12 action to pay interest on such escrow account or to pro13 hibit such institution from paying interest on such escrow 

14 account. No provision of this Act shall be construed as 

15 preempting the provisions of law of any State dealing with 

16 the payment of interest on escrow accounts maintained in 

17 connection with real estate transactions. 

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