State Eases Off on Credit Card Crackdown

NEW YORK — California lawmakers are backing away from restrictions on the credit card industry after threats from bankers to move jobs elsewhere.

State legislators recently scuttled a proposed card rate cap and now seem bent on reversing some pro-consumer court rulings limiting late fees.

Card bankers in other states have increasingly used threats of moving jobs to beat back proposed restrictions.

But the tactic appears to have been especially successful in California, largely because of the state’s long recession.

Protecting jobs is “certainly the impetus” behind a bill to reverse the late-fee rulings, said an aide to state Sen. Daniel E. Boatwright (D-Concord), the bill’s sponsor.

Last month, the Legislature defeated a plan backed by consumer groups to limit card rates to the interest rate paid by the bank on savings accounts plus 10 percentage points.

Now Boatwright’s bill, which would enable banks in California to impose late fees comparable to those charged by banks in the more lenient states, appears to be sailing through the committee process.

The proposal was approved in a 6-1 vote by the Banking and Trade Committee of the state Senate and is expected to go to the Judiciary Committee soon.

It was inspired by several court decisions against First Interstate and Wells Fargo banks that bankers said set a dangerous precedent.

The courts held that the late fees charged by these banks--modest fees, by industry standards--were illegal because delinquent borrowers suffered the same penalty regardless of the amount past due.