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.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Business Checking
Freedom Act of 2002’’.
SEC. 2. INTEREST-BEARING TRANSACTION ACCOUNTS AU-
THORIZED.
(a) REPEAL OF PROHIBITION ON PAYMENT OF IN-
TEREST ON DEMAND DEPOSITS.—
(1) FEDERAL RESERVE ACT.—Section 19(i) of
the Federal Reserve Act (12 U.S.C. 371a) is amend-
ed to read as follows:
‘‘(i) [Repealed]’’.
(2) HOME OWNERS’ LOAN ACT.—The first sen-
tence of section 5(b)(1)(B) of the Home Owners’
Loan Act (12 U.S.C. 1464(b)(1)(B)) is amended by
striking ‘‘savings association may not—’’ and all
that follows through ‘‘(ii) permit any’’ and inserting
‘‘savings association may not permit any’’.
(3) FEDERAL DEPOSIT INSURANCE ACT.—Sec-
tion 18(g) of the Federal Deposit Insurance Act (12
U.S.C. 1828(g)) is amended to read as follows:
‘‘(g) [Repealed]’’.
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) shall take effect at the end of the 2-year
period beginning on the date of the enactment of this Act.
SEC. 3. INTEREST-BEARING TRANSACTION ACCOUNTS AU-
THORIZED FOR ALL BUSINESSES.
Section 2 of Public Law 93–100 (12 U.S.C. 1832)
is amended—
(1) by redesignating subsections (b) and (c) as
subsections (c) and (d), respectively; and
(2) by inserting after subsection (a) the fol-
lowing:
‘‘(b) Notwithstanding any other provision of law, any
depository institution may permit the owner of any deposit
or account which is a deposit or account on which interest
or dividends are paid and is not a deposit or account de-
scribed in subsection (a)(2) to make up to 24 transfers
per month (or such greater number as the Board of Gov-
ernors of the Federal Reserve System may determine by
rule or order), for any purpose, to another account of the
owner in the same institution. An account offered pursu-
ant to this subsection shall be considered a transaction
account for purposes of section 19 of the Federal Reserve
Act unless the Board of Governors of the Federal Reserve
System determines otherwise.’’.
SEC. 4. PAYMENT OF INTEREST ON RESERVES AT FEDERAL
RESERVE BANKS.
(a) IN GENERAL.—Section 19(b) of the Federal Re-
serve Act (12 U.S.C. 461(b)) is amended by adding at
the end the following new paragraph:
of the institution (including small institutions) and geo-
graphic location, of the following retail banking services
and products provided by insured depository institutions
and insured credit unions (along with related fees and
minimum balances):
‘‘(1) Checking and other transaction accounts.
‘‘(2) Negotiable order of withdrawal and sav-
ings accounts.
‘‘(3) Automated teller machine transactions.
‘‘(4) Other electronic transactions.
‘‘(b) MINIMUM SURVEY REQUIREMENT.—The annual
survey described in subsection (a) shall meet the following
minimum requirements:
‘‘(1) CHECKING AND OTHER TRANSACTION AC-
COUNTS.—Data on checking and transaction ac-
counts shall include, at a minimum, the following:
‘‘(A) Monthly and annual fees and min-
imum balances to avoid such fees.
‘‘(B) Minimum opening balances.
‘‘(C) Check processing fees.
‘‘(D) Check printing fees.
‘‘(E) Balance inquiry fees.
‘‘(F) Fees imposed for using a teller or
other institution employee.
‘‘(G) Stop payment order fees.
‘‘(H) Nonsufficient fund fees.
‘‘(I) Overdraft fees.
‘‘(J) Deposit items returned fees.
‘‘(K) Availability of no-cost or low-cost ac-
counts for consumers who maintain low
balances.
‘‘(2) NEGOTIABLE ORDER OF WITHDRAWAL AC-
COUNTS AND SAVINGS ACCOUNTS.—Data on nego-
tiable order of withdrawal accounts and savings ac-
counts shall include, at a minimum, the following:
‘‘(A) Monthly and annual fees and min-
imum balances to avoid such fees.
‘‘(B) Minimum opening balances.
‘‘(C) Rate at which interest is paid to con-
sumers.
‘‘(D) Check processing fees for negotiable
order of withdrawal accounts.
‘‘(E) Fees imposed for using a teller or
other institution employee.
‘‘(F) Availability of no-cost or low-cost ac-
counts for consumers who maintain low
balances.
‘‘(3) AUTOMATED
TELLER
TRANSACTIONS.—
Data on automated teller machine transactions shall
include, at a minimum, the following:
‘‘(A) Monthly and annual fees.
