Sen. Laurence Levitan, chairman of the Senate budget and tax committee, has asked Attorney General Stephen H. Sachs to issue an opinion that would exempt American Express Co.'s extended payment plan from state credit card fee laws.
Levitan said he asked Sachs for the ruling because it would allow American Express to charge customers an 18 percent interest rate on its extended payment plan instead of the 21 percent it now charges. American Express, which has more than 200,000 customers in Maryland, introduced the extended payment plan, for travel-related expenses only, last month. In 34 states, the interest rate under the plan is 18 percent; in Maryland, the District and 15 states the rate is 21 percent.
Maryland law prohibits a credit company from charging a membership fee, as American Express does, on an account that permits open-ended payments, in which the account does not have to be paid in full as long as the minimum monthly payment is made each month. Membership fees are permitted on close-ended accounts, such as American Express has maintained for years, where payment in full is due upon rendering of the bill.
Levitan wants Sachs to rule that because the travel plan, which is open-ended, is only a small part of the business done by American Express, it is not affected by the state law. If that is done, Levitan says, American Express would be willing to deal directly with its customers without fear of violating Maryland law and would charge the 18 percent interest rate.
As it is now, American Express farms out its extended payment plan to a California bank, which has set the interest rate at 21 percent. Recently, Maine, which has credit laws similar to Maryland, issued an opinion exempting the American Express travel program from its laws, and based on that the company agreed to deal directly with customers in the state and charge 18 percent interest.
Levitan has introduced legislation that would require American Express to lower its charge to 18 percent, but he said that if Sachs will issue an opinion similar to Maine's, he will withdraw his bill.
"The American Express people tell me this can be solved without legislation and that's fine with me," Levitan said. "The point is to get the consumers the lower interest rate one way or the other."
Sachs, who received the request today, said he could not speculate yet on what his ruling would be.
If Sachs does not issue the opinion, American Express customers will have two other chances to get the lower interest rate, through Levitan's bill and through legislation supported by Gov. Harry Hughes that would legalize credit card fees in the state.