Legislation pending in the House would require creditors to consider a bill paid on the date it was mailed - a move the banking industry said would cost banks a fortune.

Under the Postmark Prompt Payment Act of 1995, introduced by Rep. John McHugh, R-N.Y., creditors would have to consider late payments as "on time" if the bill was mailed by the due date.

If HR 1963 is enacted, the American Bankers Association said, banks would have to go through the time-consuming and expensive process of checking postmarks on envelopes, then retroactively crediting accounts and rescinding late fees charged.

"In effect, the bill would render today's expensive equipment virtually obsolete," the trade group said in a written statement submitted to House Government Reform and Oversight's postal service subcommittee, which held a hearing on the measure last Thursday.

"Processing equipment would have to be invented and built," the ABA said, "in order to process various-sized envelopes and to capture the postmark."

Congress wants to shift the consequences of uncertain postal delivery to creditors, ABA charged, adding that grace periods give borrowers plenty of time to pay up.

"This legislation is not needed because existing industry practices already adequately shield consumers from those uncertainties in the form of grace periods and flexibility when payments do arrive late," the ABA wrote.

However, Rep. McHugh, who chairs the postal service subcommittee, said most consumers have been stung by unwarranted late fees and that using postmarks to determine whether payments are on time is the best way to avoid this.

"Quite often, conscientious people will dutifully pay their bills on a timely basis, only to discover that they are assessed late fees and interest charges when the recording or receipt of their payment is delayed through no fault of their own," Rep. McHugh said.

If Rep. McHugh's measure can be attached to a larger bill, its prospects for passage would be good, said Karen Shaw Petrou, president of ISD/Shaw Inc., whose firm tracks bank regulation and legislation.

"The chairman is determined to pass the bill, and it has a lot of grassroot support, so it has to be taken seriously," said Ms. Petrou.

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