‘‘(B) Card fees.
‘‘(C) Fees charged to customers for with-
drawals, deposits, and balance inquiries through
institution-owned machines.
‘‘(D) Fees charged to customers for with-
drawals, deposits, and balance inquiries through
machines owned by others.
‘‘(E) Fees charged to noncustomers for
withdrawals, deposits, and balance inquiries
through institution-owned machines.
‘‘(F) Point-of-sale transaction fees.
‘‘(4) OTHER
ELECTRONIC
TRANSACTIONS.—
Data on other electronic transactions shall include,
at a minimum, the following:
‘‘(A) Wire transfer fees.
‘‘(B) Fees related to payments made over
the Internet or through other electronic means.
‘‘(5) OTHER
FEES
AND
CHARGES.—Data on
any other fees and charges that the Board of Gov-
ernors of the Federal Reserve System determines to
be appropriate to meet the purposes of this section.
‘‘(6) FEDERAL RESERVE BOARD AUTHORITY.—
The Board of Governors of the Federal Reserve Sys-
tem may cease the collection of information with re-
gard to any particular fee or charge specified in this
subsection if the Board makes a determination that,
on the basis of changing practices in the financial
services industry, the collection of such information
is no longer necessary to accomplish the purposes of
this section.
‘‘(c) ANNUAL REPORT TO CONGRESS REQUIRED.—
‘‘(1) PREPARATION.—The Board of Governors
of the Federal Reserve System shall prepare a report
of the results of each survey conducted pursuant to
subsections (a) and (b) of this section and section
136(b)(1) of the Consumer Credit Protection Act.
‘‘(2) CONTENTS OF THE REPORT.—In addition
to the data required to be collected pursuant to sub-
sections (a) and (b), each report prepared pursuant
to paragraph (1) shall include a description of any
discernible trend, in the Nation as a whole, in a rep-
resentative sample of the 50 States (selected with
due regard for regional differences), and in each
consolidated metropolitan statistical area (as defined
by the Director of the Office of Management and
Budget), in the cost and availability of the retail
banking services, including those described in sub-
sections (a) and (b) (including related fees and min-
imum balances), that delineates differences between
institutions on the basis of the type of institution
and the size of the institution, between large and
small institutions of the same type, and any engage-
ment of the institution in multistate activity.
‘‘(3) SUBMISSION TO CONGRESS.—The Board
of Governors of the Federal Reserve System shall
submit an annual report to the Congress not later
than June 1, 2004, and not later than June 1 of
each subsequent year.
‘‘(4) TRANSITION PROVISION.—Notwithstanding
section 4(c)(3) of the Business Checking Freedom
Act of 2002, the Board of Governors of the Federal
Reserve System shall, on an interim basis, continue
to comply with the requirements for the bank fee
survey under the amendment made to this section by
section 108 of the Riegle-Neal Interstate Banking
and Branching Efficiency Act of 1994 for reports
submitted to the Congress under this section not
later than June 1, 2003, except that the Board shall
incorporate within any such report, to the extent
possible, any additional information on any credit
card fee or charge that is available to the Board
even though such information is not required by
such amendment.
‘‘(d) DEFINITIONS.—For purposes of this section, the
term ‘‘insured depository institution’’ has the meaning
given such term in section 3 of the Federal Deposit Insur-
ance Act, and the term ‘‘insured credit union’’ has the
meaning given such term in section 101 of the Federal
Credit Union Act.’’.
(2) AMENDMENT TO THE TRUTH IN LENDING
ACT.—
(A) IN GENERAL.—Paragraph (1) of sec-
tion 136(b) of the Truth in Lending Act (15
U.S.C. 1646(b)(1)) is amended to read as fol-
lows:
‘‘(1) COLLECTION REQUIRED.—The Board shall
collect, on a semiannual basis, from a broad sample
of financial institutions which offer credit card serv-
ices, credit card price and availability information
including—
‘‘(A) the information required to be dis-
closed under section 127(c) of this chapter;
‘‘(B) the average total amount of finance
charges paid by consumers; and
‘‘(C) the following credit card rates and
fees:
‘‘(i) Application fees.
‘‘(ii) Annual percentage rates for cash
advances and balance transfers.
‘‘(iii) Maximum annual percentage
rate that may be charged when an account
is in default.
‘‘(iv) Fees for the use of convenience
checks.
‘‘(v) Fees for balance transfers.
‘‘(vi) Fees for foreign currency con-
versions.’’.
(B) EFFECTIVE
DATE.—The amendment
made by subparagraph (A) shall take effect on
January 1, 2003.
