The Maryland Senate gave the state's lending industry a major victory here today as it approved controversial legislation that will allow higher interest-rate ceilings for most consumer loans and credit card charges.
The bill, approved on a 30-to-13 vote, will enable banks, businesses, and small loan companies to raise current interest ceilings on most types of consumer loans to 24 percent from 18 percent. The lid on credit card finance charges, now at 18 percent, also will be raised to 24 percent.
Today's debate was bland in comparison to the scenario in the House of Delegates last month, where opponents of the bill had marshalled their forces to exclude a provision that would have allowed membership fees on credit cards.
Banking lobbyists could not persuade the senators to restore the fees, but they applauded final passage of the legislation.
"This again points up that the Maryland General Assembly is not afraid to accept responsibility on a very difficult measure," said William K. Weaver, executive director of the Maryland Bankers' Association. "Credit would not have been available to people in Maryland. This should help considerably."
Critics of the bill disputed that point, arguing that profit-making banks are the chief beneficiaries of the legislation.
"If banks were in a difficult situation it would be one thing," said Sen. Julian L. Lapides (D-Baltimore). "But this is a bad bill; it's in the consumer's worst interest." Opponents won an unlikely ally in Sen. Frederick Malkus (D-Dorchester), who voted for the first time in his 31-year career against higher interest rate ceilings. "I've been told too many times that money is a commodity and that if you take off the limits the (interest) rates will go down," said Malkus (D-Dorchester). "I've been lied to."
The evolution of the bill during the legislative session was marred with conflict and awkard efforts at compromise. Gov. Harry Hughes surprised State House observers at the outset by reversing his earlier position on interest rate deregulation and announcing his support of a 36 percent ceiling. He changed that position two more times, partly at the behest of legislative leaders who disagreed with the proposed ceilings. But the twists and turns at all stages jeopardized efforts to change the bill in the Senate -- perhaps to restore credit card fees -- which annoyed some legislators, including several who voted for it today.
"I object to packaging all these rates and limits in one bill," said Sen. John A. Cade (R-Anne Arundel). "Because of the lack of leadership on the part of the administration, we have had very little opportunity to work on or amend this bill in the last week of the session. I resent that."
Supporters said they hope the legislation will deter banks from moving from Maryland to Delaware, where banking laws are more lenient. The state's four largest banks already have begun to transfer their credit card operations out-of-state to take advantage of higher interest ceilings and the ability to charge fees for credit-cards.
Proponents also argued that small loan companies and businesses are going bankrupt daily and are in desperate need of higher interest ceilings.
The bill, when signed by the governor as expected, will allow a 24 percent ceilings on consumer loans over $2,000 and all credit card balances. Those balances of more than $700 currently have a 12 percent lid.
Ceilings on consumer loans between $500 and $700, which already are at 24 percent, would be allowed to go as high as 33 percent. Loans on second mortgages could increase from the current lid of 16 percent to 24 percent.