A legislative panel that worked closely with banking and credit industry lobbyists over the past month was blocked today by House of Delegates leaders from raising the state's credit-card interest-rate ceilings -- a move that escalated the political battle over regulation of Maryland banks.
Members of the panel said they received word from Speaker of the House Benjamin L. Cardin (D-Baltimore) that their proposal would not be supported by the House leadership, and would probably founder on a wave of antibank sentiment if it reached the floor.
Rather than buck the leadership, the subcommittee today reluctantly withdrew its proposal for a small increase in the present credit-card interest-rate ceilings, and instead sent the full House Economic Matters Committee a bill that would tighten state control of banks by prohibiting membership fees for credit-card customers, while leaving the ceilings unchanged.
"I honestly believe we're making a mistake," said Del. Casper Taylor (D-Cumberland), vice chairman of economic matters, as he half-heartedly voted to kill the subcommittee's original proposal. "But my name is Taylor. It's not George Custer, and I don't want this to be my last stand."
Taylor and other subcommittee members did not mask their discomfort with the leadership's position, which is supported by Gov. Harry Hughes. But as subcommittee Chairman Frank Komenda (D-Prince George's) put it: "The political reality is there. The leadership is in no way dictating what the subcommittee must do. But I don't see that any bill contrary to the leadership position has much chance of going anywhere."
Cardin, for his part, stressed that he had not strong-armed the subcommittee, but added, "They have read our leanings accurately."
The full committee today supported and sent to the House floor a package of bills that would leave interest-rate ceilings at 18 percent for the first $500 on a credit-card balance, while banning membership fees for all credit-card operations in the state, including cards issued by retail stores. The bills also would require banks to disclose fully the financial data on their credit-card operations.
The push for tighter state regulation of banks -- particularly credit-card operations -- quickly gathered momentum early in the session when a Baltimore judge ruled that banks could charge up to 33 percent on a $500 credit-card balance, almost twice the 18 percent ceiling imposed by the legislature.
The ruling, which Attorney General Stephen Sachs plans to appeal, prompted an outcry from legislators, who complained that the courts and federal deregulation laws were stripping them of their traditional powers over the banking industry. Legislators said they were angry with the bankers for even filing the suit that produced the ruling, since it came just after the enactment of a 1980 law that significantly raised interest-rate ceilings.
Sachs urged the legislature this year to pass a measure exempting Maryland from the federal banking deregulation law, restoring the state's power to control interest-rate ceilings for federally chartered state banks, although not national banks. The committee today voted down that measure. But Sachs insists it is potentially the most significant issue, since customers could end up paying much more in interest than they would in membership fees if his office fails to reverse the ruling allowing 33 percent interest-rate ceilings.
However, Hughes and the leadership have split with Sachs on the deregulation issue. Hughes said today that he is concerned that state-chartered banks would move to become national banks, and perhaps eventually leave the state if Maryland tightens controls too much. a
Under present law, banks charge 18 percent interest on credit-card balances of up to $700, and 12 percent for anything over that. Bank spokesmen have said they will not raise interest rates until the appeal of the recent court ruling has been completed.
In hearings on the bills, officers of several banks said they may move their operations to neighboring Delaware -- whose legislature recently removed interest-rate ceilings and passed a law allowing membership fees in an effort to attract out-of-state banks -- unless Maryland grants them some relief.
The argument angered many legislators, and fell on deaf ears in the Senate.
But the Economic Matters subcommittee, which was joined at most of its meetings by lobbyists for the banks, savings and loan assocations and retail merchants, expressed sympathy with the bankers' plight, and attempted to respond to it -- until being blocked today.