Pennsylvania bankers will have to wait just a little longer for a much-desired banking reform bill, as state lawmakers delayed a final vote until
after the November election.
"A lot of the members don't want to vote on it before the election," said Paul H. Wentzel, executive assistant to the secretary of banking. "We don't think it is [controversial], but they think it is."
The bill, which has been floating around the Legislature for 13 years, is supported by the Pennsylvania Association of Community Bankers, the Pennsylvania Bankers Association, and the state banking department. But it faces strong opposition from unions, whose influence dominates the Democratic-controlled House of Representatives that must still pass it.
The bill would make direct consumer bank loans subject only to federal Truth in Lending laws. Currently, such loans are governed by 11 state consumer lending acts, with rates, regulations, and exceptions that conflict with each other.
"It would eliminate some of the confusion that happens during lending," said the Pennsylvania Bankers Association state lobbyist, Daniel E. Stambaugh.
Other loans and consumer loans by nonbanks, such as car companies, would still be controlled by the other acts.
The bill also raises the state's rate caps on direct consumer loans under $50,000, including the 27-year-old ceiling on credit card interest rates, currently set to 18%. It would allow banks to use a floating rate linked to the higher of 18% or the five-year Treasury bond rate plus 10%.
But unions fear that raising the cap will hurt their members. In fact, union representatives have consistently proposed adding new low caps on consumer lending rates to those in place on credit cards.
"They've always opposed any kind of relief like this," Mr. Wentzel Said.
"They don't like it and they. have friends and it makes it tough to get it through in a state like Pennsylvania."
Bankers have complained that the state's complex web of lending laws and rate caps have driven the credit card industry out of the state over the last 12 years. Those companies have moved their credit card operations to Delaware, which has a friendly tax structure and no rate caps, bringing 5,000 to 6,000 jobs with them.
New Jersey also has no caps and New York repealed its caps last January.
Community bankers are disappointed that the bill again failed to pass, said Mr. Stambaugh.
"It's time to move this and pass the bill," he said. "With interstate branching, it just makes the competition in the financial industry more intense.
Anything that puts you at a financial disadvantage could hurt Pennsylvania's banking industry."
The bill has passed the State Senate and is awaiting final action on the floor of the House. PBA executive vice president James R. Biery said legislative leaders have committed to a vote as soon as lawmakers return to Harrisburg Nov. 14 for a brief lame duck session.
"We're confident it's going to pass," said Mr. Stambaugh.
Bank Simplification Bill at a Giance
Provisions:
* Would subject direct. consumer bank loans to federal truth-in-lending laws only, instead of 11 conflicting state lending laws
* Would create a floating credit card interest rate limit of the higher of 18% or the five-year Treasury bond plus 10%, instead of a state-imposed limit of 18%
Positions:
* Bankers support the bill because it would simplify lending restrictions and lift the interest rate caps that drove credit card operations out of the state.
* Unions oppose it because it doesn't protect consumers.
