107TH CONGRESS

2D SESSION H. R. 1009

AN ACT

To repeal the prohibition on the payment of

interest on demand deposits.

107TH CONGRESS

2D SESSION H. R. 1009

AN ACT

To repeal the prohibition on the payment of interest on

demand deposits.

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

2 This Act may be cited as the ‘‘Business Checking

3 Freedom Act of 2002’’.

4 SEC. 2. INTEREST-BEARING TRANSACTION ACCOUNTS AU5 THORIZED.

6 (a) REPEAL OF PROHIBITION ON PAYMENT OF IN7 TEREST ON DEMAND DEPOSITS.—

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

9 the Federal Reserve Act (12 U.S.C. 371a) is amend10 ed to read as follows:

11 ‘‘(i) [Repealed]’’.

12 (2) HOME OWNERS’ LOAN ACT.—The first sen13 tence of section 5(b)(1)(B) of the Home Owners’

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

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

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

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

18 (3) FEDERAL DEPOSIT INSURANCE ACT.—Sec19 tion 18(g) of the Federal Deposit Insurance Act (12

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

21 ‘‘(g) [Repealed]’’.

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

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

24 period beginning on the date of the enactment of this Act.
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1 SEC. 3. INTEREST-BEARING TRANSACTION ACCOUNTS AU2 THORIZED FOR ALL BUSINESSES.

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

4 is amended—

5 (1) by redesignating subsections (b) and (c) as

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

7 (2) by inserting after subsection (a) the fol8 lowing:

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

10 depository institution may permit the owner of any deposit

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

12 or dividends are paid and is not a deposit or account de13 scribed in subsection (a)(2) to make up to 24 transfers

14 per month (or such greater number as the Board of Gov15 ernors of the Federal Reserve System may determine by

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

17 owner in the same institution. An account offered pursu18 ant to this subsection shall be considered a transaction

19 account for purposes of section 19 of the Federal Reserve

20 Act unless the Board of Governors of the Federal Reserve

21 System determines otherwise.’’.

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

23 RESERVE BANKS.

24 (a) IN GENERAL.—Section 19(b) of the Federal Re25 serve Act (12 U.S.C. 461(b)) is amended by adding at

26 the end the following new paragraph:
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1 ‘‘(12) EARNINGS ON RESERVES.—

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

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

4 depository institution may receive earnings to

5 be paid by the Federal reserve bank at least

6 once each calendar quarter at a rate or rates

7 not to exceed the general level of short-term in8 terest rates.

9 ‘‘(B) REGULATIONS RELATING TO PAY10 MENTS AND DISTRIBUTION.—The Board may

11 prescribe regulations concerning—

12 ‘‘(i) the payment of earnings in ac13 cordance with this paragraph;

14 ‘‘(ii) the distribution of such earnings

15 to the depository institutions which main16 tain balances at such banks or on whose

17 behalf such balances are maintained; and

18 ‘‘(iii) the responsibilities of depository

19 institutions, Federal home loan banks, and

20 the National Credit Union Administration

21 Central Liquidity Facility with respect to

22 the crediting and distribution of earnings

23 attributable to balances maintained, in ac24 cordance with subsection (c)(1)(A), in a
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1 Federal reserve bank by any such entity on

2 behalf of depository institutions.

3 ‘‘(C) DEPOSITORY INSTITUTIONS DE4 FINED.—For purposes of this paragraph, the

5 term ‘depository institution’, in addition to the

6 institutions described in paragraph (1)(A), in7 cludes any trust company, corporation orga8 nized under section 25A or having an agree9 ment with the Board under section 25, or any

10 branch or agency of a foreign bank (as defined

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

12 of 1978).’’.

