The New York Legislature passed a bill that would ban universal default pricing on credit cards, but even if the governor signs it, out-of-state lenders may well be exempt.
Nessa Feddis, a senior counsel for the American Bankers Association in Washington, said she was unaware of any other state having passed such a bill.
A spokeswoman for Gov. George Pataki said the bill has not reached his desk and he will review it when it does.
Universal default clauses, a common feature in the fine print of credit card agreements, give a lender the right to adjust pricing if a borrower defaults or is late in making payments - even to other creditors.
The bill would forbid issuers from increasing the interest rate or imposing a fee "solely [as] the result of" the cardholder's standing with another creditor.
The New York Senate passed it on June 21, four months after receiving it from the Assembly.
Joseph Kolar, a partner at the Washington law firm Buckley Kolar LLP, said that the bill probably would not apply to national banks.
"I think there is a strong argument that this law … can be preempted" by federal regulators, he said.
Even state-chartered banks based outside New York could be immune, Mr. Kolar said. The Federal Deposit Insurance Corp. lets state-chartered banks export the rate laws of their home state to other states, and the bill "is a very clear interest rate restriction."
Opponents of universal default clauses may be more successful challenging the practice in court as unfair and deceptive, Mr. Kolar said.
Ms. Feddis said the practice is necessary for managing risk.
"Some years ago when credit card issuers were finding that long-term customers who had never been late were now suddenly defaulting, they had to develop a model to try to identify those risky borrowers," she said. "They had to look beyond just their own experience. They had to look at the whole picture of the customer."
Issuers do not necessarily raise rates after just one late payment with another creditor, Ms. Feddis said.
Her trade group does not take positions on state legislation.
Karen Jennapty, a spokeswoman for the New York Bankers Association, said it neither opposes nor supports the bill in its current form. The group had opposed the bill until the word "solely" was added, she said.
Though many major financial services companies are based in New York, they tend to have credit card units in other states. JPMorgan Chase & Co.'s Chase Bank USA, for instance, is based in Newark, Del., and Citigroup Inc.'s credit card bank is based in Sioux Falls, S.D.