A meeting of the minds among California legislators, bankers, and consumer groups has resulted in a compromise bill that, if passed, would establish tiered late fees on credit card accounts.
Currently, California-based issuers can charge a $5.75 late fee, well below the $15 or more that out-of-state competitors are able to charge for credit card accounts.
The state Assembly's judiciary committee voted 8 to 1 last week to approve Senate Bill 1333. It bill will be considered by the full Assembly when the legislature reconvenes in late August. It follows a series of credit card-related bills that have failed to pass both houses.
If passed, the bill would allow a $7 fee if a credit card account is five days overdue; $10 for 10 days overdue, and $15 for 15 days past due. If cardholders incur a second late payment within 12 months, issuers would have the option to assess a $15 fee for a 10-day overdue account.
The bill calls for a $10 over-limit fee, but not until a cardholder overextends his limit by 20% or by $500.
As amended, the bill would require a mandatory 25-day grace period for credit card issuers in California, even though the bankers and consumer groups agreed to 20 days.
"There's no question, all along this effort has been to solve two problems -- to bring an end to the class-action litigation and to make California competitive," said Gregory O. Wilhelm, senior vice president for the California Bankers Association.
If Sen. Bill Lockyer's bill is passed, it will accomplish the first objective, he said. Most recently, the Golden One public employee credit union was sued by a San Diego law firm for charging a $5 late fee. Mr. Wilhelm said similar lawsuits have cost California institutions more than $30 million in legal costs and judgments.
Attorneys Still Opposed
The California Trial Lawyers Association remains opposed to the bill.
Sen. Lockyer's original credit card deregulation bill was voted out by the Assembly banking and finance committee 8 to 0 on June 27. However, that bill, which called for a $10 fee and a mandatory five-day grace period and a $15 fee on second and subsequent late payments was amended in the compromise.
Most of the groups who opposed one another on the issue of late fees came together Tuesday to hammer out the compromise bill. The agreement involved the state Bankers Association, the California Credit Union League, and Consumers Union.
Sen. Lockyer's bill differs substantially from another credit card deregulation bill the Assembly banking and finance committee approved in April.
That bill called for the elimination of existing caps on late and over-limit fees, but ran into legislative roadblocks that effectively stopped its progress.