13 (b) AUTHORIZATION FOR PASS THROUGH RESERVES

14 FOR MEMBER BANKS.—Section 19(c)(1)(B) of the Fed15 eral Reserve Act (12 U.S.C. 461(c)(1)(B)) is amended by

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

17 (c) CONSUMER BANKING COSTS ASSESSMENT.—

18 (1) IN GENERAL.—Section 1002 of the Finan19 cial Institutions Reform, Recovery, and Enforcement

20 Act of 1989 (12 U.S.C. 1811 note) is amended to

21 read as follows:

22 ‘‘SEC. 1002. SURVEY OF BANK FEES AND SERVICES.

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

24 Governors of the Federal Reserve System shall obtain an25 nually a sample, which is representative by type and size
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1 of the institution (including small institutions) and geo2 graphic location, of the following retail banking services

3 and products provided by insured depository institutions

4 and insured credit unions (along with related fees and

5 minimum balances):

6 ‘‘(1) Checking and other transaction accounts.

7 ‘‘(2) Negotiable order of withdrawal and sav8 ings accounts.

9 ‘‘(3) Automated teller machine transactions.

10 ‘‘(4) Other electronic transactions.

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

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

13 minimum requirements:

14 ‘‘(1) CHECKING AND OTHER TRANSACTION AC15 COUNTS.—Data on checking and transaction ac16 counts shall include, at a minimum, the following:

17 ‘‘(A) Monthly and annual fees and min18 imum balances to avoid such fees.

19 ‘‘(B) Minimum opening balances.

20 ‘‘(C) Check processing fees.

21 ‘‘(D) Check printing fees.

22 ‘‘(E) Balance inquiry fees.

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

24 other institution employee.

25 ‘‘(G) Stop payment order fees.
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1 ‘‘(H) Nonsufficient fund fees.

2 ‘‘(I) Overdraft fees.

3 ‘‘(J) Deposit items returned fees.

4 ‘‘(K) Availability of no-cost or low-cost ac5 counts for consumers who maintain low

6 balances.

7 ‘‘(2) NEGOTIABLE ORDER OF WITHDRAWAL AC8 COUNTS AND SAVINGS ACCOUNTS.—Data on nego9 tiable order of withdrawal accounts and savings ac10 counts shall include, at a minimum, the following:

11 ‘‘(A) Monthly and annual fees and min12 imum balances to avoid such fees.

13 ‘‘(B) Minimum opening balances.

14 ‘‘(C) Rate at which interest is paid to con15 sumers.

16 ‘‘(D) Check processing fees for negotiable

17 order of withdrawal accounts.

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

19 other institution employee.

20 ‘‘(F) Availability of no-cost or low-cost ac21 counts for consumers who maintain low

22 balances.

23 ‘‘(3) AUTOMATED TELLER TRANSACTIONS.—

24 Data on automated teller machine transactions shall

25 include, at a minimum, the following:
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1 ‘‘(A) Monthly and annual fees.

2 ‘‘(B) Card fees.

3 ‘‘(C) Fees charged to customers for with4 drawals, deposits, and balance inquiries through

5 institution-owned machines.

6 ‘‘(D) Fees charged to customers for with7 drawals, deposits, and balance inquiries through

8 machines owned by others.

9 ‘‘(E) Fees charged to noncustomers for

10 withdrawals, deposits, and balance inquiries

11 through institution-owned machines.

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

13 ‘‘(4) OTHER ELECTRONIC TRANSACTIONS.—

14 Data on other electronic transactions shall include,

15 at a minimum, the following:

16 ‘‘(A) Wire transfer fees.

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

18 the Internet or through other electronic means.

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

20 any other fees and charges that the Board of Gov21 ernors of the Federal Reserve System determines to

22 be appropriate to meet the purposes of this section.

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

24 The Board of Governors of the Federal Reserve Sys25 tem may cease the collection of information with re-
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1 gard to any particular fee or charge specified in this

2 subsection if the Board makes a determination that,

3 on the basis of changing practices in the financial

4 services industry, the collection of such information

5 is no longer necessary to accomplish the purposes of

6 this section.

