Pennsylvania bankers hope their state will simplify a package of consumer lending rules by the end of this year's legislative session.

A bill to eliminate an 18% interest rate limit on credit cards already has passed the state Senate.

The bill also would deregulate bank lending below $50,000 for all but student, first lien, and homebuying purposes. It was sponsored by state Sen. Eugene Scanlon, and written by the Pennsylvania Bankers Association -- which has led this fight for more than 10 years.

But the Pennsylvania Association of Community Bankers, whose members increasingly are offering credit cards, also wants to see the measure enacted.

The limits have driven more than 5,000 banking and other jobs to neighboring Delaware, says Frank Pinto, president of the community bankers association.

Moreover, he says, "Even if we make just 25 basis points more, we're just recycling the money. We have 300 members, and earning more means more reinvestment in their communities."

Pennsylvania's banking secretary, Sarah W. Hargrove, supports the concept of simplification but would like similar revisions to the state's motor vehicle finance and other consumer lending rules, says Paul Wentzel, Ms. Hargrove's executive assistant.

"They're all a mess," says Mr. Wentzel. "We have eight or nine antiquated usury statutes, and they're a very strange patchwork.

"If you finance a rug that won't be nailed to the floor, it's governed by the Goods and Services Installment Sales Act, and you might pay 1.5% a month.

"If you finance a wall-to-wall carpet, it's governed by the Home Improvement Finance Act, and the rate might be 14%. It's very confusing for the banks, let alone the borrowers."

Threat to Consumers Seen

Although Ms. Hargrove wants sweeping simplification, her department still will lobby for the bill, Mr. Wentzel says.

Lobbying against the bill during House deliberations will be Senate majority whip Leonard Bodack, who backs simplification, but worries that "the simplification proposed by the bankers might destroy 60 years of consumer protection," says the senator's administrative assistant, Charlie Wilson.

"It's more what the measure doesn't say that's the threat. It would allow banks to impose any interest rates they want; to charge anything they want for services or bounced checks; to demand immediate loan repayments even if a borrower hasn't defaulted; to eliminate grace periods, and require any any collateral they want -- like a house for a refrigerator loan."

Greater Uniformity

Mr. Wentzel says the opponents of the bill are technically, but not practically, correct.

He also believes that sweeping revisions would afford more uniform lending agreements.

"It would make things more user friendly from both sides. When the laws were changing, back in the 1980s, the small banks had to have attorneys explain the changes to them."

The Senate passed the bill in a 29-to-19 vote on June 21. The Business and Economic Development Committee of the House, which returns to work Sept. 27, will be next to debate the bill.

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