Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, March 22, 1992 TAG: 9203230184
SECTION: EDITORIAL PAGE: B-2 EDITION: METRO
SOURCE:
DATELINE: LENGTH: Medium
The veto amounts to populism on the cheap. It sounds good to require a 25-day grace period and prohibit flat-rate late fees. But competitive pressures would do much the same - and those state regulations beloved by Wilder don't even apply to two-thirds of the bank cards held by Virginians.
Most bank cards held by Virginians are from issuers in places like unregulated Delaware and South Dakota. And under the law of the land, credit cards are subject to the rules of the state where they're issued, not where their holders reside or the cards are used.
The Virginia rules do apply to in-state issuers. But their worth to consumers seems slight; meanwhile, they inhibit the ability of Virginia issuers to offer more choices to their customers.
No Virginia law requires out-of-state issuers to have grace periods, but they commonly have them. This is the result of competitive pressure, not charitable sentiment. The same competitive pressures make the Virginia mandates near-pointless.
But not quite. Out-of-state issuers can offer alternatives to their Virginia customers that Virginia issuers cannot.
If you intend to hold a card only for seldom-used emergency backup, you might prefer to swap the grace period for a zero annual fee. For an oft-used card paid in full every month, you'd want the grace period - but you might be attracted by an offer of higher late-payment fees in exchange for a zero annual fee. If you don't pay in full every month, the grace period is of no use anyway: If that's your situation, you might want to swap the grace period for a break in the interest rate.
As it is now, however, the state rules prohibit such options - except, that is, to the out-of-state competition.
In-state issuers employ 2,000-plus Virginians, including those at Dominion Bank's credit-card operation in Roanoke. The jobs issue may be overplayed: Whether they stay in Virginia or leave will depend on more than grace-period and late-fee rules. But in an era when computers and instant telecommunications have broken down once-formidable geographic barriers to relocation, such rules can be a factor.
In any event, it seems odd for a national playing field to be tilted against Virginia players - with Virginia itself doing the tilting.
While the law of the land can change, it's not likely to. States' lack of authority to regulate cards issued outside their borders is under court challenge. (These days, what isn't?) But there's little reason to think the U.S. Supreme Court wouldn't say about grace periods and late fees what it said in 1978 about credit-card interest rates: They're subject to the laws of the issuer's, not the cardholder's, state.
Perhaps competition and disclosure rules aren't enough to protect consumers. Perhaps credit cards should be subject to stricter regulation. If so, it should come at the federal rather than state level, so the rules can be the same for everybody.
by CNB