(3) REPEAL OF SUNSET PROVISION.—Section
108 of the Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994 is hereby repealed.
(4) NONAPPLICABILITY OF OTHER PROVISION
OF
LAW.—Section 3003(a)(1) of the Federal Re-
ports Elimination and Sunset Act of 1995 (31
U.S.C. 1113 note) shall not apply to any report re-
quired to be submitted under section 1002(b) of Fi-
nancial Institutions Reform, Recovery, and Enforce-
ment Act of 1989.
(d) TECHNICAL AND CONFORMING AMENDMENTS.—
Section 19 of the Federal Reserve Act (12 U.S.C. 461)
is amended—
(1) in subsection (b)(4) (12 U.S.C. 461(b)(4)),
by striking subparagraph (C) and redesignating sub-
paragraphs (D) and (E) as subparagraphs (C) and
(D), respectively; and
(2) 
in 
subsection 
(c)(1)(A) 
(12 
U.S.C.
461(c)(1)(A)), by striking ‘‘subsection (b)(4)(C)’’
and inserting ‘‘subsection (b)’’.
SEC. 5. INCREASED FEDERAL RESERVE BOARD FLEXI-
BILITY 
IN 
SETTING 
RESERVE 
REQUIRE-
MENTS.
Section 19(b)(2)(A) of the Federal Reserve Act (12
U.S.C. 461(b)(2)(A)) is amended—
(1) in clause (i), by striking ‘‘the ratio of 3 per
centum’’ and inserting ‘‘a ratio not greater than 3
percent (and which may be zero)’’; and
(2) in clause (ii), by striking ‘‘and not less than
8 per centum,’’ and inserting ‘‘(and which may be
zero),’’.
SEC. 6. TRANSFER OF FEDERAL RESERVE SURPLUSES.
(a) IN GENERAL.—Section 7(b) of the Federal Re-
serve Act (12 U.S.C. 289(b)) is amended by adding at
the end the following new paragraph:
‘‘(4) ADDITIONAL
TRANSFERS
TO
COVER
IN-
TEREST
PAYMENTS
FOR
FISCAL
YEARS
2002
THROUGH 2006.—
‘‘(A) IN
GENERAL.—In addition to the
amounts required to be transferred from the
surplus funds of the Federal reserve banks pur-
suant to subsection (a)(3), the Federal reserve
banks shall transfer from such surplus funds to
the Board of Governors of the Federal Reserve
System for transfer to the Secretary of the
Treasury for deposit in the general fund of the
Treasury, such sums as are necessary to equal
the net cost of section 19(b)(12) in each of the
fiscal years 2002 through 2006.
‘‘(B) ALLOCATION BY FEDERAL RESERVE
BOARD.—Of the total amount required to be
paid by the Federal reserve banks under sub-
paragraph (A) for fiscal years 2002 through
2006, the Board of Governors of the Federal
Reserve System shall determine the amount
each such bank shall pay in such fiscal year.
‘‘(C) REPLENISHMENT OF SURPLUS FUND
PROHIBITED.—During 
fiscal 
years 
2002
through 2006, no Federal reserve bank may re-
plenish such bank’s surplus fund by the amount
of any transfer by such bank under subpara-
graph (A).’’.
(b) TECHNICAL AND CONFORMING AMENDMENT.—
Section 7(a) of the Federal Reserve Act (12 U.S.C.
289(a)) is amended by adding at the end the following
new paragraph:
‘‘(3) PAYMENT
TO
TREASURY.—During fiscal
years 2002 through 2006, any amount in the sur-
plus fund of any Federal reserve bank in excess of
the amount equal to 3 percent of the paid-in capital
and surplus of the member banks of such bank shall
be transferred to the Secretary of the Treasury for
deposit in the general fund of the Treasury.’’.
SEC. 7. RULE OF CONSTRUCTION.
In the case of an escrow account maintained at a de-
pository institution in connection with a real estate
transaction—
(1) the absorption, by the depository institution,
of expenses incidental to providing a normal banking
service with respect to such escrow account;
(2) the forbearance, by the depository institu-
tion, from charging a fee for providing any such
banking function; and
(3) any benefit which may accrue to the holder
or the beneficiary of such escrow account as a result
of an action of the depository institution described
in subparagraph (1) or (2) or similar in nature to
such action,
shall not be treated as the payment or receipt of interest
for purposes of this Act and any provision of Public Law
93-100, the Federal Reserve Act, the Home Owners’ Loan
Act, or the Federal Deposit Insurance Act relating to the
payment of interest on accounts or deposits at depository
institutions.
Passed the House of Representatives April 9, 2002.
Attest:
Clerk.