As Congress mulls legislation that would shield banks and other businesses from year-2000-related lawsuits, banks in seven states have already won some protection.

Florida, Virginia, Arizona, Colorado, North Dakota, South Dakota, and Texas have enacted laws that make it tougher to sue over year-2000-related computer glitches. Similar measures in Alaska, Hawaii, and Illinois are awaiting governors' signatures.

Though the laws vary from state to state, most eliminate punitive damages and limit suits to parties that have direct contractual relationships. For example, a small-business customer could sue the bank that holds his or her checking account if a problem occurs, but a business associate of the customer could not sue the bank if the customer's check bounces because of a computer error.

Virginia's law even protects bank executives and directors from being individually sued if a bank experiences problems.

"If you're a banker in a state like Florida or Colorado or Virginia, you're in a very strong position," said Mathew Street, who follows state legislative issues for the American Bankers Association.

Don A. Childears, the president and chief executive officer of the Colorado Bankers Association, said it is impossible to quantify how much money Colorado banks may save as a result of the state's new law. But he said banks appreciate the up-front guarantee against some lawsuits.

"We wanted to do everything we could do to help with prevention," he said. "The banks really value it."

Still, the legislative victories did not come easy.

To satisfy trial lawyers, for example, bank interests in Illinois agreed to some pro-consumer provisions, including one that grants borrowers a one- time late fee waiver if they miss a payment because of year-2000 computer problems. The final version was passed in the last hours of the legislative session on May 28.

Trial lawyers in Iowa, however, were unwilling to compromise. The lawyers, along with the American Association of Retired Persons, persuaded Democratic Gov. Thomas J. Vilsack last month to veto Iowa's version of the liability bill.

The laws, in most cases, protect all businesses in the states, not just banks. That is more good news for banks, because their commercial customers could have harmed them indirectly if they were hit with pricey lawsuits.

"We're not nearly as concerned about suits against banks as we are about litigation against customers," said Tom Cardwell, an attorney at the Akerman law firm in Orlando and general counsel to the Florida Bankers Association.

Some banks are taking steps to make sure their commercial customers know about the new laws.

In Colorado, for example, businesses must complete seven planning and testing steps before they can receive protection from year-2000 lawsuits. So FirstBank of Colorado in Lakewood plans to educate its large business customers next quarter on the requirements and encourage businesses to meet them.

"To the extent that they avoid Y2K problems, it's probably better for both of us," said David Baker, the president of the $506 million-asset bank.

Bankers in states without year-2000 liability laws may still be shielded from some lawsuits. The U.S. House of Representatives passed a bill in May that would offer some protections, and the Senate is expected to pass a similar version today.

Both versions would require that all year-2000-related lawsuits must be filed within three years of the date change. They also include caps on damages businesses would be required to pay if they are found responsible for computer errors.

The Senate bill would exempt businesses with less than 50 employees from punitive damages. It would not trump state laws already passed and, like the House version, would probably take precedence in cases where customers and banks reside in different states.

The federal proposal is far from a sure thing, however. The Clinton administration has threatened to veto the legislation if Republicans fail to grant some Democratic concessions.

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