Banks again look to Legislature to end fee controversy.

Defeated credit card bill gets reintroduced in Assembly

After seeing its efforts go down in defeat earlier this year, the California Bankers Association has found a sponsor to re-introduce industry-backed legislation allowing banks with in-state credit card operations to charge late fees.

State Assembly Republican Leader Jim Brulte, R-Pomona, on Feb. 14 introduced AB 2830, which would allow banks with credit card operations in California to charge a late fee of up to $15 to customers who fail to make their monthly minimum payment on time. The bill applies to financial institutions which process credit card bills at facilities within California.

The bill is a resurrection of SB 1145, authored by Sen. Daniel Boatwright, D-Concord, which was voted down by the Senate Judiciary Committee in January. The bill was reintroduced into the Assembly because, after the Boatwright bill failed, the bankers association approached Brulte, who is an assemblyman, to re-introduce the bill, said Phil Perry, Brulte's press secretary.

"They approached Jim (Brulte) and he said he'd carry it because it has to do with keeping jobs in the state," Perry said.

Los Angeles-based First Interstate Bancorp, which supports the bill, is "more optimistic" that it will pass as an Assembly bill, said bank spokesman Rich Wyler. A First Interstate lobbyist believes the bill "has more bipartisan support in the Assembly" than in the Senate, Wyler said.

The bill would allow banks which operate in-state credit card operations to charge late fees like those charged by out-of-state credit card operations, said Gregory Wilhelm, lobbyist for the bankers association. Currently, banks which distribute credit cards to California residents, but domicile credit card operations out of state, charge late fees of about $10 to $20, Wilhelm said. There is no law in California regarding what banks can charge consumers who are late payers. But in recent years California courts have held that late payment charges of $3 to $5 are excessive.

Last year, Los Angeles-based First Interstate Bancorp was ordered by a state court to pay $13.9 million to the late payers who were charged fees, while San Francisco-based Wells Fargo & Co. was ordered by a state court in 1989 to pay $5.2 million for charging late credit card fees.

In March 1992, the California Supreme Court refused to hear an appeal of the Wells Fargo case.

Wells Fargo did not appeal the decision to the U.S. Court of Appeals because it did not want to spend more money on legal fees, said Kathleen Shilkret, spokeswoman for the bank.

The legislation has been opposed in the past by consumer groups and the California Trial Lawyers Association. Bankers have threatened to move California credit card operations to other states so they can charge late fees and avoid multimillion-dollar court judgments, Wilhelm said.

Boatwright originally introduced the bill in order to save 1,000 jobs at the Wells Fargo Bank credit card operations center in Concord.

Wells Fargo spokeswoman Shilkret said no decision has been made yet on whether the bank will move its operation out of state as a result of the Boatwright bill's defeat.

"Our head of credit card operations has said that moving is something we may have to look at," she said. "We have been heavily lobbied by other states" which want the bank to move the operations and 1,000 jobs there.

Wilhelm said other credit card operations and California jobs are at stake unless the Legislature passes the bill. Notably, he said, the First Interstate operation is in jeopardy, particularly since the Simi Valley credit card operation's building was severely damaged in the Jan. 17 Northridge earthquake. Rich Wyler, First Interstate spokesman, said the four-story building is currently "yellow tagged," or deemed to have limited entry by building officials.

Since the earthquake, First Interstate has been bussing 540 credit card employees into downtown Los Angeles while the building is being repaired. It will take at least two months, if not longer, for the building to become operational again, Wyler said.

He said the bank intends to move the employees back to the building when it is repaired and not relocate the credit card operation out of state.

Wyler added, "We are currently supporting legislation which would make a more level playing field between the California state credit card operations and the out-of-state credit card operations."

Wilhelm said the legislation may have a better chance now that several publications have written about the credit card issue.

Notably, Forbes magazine published a story this month, titled "How to rob a bank," which detailed how lawyers who sued First Interstate and Wells Fargo reaped millions in legal fees.

Wilhelm said, "It is painful to see this issue become the subject of national ridicule and an embarrassment for the State of California. It is time this state put out a welcome mat for business. Stories like this are sending a terrible message to Forbes readers -- from CEOs to relocation consultants."