108TH CONGRESS

1ST SESSION H. R. 758

AN ACT

To allow all businesses to make up to 24 transfers

each month from interest-bearing transaction accounts to other transaction accounts, to requirethe payment of interest on reserves held for depository institutions at Federal reserve banks,and for other purposes.

108TH CONGRESS

1ST SESSION H. R. 758

AN ACT

To allow all businesses to make up to 24 transfers each

month from interest-bearing transaction accounts to

other transaction accounts, to require the payment of

interest on reserves held for depository institutions at

Federal reserve banks, 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 ‘‘Business Checking

5 Freedom Act of 2003’’.

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

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

9 is amended—

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

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

12 (2) by inserting after subsection (a) the fol13 lowing:

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

15 depository institution may permit the owner of any deposit

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

17 or dividends are paid and is not a deposit or account de18 scribed in subsection (a)(2) to make up to 24 transfers

19 per month (or such greater number as the Board of Gov20 ernors of the Federal Reserve System may determine by

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

22 owner in the same institution. An account offered pursu23 ant to this subsection shall be considered a transaction

24 account for purposes of section 19 of the Federal Reserve
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1 Act unless the Board of Governors of the Federal Reserve

2 System determines otherwise.’’.

3 (b) Effective at the end of the 2-year period begin4 ning on the date of the enactment of this Act, section 2

5 of Public Law 93–100 (12 U.S.C. 1832) is amended—

6 (1) in subsection (a)(1), by striking ‘‘but sub7 ject to paragraph (2)’’;

8 (2) by striking paragraph (2) of subsection (a)

9 and inserting the following new paragraph:

10 ‘‘(2) No provision of this section may be con11 strued as conferring the authority to offer demand

12 deposit accounts to any institution that is prohibited

13 by law from offering demand deposit accounts.’’; and

14 (3) in subsection (b) (as added by subsection

15 (a) of this section) by striking ‘‘and is not a deposit

16 or account described in subsection (a)(2)’’.

17 SEC. 3. INTEREST-BEARING TRANSACTION ACCOUNTS AU18 THORIZED.

19 (a) REPEAL OF PROHIBITION ON PAYMENT OF IN20 TEREST ON DEMAND DEPOSITS.—

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

22 the Federal Reserve Act (12 U.S.C. 371a) is amend23 ed to read as follows:

24 ‘‘(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

3 balances.

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

19 balances.

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, 2005, 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, 2004.

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 2003

3 THROUGH 2007.—

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 2003 through 2007.

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 2003 through

19 2007, 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 2003

24 through 2007, 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 2003 through 2007, 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, provided, however, that nothing herein shall

10 be construed so as to require a depository institution that

11 maintains an escrow account in connection with a real es12 tate transaction to pay interest on such escrow account

13 or to prohibit such institution from paying interest on

14 such escrow account. Nor shall anything herein be con15 strued to preempt the provisions of law of any State deal16 ing with the payment of interest on escrow accounts main17 tained in connection with real estate transactions.

Passed the House of Representatives April 1, 2003.

Attest:

Clerk.