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

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

9 of the Federal Reserve System shall prepare a report

10 of the results of each survey conducted pursuant to

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

12 136(b)(1) of the Consumer Credit Protection Act.

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

14 to the data required to be collected pursuant to sub15 sections (a) and (b), each report prepared pursuant

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

17 discernible trend, in the Nation as a whole, in a rep18 resentative sample of the 50 States (selected with

19 due regard for regional differences), and in each

20 consolidated metropolitan statistical area (as defined

21 by the Director of the Office of Management and

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

23 banking services, including those described in sub24 sections (a) and (b) (including related fees and min25 imum balances), that delineates differences between
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1 institutions on the basis of the type of institution

2 and the size of the institution, between large and

3 small institutions of the same type, and any engage4 ment of the institution in multistate activity.

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

6 of Governors of the Federal Reserve System shall

7 submit an annual report to the Congress not later

8 than June 1, 2004, and not later than June 1 of

9 each subsequent year.

10 ‘‘(4) TRANSITION PROVISION.—Notwithstanding

11 section 4(c)(3) of the Business Checking Freedom

12 Act of 2002, the Board of Governors of the Federal

13 Reserve System shall, on an interim basis, continue

14 to comply with the requirements for the bank fee

15 survey under the amendment made to this section by

16 section 108 of the Riegle-Neal Interstate Banking

17 and Branching Efficiency Act of 1994 for reports

18 submitted to the Congress under this section not

19 later than June 1, 2003, except that the Board shall

20 incorporate within any such report, to the extent

21 possible, any additional information on any credit

22 card fee or charge that is available to the Board

23 even though such information is not required by

24 such amendment.
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1 ‘‘(d) DEFINITIONS.—For purposes of this section, the

2 term ‘‘insured depository institution’’ has the meaning

3 given such term in section 3 of the Federal Deposit Insur4 ance Act, and the term ‘‘insured credit union’’ has the

5 meaning given such term in section 101 of the Federal

6 Credit Union Act.’’.

7 (2) AMENDMENT TO THE TRUTH IN LENDING

8 ACT.—

9 (A) IN GENERAL.—Paragraph (1) of sec10 tion 136(b) of the Truth in Lending Act (15

11 U.S.C. 1646(b)(1)) is amended to read as fol12 lows:

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

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

15 of financial institutions which offer credit card serv16 ices, credit card price and availability information

17 including—

18 ‘‘(A) the information required to be dis19 closed under section 127(c) of this chapter;

20 ‘‘(B) the average total amount of finance

21 charges paid by consumers; and

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

23 fees:

24 ‘‘(i) Application fees.
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1 ‘‘(ii) Annual percentage rates for cash

2 advances and balance transfers.

3 ‘‘(iii) Maximum annual percentage

4 rate that may be charged when an account

5 is in default.

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

7 checks.

8 ‘‘(v) Fees for balance transfers.

9 ‘‘(vi) Fees for foreign currency con10 versions.’’.

11 (B) EFFECTIVE DATE.—The amendment

12 made by subparagraph (A) shall take effect on

13 January 1, 2003.

14 (3) REPEAL OF SUNSET PROVISION.—Section

15 108 of the Riegle-Neal Interstate Banking and

16 Branching Efficiency Act of 1994 is hereby repealed.

17 (4) NONAPPLICABILITY OF OTHER PROVISION

18 OF LAW.—Section 3003(a)(1) of the Federal Re19 ports Elimination and Sunset Act of 1995 (31

20 U.S.C. 1113 note) shall not apply to any report re21 quired to be submitted under section 1002(b) of Fi22 nancial Institutions Reform, Recovery, and Enforce23 ment Act of 1989.
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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 2002

3 THROUGH 2006.—

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 2002 through 2006.

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 2002 through

19 2006, 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 2002

24 through 2006, 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 2002 through 2006, 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. RULE OF CONSTRUCTION.

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

17 transaction—

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.

Passed the House of Representatives April 9, 2002.

Attest:

Clerk.