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Government News

Lobbying Sheet: Interest on Business Checking

May 1, 2002

Ann vom Eigen, Legislative & Regulatory Counsel

ALTA members have voiced concern regarding HR 1009, the Business Checking Freedom Act, and are urging retention of Section 7 of that bill to ensure continued treatment of real estate transaction escrow accounts under the new law.

This bill would repeal the current Regulation Q (Federal Reserve) prohibition on banks paying interest, but would effectively eliminate certain well-established financial benefits and checking services that large depositors now receive from banks in lieu of interest.

ALTA obtained an amendment, Section 7, Rule of Construction, to HR 974, the 2001 Interest on Business Checking legislation, and HR 1009 the Business Checking Freedom Act that ensures the current regulatory treatment under Regulation Q would continue for real estate transaction escrow accounts under the new law.

These financial benefits are now provided in accordance with current guidance under Regulation Q. For example, Regulation Q provides that offering the following services without charge is not the payment of interest:

Armored car services;

Short-term overdraft privileges;

Full endorsement stamps;

Printed checks;

Safe deposit boxes and night depository facilities;

Preparation of reports required of a bank by a municipality;

Loans at preferential interest rates; and

Maintenance of a permanent record of all checks and deposits.

ALTA members hope that the current provision of services by banks, in accordance with Regulation Q and identical legal treatment, would be continued even if the legislation allowing interest to be paid on business checking accounts passes. We believe that a clear Congressional statement to that effect would be invaluable.

The Federal Reserve Congressional staff has indicated "they don?t have a dog in this fight."

To address this issue, Rep. Judy Biggert (R-IL) offered an amendment during the Financial Institutions Subcommittee?s consideration of the Interest on Business Checking legislation. A version of this amendment was adopted in the full Financial Services Committee consideration of H.R. 974, the Small Business Interest Checking Act of 2001, when it passed the House on April 3, 2001. An improved version was also included in HR 1009, the Business Checking Freedom Act when it was considered on the House floor on April 9, 2002. We hope Congress retains the language dealing with the treatment of these accounts as action proceeds on this legislation.

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