WASHINGTON - The Senate Banking Committee is expected to breathe new life Thursday into a measure that would let banks pay interest on business checking accounts.
The provision, which easily passed the committee in February but has been stalled by unrelated issues, could get a second chance when Sen. Richard C. Shelby offers it as an amendment to a securities bill scheduled for consideration tomorrow, the Alabama Republican's spokeswoman said.
Industry lobbyists expect Sen. Shelby's amendment to mirror his business checking bill, which would repeal a Depression-era ban on paying interest to commercial checking customers as of Jan. 1.
In the interim, banks would get broader powers to "sweep" funds from business checking accounts to interest-bearing accounts.
"My expectation is that he will offer the same provisions, because those provisions have already been negotiated between Republicans and Democrats," said Robert R. Davis, the head lobbyist at America's Community Bankers, one of the strongest supporters of allowing interest on business checking accounts.
"Having the same provision residing in two separate bills passed out of the Senate Banking Committee increases the likelihood of eventual passage," he said.
The House approved a similar measure in April, though its version would not allow banks to pay interest on business checking accounts until three years after enactment. Possibly providing a middle ground, Senate leaders have agreed to push back the effective date of their legislation until Sept. 1, 2002, lobbyists said.
Lenders could still take advantage of the law by using its expanded power to sweep funds into interest-bearing accounts. Both the House and Senate versions would quadruple to 24 the number of withdrawals that could be made from business checking accounts each month.
Industry opinion is split. Small banks fear the move would drive up the cost of deposits. Even some large banks oppose the legislation because they have already invested so much in sweep programs. But proponents argue that lifting the ban on paying interest would help banks attract more business customers. "It's a funny issue. It doesn't break down by bank size or geography," said Edward L. Yingling, chief lobbyist for the American Bankers Association.
Industry representatives had been concerned that Thursday's vote would be canceled because privacy advocates, such as Sen. Shelby, were expected to offer amendments that Committee Chairman Phil Gramm opposes. This has already delayed a vote on the securities bill once.
However, sources in the lobbying community said Tuesday that Sen. Gramm is likely to offer his own medical privacy amendment to the securities bill, barring lenders from using consumers' private medical information to make credit decisions. He reportedly has lined up support on the committee to defeat all other privacy-related amendments.