[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1224 Engrossed in House (EH)]


  1st Session

                               H. R. 1224

_______________________________________________________________________

                                 AN ACT

    To repeal the prohibition on the payment of interest on demand 
                   deposits, and for other purposes.
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
109th CONGRESS
  1st Session
                                H. R. 1224

_______________________________________________________________________

                                 AN ACT


 
    To repeal the prohibition on the payment of interest on demand 
                   deposits, and for other purposes.

    Be it enacted by the Senate and House of Representatives 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 
2005''.

SEC. 2. INTEREST-BEARING TRANSACTION ACCOUNTS AUTHORIZED FOR ALL 
              BUSINESSES.

    (a) Daily Transfers Allowed Into Demand Deposit Accounts.--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;
            (2) by inserting after subsection (a) the following:
    ``(b) Transfers.--Notwithstanding any other provision of law, any 
depository institution, other than a nonqualified industrial loan 
company, 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 described in subsection (a)(2) to make up to 24 
transfers per month (or such greater number as the Board of Governors 
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 pursuant 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.''; and
            (3) by adding at the end of subsection (a) the following 
        new paragraph:
            ``(3) Nonqualified industrial loan companies.--
                    ``(A) Definition.--For purposes of this section, 
                the term `nonqualified industrial loan company' means 
                any industrial loan company, industrial bank, or other 
                institution described in section 2(c)(2)(H) of the Bank 
                Holding Company Act of 1956 that is determined by an 
                appropriate State bank supervisor (as defined in 
                section 3 of the Federal Deposit Insurance Act) to be 
                controlled, directly or indirectly, by a commercial 
                firm.
                    ``(B) Commercial firm defined.--For purposes of 
                this paragraph, the term `commercial firm' means any 
                entity at least 15 percent of the annual gross revenues 
                of which on a consolidated basis, including all 
                affiliates of the entity, were derived from engaging, 
                on an on-going basis, in activities that are not 
                financial in nature or incidental to a financial 
                activity during at least 3 of the prior 4 calendar 
                quarters.
                    ``(C) Grandfathered institutions.--The term 
                `nonqualified industrial loan company' does not include 
                any industrial loan company, industrial bank, or other 
                institution described in section 2(c)(2)(H) of the Bank 
                Holding Company Act of 1956--
                            ``(i) which became an insured depository 
                        institution before October 1, 2003, or pursuant 
                        to an application for deposit insurance which 
                        was approved by the Federal Deposit Insurance 
                        Corporation before such date; and
                            ``(ii) with respect to which there is no 
                        change in control, directly or indirectly, of 
                        the company, bank, or institution after 
                        September 30, 2003, that requires an 
                        application under section 7(j) or 18(c) of the 
                        Federal Deposit Insurance Act, section 3 of the 
                        Bank Holding Company Act of 1956, or section 10 
                        of the Home Owners' Loan Act.''.
    (b) Interest on Business Now Accounts.--
            (1) In general.--Section 2(a) of Public Law 93-100 (12 
        U.S.C. 1832(a)) is amended--
                    (A) by striking paragraph (2) and inserting the 
                following new paragraph:
            ``(2) Payment of interest on certain now accounts.--An 
        industrial loan company, industrial bank, or other institution 
        described in section 2(c)(2)(H) of the Bank Holding Company Act 
        of 1956 may not pay interest on any deposit or account of a 
        corporation, business partnership, or other business entity 
        from which funds may be withdrawn by negotiable instrument for 
        payment to third parties, unless the appropriate State bank 
        supervisor (as defined in section 3 of the Federal Deposit 
        Insurance Act) of such company, bank, or institution determines 
        that such company, bank, or institution is not a nonqualified 
        industrial loan company.''; and
                    (B) by adding at the end the following new 
                paragraph:
            ``(4) Rule of construction relating to demand deposits.--No 
        provision of this section may be construed as conferring the 
        authority to offer demand deposit accounts to any institution 
        that is prohibited by law from offering demand deposit 
        accounts.''.
            (2) Technical and conforming amendment.--Section 2(b) of 
        Public Law 93-100 (12 U.S.C. 1832(b)) (as added by subsection 
        (a)(2) of this section) is amended by striking ``and is not a 
        deposit or account described in subsection (a)(2)''.
            (3) Effective date.--The amendments made by this subsection 
        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 AUTHORIZED.

    (a) Repeal of Prohibition on Payment of Interest on Demand 
Deposits.--
            (1) Federal reserve act.--Section 19(i) of the Federal 
        Reserve Act (12 U.S.C. 371a) is amended to read as follows:
    ``(i) [Repealed]''.
            (2) Home owners' loan act.--The first sentence 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.--Section 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. 4. PAYMENT OF INTEREST ON RESERVES AT FEDERAL RESERVE BANKS.

