The Maryland House of Delegates passed by a lopsided margin today a bill outlawing membership fees on credit cards issued by banks and retail stores as legislators called on each other to reassert local control over the banking industry.
The House action, on a vote of 105 to 24, virtually assures a state ban on the fees, since an identical bill sailed through the Senate last month with only one dissenting vote and Gov. Harry Hughes has said he will sign the measure into law.
Today's vote closed a major banking controversy in Maryland, which has counterparts in several other states, that resulted from recent federal laws and court decisions eroding the states' control over banking activities within their borders.
The Maryland controversy peaked in January when a Baltimore judge, citing a 1980 U.S. banking deregulation law and court decisions, ruled that Maryland banks could impose credit card membership fees and raise interest rates to 33 percent on balances up to $500 - almost twice the 18 percent ceiling enacted by the General Assembly last year.
The bill passed today effectively cancels out the judge's ruling on membership fees Del. Steven Sklar (D-Baltimore), arguing for the bill, called the fees "as insidious a tax on people who have to pay them as if we pass a regular tax measure."
Banks have tried to impose membership fees in Maryland and other states, arguing that the high cost of money makes in impossible for them to make a profit on credit card operations at the present 18 percent interest rate ceilings. The Bank of Virginia, for example, recently announced plans to charge credit card membership fees after the Virginia General Assembly killed a bill that would have raised interest rates.
The Maryland legislature, with Hughes' encouragement, has deferred action on the larger question of how Maryland can assert control over interst rate ceilings. Hughes said he is concerned by warnings from several banks that Maryland's regulatory zeal could drive them to nearby Delaware, which has almost totally deregulated banking.
Attorney General Stephen H. Sachs, who has taken an outspoken role in favor of tighter state regulation, argues that the interest rate issue is more urgent than the ban on fees. If Sach's office is unable to overturn the Baltimore court ruling on appeal, banks will be free to charge up to 33 percent interest rates on the first $500 of a credit card balance.
To re-establish state control over interest rates, the legislature would have to press a law exempting Maryland from the 1980 federal banking deregulation law. Even so, the state would have jurisdiction only over federally-chartered state banks, not over national banks.
Sklar and other delegates are mounting a petition drive to bring the exemption bill to the House floor this session, although the House Economic Matters Committee voted last week to send it to a summer study committee.