Massachusetts will withdraw more than $231 million of state funds from a Bank of America Corp. account because the lender refuses to cap credit card interest rates at 18%, State Treasurer Timothy Cahill said.
The decision followed a meeting in which the Greater Boston Interfaith Organization asked Bank of America to comply with the state's usury law, which caps rates at 18%, Cahill said Tuesday. When the bank refused, the state said it would invest its funds with banks and other companies willing to adhere to the rate limits, Cahill said.
Bank of America values Massachusetts as a customer and believes it provides "great value to the financial management for the Commonwealth," B of A spokesman James Mahoney said. In meetings with the state, B of A said 70% of its customers have credit card rates below 15%, Mahoney said.
"The practicalities of state-by-state regulation are very unfavorable with regard to cost and efficiency of providing credit card services," Mahoney said.
A $9 million Massachusetts account with Citigroup Inc. and a $3 million Wells Fargo & Co. account also will be moved, Cahill said. The banks declined to meet with the Greater Boston Interfaith group on the interest rate issue, said Cahill, who is running for governor as an independent. A $17 million account with JPMorgan Chase & Co. is under review, pending talks with the New York banking company, Cahill said.
The withdrawals from the state's municipal depository fund, a money market account where localities put money temporarily before they need to spend it, are meant to send a message to lenders that Massachusetts wants its citizens to be able to avoid debt traps, Cahill said. The move may prompt other states to follow suit, he said.