Today, Congresswoman Maxine Waters (D-CA), the top Democrat on the House Financial Services Committee, reintroduced H.R. 4551, the “Employee Paycheck and Small Business Protection Act.” This bill would update the deposit insurance framework for business payment accounts to ensure small businesses can bank with community financial institutions and continue to pay their employees, even if their bank or credit union unexpectedly fails. This bill also enhances emergency tools for the Federal Deposit Insurance Corporation (FDIC) and National Credit Union Administration (NCUA) to use in future crises. Congresswoman Waters first introduced this bill in 2024.

Efforts to modernize federal deposit insurance have wide bipartisan support, including from Vice President J.D. Vance who introduced a bill last Congress to reform deposit insurance when he was in the Senate. Other Republicans have introduced similar bills to expand deposit insurance or improve FDIC’s emergency tools, including one from Sen. Bill Hagerty (R-TN), another one co-led by Sen. Mike Braun (R-IN), and another one from former Rep. Blaine Luetkemeyer (R-MO). Additionally, in a speech this year before the American Bankers Association, Treasury Secretary Scott Bessent emphasized the Department’s plan to work with Congress to explore deposit insurance reforms, including expanding it to cover more business payment accounts.

The “Employee Paycheck and Small Business Protection Act” follows the failure of Silicon Valley Bank and two other regional banks in 2023, where startups and other small businesses were worried they wouldn’t be able to pay their employees the following week. Regulators used emergency tools that eventually protected these depositors, but many other businesses moved their money to the biggest banks. Since 2007, there have been at least 37 bank failures, including many small banks like First National Bank of Lindsay which failed last year in Oklahoma, where emergency tools were not used to protect depositors and small businesses were harmed, losing money through no fault of their own. This bill will help protect all small businesses and their employees while helping community banks and credit unions better serve local businesses in their communities.

“As we saw with the collapse of Silicon Valley Bank, when banks fail abruptly, small businesses are left scrambling to figure out how they’re going to pay their hardworking employees if they lose any money, while other businesses quickly transfer their funds from trusted community banks to megabanks. In worse cases, such as the First National Bank of Lindsay, small businesses lose funds through no fault of their own, but simply because their bank is too small to qualify for emergency protections. This is not fair to small businesses or their workers, and it threatens to undermine community banks and credit unions while concentrating even more power in our megabanks,” said Ranking Member Waters. “The simple truth is, small businesses need reliable banking services, and they should be able to work with local financial institutions in their communities. My bill, the ‘Employee Paycheck and Small Business Protection Act,’ will expand deposit insurance coverage for business accounts, so entrepreneurs are protected if their depository institution fails. I’m proud that this effort is supported by a number of Republicans, and I look forward to working with Chairman Hill and my other colleagues in Congress to get this enacted into law.”

Specifically, the “Employee Paycheck and Small Business Protection Act” will:

• Authorize the FDIC and NCUA to collect data, conduct analysis, and issue a proposed rule within 18 months to increase the deposit and share insurance threshold for business payment accounts from $250,000 to a higher dollar threshold. The agencies would jointly determine this higher threshold, along with which type of business transaction accounts would be covered that would promote safety and soundness, financial stability, depository institution competition, and the ability for businesses to make timely payments, including payroll and vendor payments.
  
  
• Require FDIC and NCUA Chairs to testify on their findings and proposed rule. The agencies would then be required to implement the expanded insurance coverage within 30 months, and if they don’t by then, they would be required to testify before Congress again. GAO would also be required to do a study and issue any administrative or legislative recommendations.
  
  
• Enhance regulators emergency tools, allowing the FDIC and NCUA to establish a temporary Transaction Account Guarantee (TAG) program for six months, which could be extended for a total of nine months, provided that it is authorized by the Secretary of the Treasury, with the support of at least two-thirds of the FDIC and Federal Reserve Boards. These TAG programs would temporarily guarantee all deposits in transaction accounts in a future crisis, and any extension beyond nine months would require Congressional approval.
  
  

Read the full text of the bill HERE.

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