WASHINGTON - The House Financial Services Committee approved legislation Wednesday that would let banks pay interest on business checking accounts as soon as 2003, temporarily expand sweep accounts, and let the Federal Reserve Board pay interest on bank reserves.
The bill would repeal, in two years, a prohibition on interest-bearing commercial checking accounts. Committee Chairman Michael G. Oxley successfully offered an amendment to double the phase-in period to two years.
The committee also approved an amendment from Rep. John J. LaFalce, D-N.Y., that would require the Fed to survey bank and credit union fees annually, including charges on checking accounts, ATM transactions, and credit cards. A legal requirement for a similar Fed survey lapsed last year.
Rep. Oxley rejected two potential amendments as non-germane, including a privacy provision offered by Rep. Jay Inslee, D-Wash., that would have strengthened current law by forcing banks that pay interest on business checking to let customers opt out of information sharing with third parties or affiliates.
The interest-bearing check account bill was combined with a measure sponsored by Rep. Sue Kelly, R-N.Y., that would quadruple the number of times banks could sweep funds from non-interest-bearing commercial checking accounts into interest-bearing ones, to 24 a month. The bill also would authorize the government to pay interest on required and excess reserves that banks and thrifts deposit with the Fed, and it would let the central bank adjust the level of required reserves.
Rep. Maxine Waters, D-Calif., introduced an amendment that would have deleted language authorizing the Fed to pay interest on reserves but withdrew it because she said it lacked sufficient support. Another amendment from Rep. Waters that would have forced banks to explain how the money they earn on interest-bearing business checking would be passed on to consumers was defeated.