Short title

This Act may be cited as the

Business Checking Freedom Act of 2005

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 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.

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.

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:

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, 2006, 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).

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),.

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.

Rules of construction

In the case of an escrow account maintained at a depository 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 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.