Bankers in the District are pressing the city government to increase the current ceilings on consumer loan interest rates to 21 percent for all kinds of loans.
Already many of the city's 17 commercial banks have cut back sharply on loans for automobile purchases, home renovations and other purposes because of a prolonged period of record interest rates and higher returns on other types of lending.
Officers and directors of the banks, who gathered here today for the 63rd annual convention of the D.C. Bankers Association, warned that the outlook for consumer lending only could worsen if current legislation before the City Council is not approved.
B. Doyle Mitchell, first vice president of the bankers group and president of Industrial Bank of Washington, which concentrates on consumer lending, said his bank is continuing to make some loans under current ceilings, but to established customers only. "But I've been told several banks have stopped," he added.
Riggs National Bank President Daniel Callahan III, who heads the D.C. bankers, said his bank and his competitors will be forced to stop lending at rates far below the current cost of money if interest rate ceilings are not lifted.
Council member John A. Wilson (D-Ward 1), who heads the City Council's finance and revenue committee, already has held one public hearing on the proposed Consumer Credit Interest Rate Amendment Act.
As Callahan noted, the proposed bill would boost interest ceilings across the board and eliminate some current differentials.
The maximum interest rate a bank or savings and loan association could charge on a car or other motor vehicle loan would jump to 21 percent from the current ceiling of 11 1/2 percent.
For credit cards offered either by financial institutions or retailers, the ceiling would increase to 21 percent on all balances. Currently, D.C. law limits the interest rate to 18 percent on the first $500 and 12 percent on any amount over $500.
Direct-installment-loan interest rates also would be boosted to 21 percent from the current ceiling of 15 percent.
The only exception to the 21 percent level would be the rate of interest allowed in court judgments, which would rise to 12 percent from the current level of 6 percent.
Interest rate ceilings have been a matter of legislative dispute in many states during recent years as the cost of money has increased to levels not anticipated by so-called usury statutes.
A number of states, including Virginia, have eliminated interest rate ceilings. New Jersey recently enacted a 30 percent ceiling.
In Maryland, the current ceiling is 18 percent but national banks and credit companies have successfully argued in court to date that they are exempt from such limitations. The conflict between Maryland's legislature and the state's banking industry has become so heated that several banks have threatened to move credit operations to neighboring Delaware.