Governor Is Expected To Sign Legislation Permitting More Fees
As California legislators renew consideration today of a bill to deregulate the credit card industry, they do so knowing that yet another state has beaten them to the punch.
Colorado's General Assembly recently passed a bill to eliminate prohibitions on credit card fees and streamline the notification requirements for changes in terms. Gov. Roy Romer is expected to sign the deregulation bill next week, with the changes taking effect July 1.
This is the second year Colorado has adopted a significant deregulation measure. Last year, Gov. Romer signed a bill authorizing $15 late fees; three years earlier he vetoed a similar bill.
"We really spent the time working with him to help bring about a broader understanding of the role of the credit card industry and consumer protection," said John Mullins, special assistant to the governor for economic development. "On balance, [Gov. Romer decided] he could live with deregulation."
Among its key elements, the latest Colorado bill will allow returned-check fees of up to $20, impose a cash-advance fee of up to the greater of $2 or 2.5%, set a minimum interest charge of up to 50 cents, let state-chartered institutions export fees and rates, and streamline notifications of changes in terms.
The Colorado bill will also require hotels, motels, and rentalcar companies to notify customers before they charge an advance deposit to a credit card and require clear and conspicuous display of annual percentage rates on all application and solicitation forms. Existing regulations set APR caps of 21% for credit cards with grace periods and 18% for those without. Maine's Legislation (Maine also recently passed legislation to liberalize its credit card industry. On ,April 7, Gov. John R. McKernan signed into law a bill to remove an 18% interest rate ceiling and the $12 annual fee cap, among other provisions.)
Meanwhile, members of the California Assembly's Judiciary Committee have a single question to consider: Do they want to eliminate late and over-limit fees on credit card accounts?
Late last month the Banking and Finance Committee approved a measure that would do so. If the Judiciary Committee also approves the bill, it would be taken up in the state Senate. In January, a similar bill with a $15 cap was defeated in the Senate Judiciary Committee.
The California bill has been strongly contested by consumer groups and trial lawyers, which was not true in Colorado.
Industry groups in Colorado worked closely with Gov. Romer and the Colorado Consumer Credit Council, a consumer watchdog group, to deregulate the card industry, said Mr. Mullins, the governor's aide.
One indication that the state has moved toward deregulation is its climb up the rankings in a 1994 DRI/McGraw-Hill study of which states are most hospitable to the credit card industry. Colorado moved up 19 spots, to 271h, and is expected to rise some more as a result of its recent legislative action.
In the same annual study, commissioned by MasterCard International, California took Colorado's former spot, 461h.
"We knew we [were] ranked low," Mr. Mullins said. "We wanted to get stronger. We pay attention to what everyone else is doing, and observed deregulation is a trend."
"I think the state realized the credit card environment nationally was changing quickly," said Thomas R. Schilling, vice president of InterMountain Partners Inc., a public affairs group in Denver. "Colorado has not kept pace with the rest of the nation."
Still, "Colorado has tended to be a center of credit card activities," said Mr. Schilling, who once worked with the state's economic development office.
Colorado employs 5,000 in the card industry and would like to build on that. The Seattle-based Nordstrom retail chain operates its credit card bank in Colorado and may add jobs, Mr. Mullins said. Others, such as Citicorp's flagship bank and First Data Corp., are looking at ways they might expand, as well.
State officials said that an "unidentified" national credit card processor is considering locating in Colorado, adding 1,200 jobs. Other credit card companies began looking at real estate in a number of Colorado cities after the DRI/McGraw-Hill study came out in April.
In the past, Colorado officials have courted Wells Fargo & Co.'s credit card operations in Concord, Calif., and those of First Interstate Bancorp in Simi Valley, Calif.
"Clearly, what we've done is target this industry as one that can grow," Mr. Mullins said.