IB 

Union Calendar No. 33

108TH CONGRESS 

1ST SESSION H. R. 758

[Report No. 108–53] 

To allow all businesses to make up to 24 transfers each month from interestbearing 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. 

IN THE HOUSE OF REPRESENTATIVES 

FEBRUARY 13, 2003

Mrs. KELLY (for herself, Mrs. MALONEY, Mrs. CAPITO, Mr. SHERMAN, and 

Mr. MOORE) introduced the following bill; which was referred to the Committee on Financial Services 

MARCH 31, 2003

Additional sponsor: Mr. BEREUTER

MARCH 31, 2003 

Reported with an amendment, 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 February 13, 2003] 

A BILL

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 Free5 dom 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 per 

19 month (or such greater number as the Board of Governors 

20 of the Federal Reserve System may determine by rule or 

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

22 in the same institution. An account offered pursuant to this 

23 subsection shall be considered a transaction account for 

24 purposes of section 19 of the Federal Reserve Act unless the 
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1 Board of Governors of the Federal Reserve System deter2 mines otherwise.’’.

3 (b) Effective at the end of the 2-year period beginning 

4 on the date of the enactment of this Act, section 2 of Public 

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

6 (1) in subsection (a)(1), by striking ‘‘but subject 

7 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 de12 posit accounts to any institution that is prohibited by 

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

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

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

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

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

19 (a) REPEAL OF PROHIBITION ON PAYMENT OF INTER20 EST ON DEMAND DEPOSITS.—

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

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

23 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’ Loan 

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

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

5 through ‘‘(ii) permit any’’ and inserting ‘‘savings as6 sociation may not permit any’’. 

7 (3) FEDERAL DEPOSIT INSURANCE ACT.—Section 

8 18(g) of the Federal Deposit Insurance Act (12 U.S.C. 

9 1828(g)) is amended to read as follows: 

10 ‘‘(g) [Repealed]’’. 

11 (b) EFFECTIVE DATE.—The amendments made by sub12 section (a) shall take effect at the end of the 2-year period 

13 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 the 

18 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 be 

23 paid by the Federal reserve bank at least once 

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

2 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 be11 half 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 organized 
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1 under section 25A or having an agreement with 

2 the Board under section 25, or any branch or 

3 agency of a foreign bank (as defined in section 

4 1(b) of the International Banking Act of 1978).’’. 

5 (b) AUTHORIZATION FOR PASS THROUGH RESERVES

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

7 Reserve Act (12 U.S.C. 461(c)(1)(B)) is amended by strik8 ing ‘‘which is not a member bank’’.

9 (c) CONSUMER BANKING COSTS ASSESSMENT.—

10 (1) IN GENERAL.—The Federal Reserve Act (12 

11 U.S.C. 221 et seq.) is amended—

12 (A) by redesignating sections 30 and 31 as 

13 sections 31 and 32, respectively; and 

14 (B) by inserting after section 29 the fol15 lowing new section: 

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

17 ‘‘(a) ANNUAL SURVEY REQUIRED.—The Board of Gov18 ernors of the Federal Reserve System shall obtain annually 

19 a sample, which is representative by type and size of the 

20 institution (including small institutions) and geographic 

21 location, of the following retail banking services and prod22 ucts provided by insured depository institutions and in23 sured credit unions (along with related fees and minimum 

24 balances): 

25 ‘‘(1) Checking and other transaction accounts. 
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1 ‘‘(2) Negotiable order of withdrawal and savings 

2 accounts. 

3 ‘‘(3) Automated teller machine transactions. 

4 ‘‘(4) Other electronic transactions. 

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

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

7 minimum requirements: 

8 ‘‘(1) CHECKING AND OTHER TRANSACTION AC9 COUNTS.—Data on checking and transaction accounts 

10 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) Check processing fees. 

15 ‘‘(D) Check printing fees. 

16 ‘‘(E) Balance inquiry fees. 

17 ‘‘(F) Fees imposed for using a teller or other 

18 institution employee. 

19 ‘‘(G) Stop payment order fees. 

20 ‘‘(H) Nonsufficient fund fees. 

21 ‘‘(I) Overdraft fees. 

22 ‘‘(J) Deposit items returned fees. 

