The Business Checking Freedom Act will repeal an unfair, outdated law that is standing between our local small businesses and their ability to earn interest on their own money
Representative Sue W. Kelly (R-NY)

Introduced on March 10, by Committee Vice Chair and Oversight and Investigations Subcommittee Chairwoman Sue W. Kelly (NY), the legislation would remove the prohibition on banks from paying interest on business checking accounts.

Rep. Kelly said, “The Business Checking Freedom Act will repeal an unfair, outdated law that is standing between our local small businesses and their ability to earn interest on their own money. By allowing banks to pay interest on business checking accounts, we create a new and broader market option that helps our main street banks and small businesses at the same time. This legislation will allow banks to better meet the needs of their small business customers.”

Small-business owners are disadvantaged by the current ban on business checking because they tend to bank at smaller institutions. If they choose to bank at larger institutions, their smaller deposits typically mean they won’t qualify for complicated mechanisms such as sweep accounts. Larger banks offer these products, which circumvent the ban on interest-bearing checking accounts, to larger business depositors. Smaller institutions are often unable to offer such products.

Rep. Paul E. Gillmor (OH) said, “The Gillmor-Frank compromise included in H.R. 1224 strikes a good balance and maintains the historic separation between banking and commerce. This agreement ensures the ability of ILCs that are financial in nature to offer interest on business NOW accounts while prohibiting those owned by commercial entities from engaging in interstate bank-like activities.”

Similar legislation cosponsored by Rep. Kelly was approved by the House in the last two Congresses.