Interest on Business Checking
March 1, 2003
Ann vom Eigen, Legislative & Regulatory Counsel
ALTA members have voiced concern regarding HR 859, the Business Checking Freedom Act of 2003, and are urging inclusion of a provision in any bill to ensure a continuation of the current legal treatment of real estate transaction escrow accounts under any new law.
These bills would repeal the current Regulation Q (Federal Reserve) prohibition on banks paying interest, and would effectively eliminate certain well-established financial benefits and checking services that large depositors now receive from banks in lieu of interest.
The House bill contains an amendment, Section 3, Rule of Construction 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."
We hope Congress includes language dealing with the treatment of these accounts as action proceeds on this legislation.