23 ‘‘(K) Availability of no-cost or low-cost ac24 counts for consumers who maintain low bal25 ances. 
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1 ‘‘(2) NEGOTIABLE ORDER OF WITHDRAWAL AC2 COUNTS AND SAVINGS ACCOUNTS.—Data on negotiable 

3 order of withdrawal accounts and savings accounts 

4 shall include, at a minimum, the following: 

5 ‘‘(A) Monthly and annual fees and min6 imum balances to avoid such fees. 

7 ‘‘(B) Minimum opening balances. 

8 ‘‘(C) Rate at which interest is paid to con9 sumers. 

10 ‘‘(D) Check processing fees for negotiable 

11 order of withdrawal accounts. 

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

13 other institution employee. 

14 ‘‘(F) Availability of no-cost or low-cost ac15 counts for consumers who maintain low bal16 ances. 

17 ‘‘(3) AUTOMATED TELLER TRANSACTIONS.—Data 

18 on automated teller machine transactions shall in19 clude, at a minimum, the following: 

20 ‘‘(A) Monthly and annual fees. 

21 ‘‘(B) Card fees. 

22 ‘‘(C) Fees charged to customers for with23 drawals, deposits, and balance inquiries through 

24 institution-owned machines. 
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1 ‘‘(D) Fees charged to customers for with2 drawals, deposits, and balance inquiries through 

3 machines owned by others. 

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

6 institution-owned machines. 

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

8 ‘‘(4) OTHER ELECTRONIC TRANSACTIONS.—Data 

9 on other electronic transactions shall include, at a 

10 minimum, the following: 

11 ‘‘(A) Wire transfer fees. 

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

13 the Internet or through other electronic means. 

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

15 other fees and charges that the Board of Governors of 

16 the Federal Reserve System determines to be appro17 priate to meet the purposes of this section. 

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

19 The Board of Governors of the Federal Reserve Sys20 tem may cease the collection of information with re21 gard to any particular fee or charge specified in this 

22 subsection if the Board makes a determination that, 

23 on the basis of changing practices in the financial 

24 services industry, the collection of such information is 
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1 no longer necessary to accomplish the purposes of this 

2 section. 

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

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

5 the Federal Reserve System shall prepare a report of 

6 the results of each survey conducted pursuant to sub7 sections (a) and (b) of this section and section 

8 136(b)(1) of the Consumer Credit Protection Act. 

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

10 to the data required to be collected pursuant to sub11 sections (a) and (b), each report prepared pursuant to 

12 paragraph (1) shall include a description of any dis13 cernible trend, in the Nation as a whole, in a rep14 resentative sample of the 50 States (selected with due 

15 regard for regional differences), and in each consoli16 dated metropolitan statistical area (as defined by the 

17 Director of the Office of Management and Budget), in 

18 the cost and availability of the retail banking services, 

19 including those described in subsections (a) and (b) 

20 (including related fees and minimum balances), that 

21 delineates differences between institutions on the basis 

22 of the type of institution and the size of the institu23 tion, between large and small institutions of the same 

24 type, and any engagement of the institution in 

25 multistate activity.
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1 ‘‘(3) SUBMISSION TO CONGRESS.—The Board of 

2 Governors of the Federal Reserve System shall submit 

3 an annual report to the Congress not later than June 

4 1, 2005, and not later than June 1 of each subsequent 

5 year. 

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

7 term ‘insured depository institution’ has the meaning given 

8 such term in section 3 of the Federal Deposit Insurance Act, 

9 and the term ‘insured credit union’ has the meaning given 

10 such term in section 101 of the Federal Credit Union Act.’’. 

11 (2) CONFORMING AMENDMENT.—

12 (A) IN GENERAL.—Paragraph (1) of section 

13 136(b) of the Truth in Lending Act (15 U.S.C. 

14 1646(b)(1)) is amended to read as follows: 

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

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

17 of financial institutions which offer credit card serv18 ices, credit card price and availability information 

19 including—

20 ‘‘(A) the information required to be dis21 closed under section 127(c) of this chapter; 

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

23 charges paid by consumers; and 

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

25 fees: 
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1 ‘‘(i) Application fees. 

2 ‘‘(ii) Annual percentage rates for cash 

3 advances and balance transfers. 

4 ‘‘(iii) Maximum annual percentage 

5 rate that may be charged when an account 

6 is in default. 

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

8 checks. 

