Card Late Fees: Ban Proposed For New York

NEW YORK -- Calling credit card late fees "a rip-off on top of a rip-off," a New York state senator is proposing to prohibit banks from imposing the charges in New York.

Sen. Franz S. Leichter -- a frequent critic of banks -- said his bill will apply to all banks, regardless of where they are based.

The impetus for his proposal was a federal court ruling in Massachusetts last month that rejected the idea that card issuers can "export" their home states' fee policies.

|Obscene Interest Rates'

"Banks don't need to charge late fees since their obscene interest rates are penalty enough," he said at a news conference on Monday.

It was a familiar stand for the veteran Democrat, whose windup has proved more dramatic than his punch. For six consecutive years, he has unsuccessfully pushed for laws that would limit interest rates charged to credit card customers in New York.

Sen. Leichter said he jumped on the late-fee issue after last month's U.S. District Court decision.

Discover Card Case

The ruling prohibits a Sears, Roebuck and Co. unit that issues the Discover card from charging late fees to Massachusetts residents. The Sears' bank is based in Delaware, which permits late fees.

The court's decision giving precedence to Massachusetts law could be significant. Many large banks established credit card issuing subsidiaries in states with liberal lending laws, such as Delaware and South Dakota.

But some attorneys say the Massachusetts ruling is not likely to stand.

"It was one case by one judge in Massachusetts. There is a very good chance the decision will be overturned on appeal," said Alan Kaplinsky, a partner at Wolf, Block, Schorr and Solis-Cohen in Philadelphia.

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