NFIB

The House Financial Services Committee passed the Business Checking Freedom Act of 2005 (H.R. 1224) Wednesday, bringing small businesses one step closer to earning interest on their checking accounts.

The bill, introduced by Rep. Sue Kelly (19th Dist.-N.Y.) would bring small-business checking into the 21st century.

“Most Americans with checking accounts would be shocked to learn that if they started their own business, any checking account they establish for that business would be prohibited from earning interest,” Kelly said. “Quite simply, this legislation is about supporting our small businesses and strengthening our banking system.”

Since 1933, there has been a statute that prohibits banks from paying interest on business checking accounts. This outdated law forces small-business owners to choose between a non-interest bearing account and a more costly sweep account, which requires a significantly higher minimum balance than ordinary checking accounts, as well as valuable employee time to manage the account.

Eighty-six percent of NFIB members say they’re tired of this cumbersome regulation, and that it’s time to level the playing field when it comes to business checking.

“This legislative fossil invokes all of the images of the Great Depression — decreasing business activity, falling prices and unemployment. But that is a far cry from the way folks characterize the very people affected by this legislation — today’s small-business owners,” said NFIB Executive Vice President of Public Policy and Political Dan Danner. “It is time for the small businesses that are growing and shaping our economy to have the freedom to operate in a banking environment that rewards their strength, rather than stifles it. This archaic law is absurd and it’s time to send it out to pasture with the rest of the relics from the Great Depression.”

While small-business checking can’t come quick enough to small-business owners, there is still a long battle ahead.

In the 108th Congress, NFIB supported H.R. 1375 and S. 1967, which included language that would allow banks to offer interest on business checking accounts. After the tireless efforts of NFIB, the House passed its version of the bill but the Senate never acted.