Banks seek help in dispute over credit card fees.

Banks may move thousands of credit card jobs out of California -- and specifically Los Angeles -- unless the state Legislature passes a law to allow banks to levy the same late fees on credit cards that their out-of state competitors charge, according to an official of the California Bankers Association.

There are 21,000 credit card jobs in the state -- one-third of them in the Los Angeles area, according to Gregory Wilhelm, director of government relations for the California Bankers Association. "These in-state folks may, in fact, move jobs out of state" if the law isn't changed, he said.

A bank's ability to charge late fees on its credit cards is tied to the laws of the state where it operates its credit card servicing center, even though it may issue cards nationally, Wilhelm said.

Chris Chenoweth, general counsel for the bankers association, which represents 420 commercial banks which employ thousands in credit card facilities throughout the state, noted that BankAmerica Corp. has already moved its credit card operation to Arizona, where state laws allow it to levy whatever late fees it wants to charge.

Other banks have been waiting and hoping that California law will be revised, which is why the issue is the association's top priority, the counsel said.

But now it looks like the Legislature won't change the law and banks will move these jobs out of state, Chenoweth said, adding, "Who will move and when, I don't know. But it's inevitable."

Wells Fargo & Co. and First Interstate Bancorp. two of the big California banks which have been forced to pay multimillion-dollar court judgments for charging what the courts found to be excessive late fees, are among the banks that may consider moving jobs out of the state in the future, if SB1145, authored by Sen. Dan Boatwright, D-Concord, is not enacted.

The bill would allow banks which operate credit card operations in state to charge the same late fees, about $10 to $20, as rivals operating in other states, said Tim Shelley, aide to Boatwright.

Banks with in-state operations "don't know what to charge," Wilhelm said.

Wells Fargo currently charges $5.75 and First Interstate is charging 5 percent of the monthly payment, with a maximum of $5, officials for the two banks said.

Currently, there is no law in California regarding what banks can charge consumers who are late in making their monthly minimum credit card payments.

But in recent years, state courts have held that late payment charges of $3 to $5 are excessive.

This year Los Angeles-based First Interstate Bancorp was ordered to pay $14.5 million and in a separate court decision in 1989 San Francisco-based Wells Fargo & Co. was ordered to pay $5.2 million for charging late credit card fees.

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

The bill is not expected to pass this year unless the California Bankers Association can reach a compromise with the measure's opponents, including consumer groups and the California Trial Lawyers Association. The bill has passed the Senate Banking Committee, but the Senate Judiciary Committee instructed the two sides to come up with a compromise that would cap the late fees, Shelley said.

But Wilhelm said that bankers association members oppose any cap. He said banks need late fees as a stick to prevent people from paying late.

"We want people to pay on time," Wilhelm said. "The out-of-state people can prevent credit risks," while banks with California operations can't and "that's the problem."

The fee legislation is the California Bankers Association's top priority this year, Wilhelm said. "This is a real litmus test, in our view, for how serious the legislature is about improving the jobs environment in California," he noted.

"What the banks are trying to do is get an exemption from the state Legislature that they can't get from the Supreme Court," said Jim Sturdevant, the San Francisco attorney who sued and won the multimillion-dollar judgments against First Interstate and Wells Fargo.

Sturdevant said that under state law, when a customer is late making a credit card payment, banks can only recover their damages -- the costs incurred because the payment was late. And the juries ruled those charges were in excess of damages.

"This legislation isn't going to prevent anyone from moving" their credit card operations, he added. "They're going to move anyway."

Banks will base location decisions on labor costs and other costs of doing business, Sturdevant said. "No corporation moves its business because of a judgment of a few million dollars," he said.

Corporations will move operations because of labor costs and other costs of doing business and not because they can't charge credit card late fees which amount to "a few million dollars" a year, Sturdevant said.

Rich Wyler, spokesman for First Interstate, said the bank, which employs 650 in its Simi Valley credit card operation, is "not necessarily" going to move jobs out of state if SB1145 doesn't pass.

"But I can say if we're looking to set up a new credit card operation, we would not look at California," Wyler said. "If we're looking to expand, one of the things that we would look at is a credit card operation in another state."

First Interstate favors SB1145 because "frankly, we feel we need that kind of shield against that kind of class action suit" which the bank recently lost, Wyler said.

Kathleen Shilkret, spokeswoman for Wells Fargo, which has a 1,000-employee credit card operation in Concord, said the bank "certainly" does not have any "immediate" plans to move jobs out of state if the law on late fees isn't changed.

"But with the regulatory environment increasingly hostile to our business, we may have to consider it," Shilkret said.