Despite determined opposition from Maryland's banking industry, a bill that would effectively ban charging membership fees for bank credit cards today sailed through the Senate economic affairs committee, a panel normally considered friendly to bankers.
"We believe they [the bankers] are flagrantly wrong on this one," committee Chairman Harry McGuirk (D-Baltimore) said after his panel voted 7 to 0, with two abstentions, to send the bill to the full Senate, where it is said to have strong support.
The bill revives a banking controversy that began last year when, after a heated lobbying campaign by bankers, the General Assembly voted to raise interest rate ceilings on loans and credit. Days after that measure was signed into law, Suburban Trust Bank and First American Bank of Maryland announced plans to charge their credit card users a $15 membership fee, in addition to the new rates.
"That initiated the [membership fee] bill," said Sen. Joseph Bonvegna (D-Baltimore), sponsor of this year's bill. "The phone calls we received were unbelieveable. I don't think the people can stand much more."
Attorney General Stephen H. Sachs blocked the membership fees, at least temporarily, with a ruling that the fees violated the ceilings set by the 1980 law. The banks now are suing to have the ruling overturned and legislators say they hope Bonvegna's bill will ban the fees once and for all.
The bill would count membership fees as a form of interest. Since the Maryland banks that issue credit cards already charge the maximum interest rates on unpaid balances, those banks would be violating state law by charging membership fees as well.
The effect of the bill, if it passes, could be limited. A recent Supreme Court ruling allows banks to charge customers in every state the maximum interest rates allowed in the state where they are headquartered. Thus, bankers argue, Maryland's ceilings do not apply to out-of-state banks that have Maryland customers.
Banking lobbyist William Weaver warned the Senate panel that the bill could put Maryland banks at a disadvantage since some other states do allow the membership fees. He contended the First National Bank of Maryland will move its credit card division to Delaware, along with up to a thousand jobs, if that state follows through on its plan to relax interest rate regulations.