Dodd-Frank repeals ban on interest-paying business accounts


Section 627 of the Dodd-Frank Act allows banks to offer interest on business transactions accounts for the first time nearly 80 years. It formally took effect on Thursday.

A lot of banks at the moment are taking a cautious approach as it's unclear what customers will opt for. Some may want to stay in non-interest bearing account, which will continue to enjoy unlimited insurance for two more years, according to the law. Insurance on interest paying accounts will be capped at $250,000. For a small accounts, an interest-bearing account just might make sense.

Geoffrey Greenwade, CEO of Houston-based Green Bank, thinks this is a significant opportunity for community banks. "We have clients that have been asking for years for this sort of business interest account, but banks could legally not offer.  We can now offer them another choice to help them operate at peak performance.  For us, it's another tool to attract deposits that we can turn around into business loans and help companies grow and--ideally--add employees along the way. For some business clients, business checking with interest is an opportunity to  simplify their accounting structure. They will not have to worry about moving or sweeping funds to a product that pays interest.  Their other choice is to be in an analyzed account that provides interest type credit to offset monthly banking expenses.  It will come down to the specific needs of each business, but now, at least, they have that choice." Banks will likely offer some choice.

For more:
- here's some background

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