Small businesses can now benefit from interest checking

It has been one year since the Dodd-Frank Wall Street Reform Act was turned into a law and Thursday marked the first anniversary. This is the day when many of the provisions as per the law, takes effect. While some of these measures may seem controversial – such as new enforcement powers for CFPB or Consumer Financial Protection Bureau, and the new limits on the fees that banks may charge merchants on debit card transactions, there are the others that seem to have escaped unnoticed.

Among the lesser known changes are the depression-era ban on interest checking has now finally retired and the major banks seem to be adapting to it quietly.

The bigger companies that have large deposits have been able to work around this prohibition by using their sweep accounts, where the deposits are invested in money market accounts every night and then the funds are returned the next day. However, sweep accounts are an expensive as well as inefficient way to earn interest. After the repeal on Thursday, on what was once known as Regulation Q, most major banks will start offering interest-bearing checking accounts to all the business customers.These major banks include Wells Fargo, TD bank, Capital One, and Citibank. Starting August 1, Regions Bank will also start offering interest checking accounts to their business customers. A spokesperson from the Cincinnati-based Fifth Third Bank has stated that the interest-earning checking accounts for companies are in the pipeline.

Two of the major banks Chase and Bank of America, had not arrived at a decision as of Wednesday, according to their spokespersons. Jefferson George, spokesman for Bank of America had stated in an e-mail, that they were presently reviewing various options but had not made any immediate plans to change anything in their existing products or make any additions with new ones. He also added that Bank of America, like most other banks offered interest accounts to non-profits, sole proprietors, as well as government entities.

There has been no response to the Agenda’s request for information from several other major banks and they seem to be maintaining widespread silence on this topic. On condition of anonymity, the spokesperson from one bank stated that these changes that would be brought about would be trivial because the interest-bearing checking was not something new. While it may be available to more businesses now, a large customer base has already been accessing it. More than the interest, these small business owners want their fees to be waived off.