A key House committee today overwhelmingly approved two sweeping interest rate deregulation bills that would lift all ceilings on the rates banks and retail stores can charge their credit card and credit account customers.
The actions, which came over the scattered protests of a handful of consumer-oriented legislators, could mean higher finance charges on 1.5 million MasterCard and Visa credit card accounts issued by Virginia banks and all revolving door accounts at about 2,250 retail stores, ranging from Sears Roebuck and Co. and Montgomery Ward & Co. to small grocery and drug stores.
The deregulation measures, which a spokesman said are generally favored by Democratic Gov. Charles Robb, would wipe out a longstanding 18 percent lid on credit card and revolving accounts. A phalanx of bankers lined the front rows of the House Corporations, Banking and Insurance Committee today to listen to top lobbyist W.O. Pearce tell the panel that failure to lift the lid this year would "put us out of the business" of offering credit cards to state customers.
Without a change in the law, Pearce warned, Virginia banks would follow the lead of banks in New York, Maryland and other states and move their credit card operations to nearby states such as Delaware, where there are no limits. Thirteen states have lifted ceilings on credit accounts and interest rates in those states now fluctuate between 19 and 20 percent a year compared to Virginia's 18 percent. Ten other states have ceilings higher than Virginia's.
"The credit card market is not a Virginia market, it's a national market," said Pearce. "We're dealing with a concept here--we're dealing with a free, unregulated market."
The bill that would deregulate rates on bank credit cards was sponsored by Del. Lewis W. Parker (D-Mecklenburg), and the bill that would deregulate rates on revolving credit accounts was sponsored by Del. Franklin P. Hall (D-Richmond).
Such deregulation has been a top priority of the bankers association and the Virginia Retail Merchants Association ever since last year when the same committee rejected similar legislation by a 7-to-7 vote. Since then, however, bankers have intensely lobbied the panel and last fall contributed more than $15,250 to the campaigns of 17 of its 20 members, according to state records.
In the days before the vote, committee members also received telephone calls from local bankers who asked them to support the measure. Delegate Gladys Keating (D-Fairfax), who voted against the bill, said she received several such calls from bankers at her Franconia home over the weekend.
When the measure came before the committee there was virtually no debate. Several committee members who had previously expressed doubts about the bills said they now realized that interest ceilings were impractical in light of the volatility of overall interest rates.
No spokesmen for consumer or labor groups that had opposed deregulation in the past showed up to speak against it. "We're fighting so many bills, it's impossible to be at all the hearings," said R.R. Foutz, secretary-treasurer of the Virginia AFL-CIO, who had testified against deregulation last year. "But we'll be sending out our position to the full House of Delegates before it gets to the floor."
The rates that will be affected by the bill, which supporters say has a good chance to pass in the Senate, are those that banks impose on credit card customers' unpaid balance, beginning 25 days from the date of billing. The bills would take effect April 1, 1983 and require banks to notify customers of higher interest rates before they begin.
And what if customers don't want to pay the higher interest rate? Pearce asked the committee. "The answer is simple," he said. "All he has to do is stop using the card."