    (a) In General.--Section 19(b) of the Federal Reserve Act (12 
U.S.C. 461(b)) is amended by adding at the end the following new 
paragraph:
            ``(12) Earnings on reserves.--
                    ``(A) In general.--Balances maintained at a Federal 
                reserve bank by or on behalf of a depository 
                institution may receive earnings to be paid by the 
                Federal reserve bank at least once each calendar 
                quarter at a rate or rates not to exceed the general 
                level of short-term interest rates.
                    ``(B) Regulations relating to payments and 
                distribution.--The Board may prescribe regulations 
                concerning--
                            ``(i) the payment of earnings in accordance 
                        with this paragraph;
                            ``(ii) the distribution of such earnings to 
                        the depository institutions which maintain 
                        balances at such banks or on whose behalf such 
                        balances are maintained; and
                            ``(iii) the responsibilities of depository 
                        institutions, Federal home loan banks, and the 
                        National Credit Union Administration Central 
                        Liquidity Facility with respect to the 
                        crediting and distribution of earnings 
                        attributable to balances maintained, in 
                        accordance with subsection (c)(1)(A), in a 
                        Federal reserve bank by any such entity on 
                        behalf of depository institutions.
                    ``(C) Depository institutions defined.--For 
                purposes of this paragraph, the term `depository 
                institution', in addition to the institutions described 
                in paragraph (1)(A), includes any trust company, 
                corporation organized under section 25A or having an 
                agreement with the Board under section 25, or any 
                branch or agency of a foreign bank (as defined in 
                section 1(b) of the International Banking Act of 
                1978).''.
    (b) Authorization for Pass Through Reserves for Member Banks.--
Section 19(c)(1)(B) of the Federal Reserve Act (12 U.S.C. 461(c)(1)(B)) 
is amended by striking ``which is not a member bank''.
    (c) Consumer Banking Costs Assessment.--
            (1) In general.--The Federal Reserve Act (12 U.S.C. 221 et 
        seq.) is amended--
                    (A) by redesignating sections 30 and 31 as sections 
                31 and 32, respectively; and
                    (B) by inserting after section 29 the following new 
                section:

``SEC. 30. SURVEY OF BANK FEES AND SERVICES.

    ``(a) Annual Survey Required.--The Board of Governors of the 
Federal Reserve System shall obtain annually a sample, which is 
representative by type and size of the institution (including small 
institutions) and geographic 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 savings 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 accounts.--Data on 
        checking and transaction accounts shall include, at a minimum, 
        the following:
                    ``(A) Monthly and annual fees and minimum 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) Fees imposed in connection with bounced-check 
                protection and overdraft protection programs.
                    ``(K) Deposit items returned fees.
                    ``(L) Availability of no-cost or low-cost accounts 
                for consumers who maintain low balances.
            ``(2) Negotiable order of withdrawal accounts and savings 
        accounts.--Data on negotiable order of withdrawal accounts and 
        savings accounts shall include, at a minimum, the following:
                    ``(A) Monthly and annual fees and minimum balances 
                to avoid such fees.
                    ``(B) Minimum opening balances.
                    ``(C) Rate at which interest is paid to consumers.
                    ``(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 accounts 
                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 withdrawals, 
                deposits, and balance inquiries through institution-
                owned machines.
                    ``(D) Fees charged to customers for withdrawals, 
                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 Governors 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 System may cease the 
        collection of information with regard 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 subsections (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 representative 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 subsections (a) and (b) (including related fees 
        and minimum 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 engagement 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, 2007, and not later than June 1 
        of each subsequent year.
    ``(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 Insurance Act, and the term `insured credit union' 
has the meaning given such term in section 101 of the Federal Credit 
Union Act.''.
            (2) Conforming amendment.--
                    (A) In general.--Paragraph (1) of section 136(b) of 
                the Truth in Lending Act (15 U.S.C. 1646(b)(1)) is 
                amended to read as follows:
            ``(1) Collection required.--The Board shall collect, on a 
        semiannual basis, from a broad sample of financial institutions 
        which offer credit card services, credit card price and 
        availability information including--
                    ``(A) the information required to be disclosed 
                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 
                        conversions.''.
                    (B) Effective date.--The amendment made by 
                subparagraph (A) shall take effect on January 1, 2006.
            (3) Repeal of other report provisions.--Section 1002 of 
        Financial Institutions Reform, Recovery, and Enforcement Act of 
        1989 and section 108 of the Riegle-Neal Interstate Banking and 
        Branching Efficiency Act of 1994 are hereby repealed.
    (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 subparagraphs (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 FLEXIBILITY IN SETTING RESERVE 
              REQUIREMENTS.

    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 Reserve Act (12 U.S.C. 
289(b)) is amended by adding at the end the following new paragraph:
            ``(4) Additional transfers to cover interest payments for 
        fiscal years 2005 through 2009.--
                    ``(A) In general.--In addition to the amounts 
                required to be transferred from the surplus funds of 
                the Federal reserve banks pursuant 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 
                2005 through 2009.
                    ``(B) Allocation by federal reserve board.--Of the 
                total amount required to be paid by the Federal reserve 
                banks under subparagraph (A) for fiscal years 2005 
                through 2009, 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 2005 through 2009, no Federal 
                reserve bank may replenish such bank's surplus fund by 
                the amount of any transfer by such bank under 
                subparagraph (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 2005 
        through 2009, any amount in the surplus 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. RULES OF CONSTRUCTION.

    In the case of an escrow account maintained at a depository 
institution for the purpose of completing the settlement of 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 institution, 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, including any benefits 
        which have been so determined by the appropriate Federal 
        regulator,
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. No provision of this Act shall be construed so 
as to require a depository institution that maintains an escrow account 
in connection with a real estate transaction to pay interest on such 
escrow account or to prohibit such institution from paying interest on 
such escrow account. No provision of this Act shall be construed as 
preempting the provisions of law of any State dealing with the payment 
of interest on escrow accounts maintained in connection with real 
estate transactions.

            Passed the House of Representatives May 24, 2005.

            Attest:

                                                                 Clerk.