9 ‘‘(v) Fees for balance transfers. 

10 ‘‘(vi) Fees for foreign currency conver11 sions.’’. 

12 (B) EFFECTIVE DATE.—The amendment 

13 made by subparagraph (A) shall take effect on 

14 January 1, 2004. 

15 (3) REPEAL OF OTHER REPORT PROVISIONS.—

16 Section 1002 of Financial Institutions Reform, Re17 covery, and Enforcement Act of 1989 and section 108 

18 of the Riegle-Neal Interstate Banking and Branching 

19 Efficiency Act of 1994 are hereby repealed. 

20 (d) TECHNICAL AND CONFORMING AMENDMENTS.—

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

22 amended—

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

24 striking subparagraph (C) and redesignating sub-
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1 paragraphs (D) and (E) as subparagraphs (C) and 

2 (D), respectively; and 

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

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

5 inserting ‘‘subsection (b)’’. 

6 SEC. 5. INCREASED FEDERAL RESERVE BOARD FLEXIBILITY 

7 IN SETTING RESERVE REQUIREMENTS. 

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

9 U.S.C. 461(b)(2)(A)) is amended—

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

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

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

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

14 8 per centum,’’ and inserting ‘‘(and which may be 

15 zero),’’. 

16 SEC. 6. TRANSFER OF FEDERAL RESERVE SURPLUSES. 

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

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

19 the following new paragraph: 

20 ‘‘(4) ADDITIONAL TRANSFERS TO COVER INTER21 EST PAYMENTS FOR FISCAL YEARS 2003 THROUGH

22 2007.—

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

24 amounts required to be transferred from the sur25 plus funds of the Federal reserve banks pursuant 
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1 to subsection (a)(3), the Federal reserve banks 

2 shall transfer from such surplus funds to the 

3 Board of Governors of the Federal Reserve Sys4 tem for transfer to the Secretary of the Treasury 

5 for deposit in the general fund of the Treasury, 

6 such sums as are necessary to equal the net cost 

7 of section 19(b)(12) in each of the fiscal years 

8 2003 through 2007. 

9 ‘‘(B) ALLOCATION BY FEDERAL RESERVE

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

11 by the Federal reserve banks under subparagraph 

12 (A) for fiscal years 2003 through 2007, the 

13 Board of Governors of the Federal Reserve Sys14 tem shall determine the amount each such bank 

15 shall pay in such fiscal year. 

16 ‘‘(C) REPLENISHMENT OF SURPLUS FUND

17 PROHIBITED.—During fiscal years 2003 through 

18 2007, no Federal reserve bank may replenish 

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

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

21 (b) TECHNICAL AND CONFORMING AMENDMENT.—Sec22 tion 7(a) of the Federal Reserve Act (12 U.S.C. 289(a)) is 

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

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

25 years 2003 through 2007, any amount in the surplus 
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1 fund of any Federal reserve bank in excess of the 

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

3 surplus of the member banks of such bank shall be 

4 transferred to the Secretary of the Treasury for de5 posit in the general fund of the Treasury.’’.

6 SEC. 7. RULE OF CONSTRUCTION. 

7 In the case of an escrow account maintained at a de8 pository institution in connection with a real estate trans9 action—

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

11 of expenses incidental to providing a normal banking 

12 service with respect to such escrow account; 

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

14 from charging a fee for providing any such banking 

15 function; and 

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

17 or the beneficiary of such escrow account as a result 

18 of an action of the depository institution described in 

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

20 action, 

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

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

23 93–100, the Federal Reserve Act, the Home Owners’ Loan 

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

25 payment of interest on accounts or deposits at depository 
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1 institutions, provided, however, that nothing herein shall be 

2 construed so as to require a depository institution that 

3 maintains an escrow account in connection with a real es4 tate transaction to pay interest on such escrow account or 

5 to prohibit such institution from paying interest on such 

6 escrow account. Nor shall anything herein be construed to 

7 preempt the provisions of law of any State dealing with 

8 the payment of interest on escrow accounts maintained in 

9 connection with real estate transactions.

Union Calendar No. 33

108TH CONGRESS 

1ST SESSION H. R. 758

[Report No. 108–53] 

A BILL

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. 

MARCH 31, 2003

Reported with an amendment, committed to the Committee of the Whole House on the State of the Union, 

and ordered to be printed