Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, February 25, 1992 TAG: 9202250173
SECTION: VIRGINIA PAGE: B3 EDITION: NEW RIVER VALLEY
SOURCE: GREG SCHNEIDER STAFF WRITER
DATELINE: RICHMOND LENGTH: Medium
SENATE COMMITTEE BACKS DEREGULATION OF CREDIT INDUSTRY
A Senate committee voted 9-4 Monday to endorse legislation that would deregulate Virginia's credit card industry, opening the door for increases that could cost consumers millions of dollars a year.The bill has two prongs: One lets banks set whatever fees the market will bear for late payments and other penalties, the other allows them to charge interest from the moment someone buys something with a credit card.
Virginia now requires a grace period, so that if you keep your account current you don't face interest penalties.
Though Lt. Gov. Donald Beyer and other supporters say deregulation will keep the state from losing 2,200 credit industry jobs, one consumer advocate said it could carry high costs.
If only half of the state's credit-card issuers eliminate the grace period, said Jean Ann Fox of the Virginia Citizens Consumer Council, card holders would pay about $38 million a year in interest.
"Giving up protections to attract a few jobs is a bad bargain," Fox told the Senate Committee on Commerce and Labor.
But Beyer, who championed the measure after it was produced by a study commission on economic growth, said the credit industry is not going to try to hurt its customers.
Most other states do not regulate fees or grace periods, he said, so the industry goes where it can have the most flexibility. More than half of all Virginians carry cards issued from deregulated states, Beyer said, and they still enjoy the grace period because competition demands it.
The president of Signet Bank, Robert Freeman, said he has 750 credit-card jobs that could leave the state if economic conditions force it.
The bill also deregulates credit cards issued by retailers, such as department stores. One senator tried and failed to take retailers out of the measure, pointing out that they aren't threatening to move jobs.
Banks have been whittling away for years at state laws regulating their credit cards. Their lobby is consistently judged among the Assembly's most powerful and they contribute heavily to legislative election campaigns. Banks, bankers and their trade groups donated just over $111,000 to senators in last year's campaigns, for example.
The full Senate is likely to act on the measure by the end of the week.
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Memo: shorter version ran in the Metro edition.