Representatives of senior citizens' groups will meet with government officials today to discuss a class action petition they are bringing that seeks payment of higher interest rates on small savings accounts.
The petition charges that federal agencies have been practicing "benign neglect" of senior citizens and other small savers who can earn only 5.0 to 5.5 percent on savings, while special new "T-bill" certificates, keyed to market rates, pay upwards of 10 percent for minimum deposits of $10,000.
The petition has been brought on behalf of the Gray Panthers, a nationwide organization representing senior citizens. They have been joined by the California Legislative Council for Older Americans and the Campaign for Economic Democracy, led by activist Tom Hayden.
These groups will be represented by Robert L. Gnaizda, attorney for Public Advocates, Inc. of San Francisco at a meeting of the Federal Reserve Board, the Federal Deposit Insurance Corp., and the Federal Home Loan Bank Board. The meeting will take place at Federal Reserve headquarters.
Gnaizda said that the main relief sought is an indexing of the maximum deposit rates to inflation, or, as an alternative, provision of the maximum interest now allowed for $10,000 deposits to those of a minimum of $500.
The Panthers' petition charges that because of the disparity between inflation rates and what savings institutions pay their depositors, "the public this year will lose an estimated $10 billion in interest," an amount which enhances the assets of the financial institutions.
In the absence of the relief they seek, the senior citizens groups said that the banks and savings institutions should be required to notify the public that the interest they pay is below the inflation rate.
An example of such notice, the petition said, might say: "Warning: savings deposits may be dangerous to your health."
Interest rate ceilings are set by Regulations Q of the Federal Reserve and IV of the FDIC, which establish rate ceilings as well as differentials, slightly favorable to the savings and loan associations. The petitioners said they support the continued existence of the differentials, but seek changes "which protect the general public instead of victimizing it."