Thursday, April 30, 2009

Rob Garagiola on Bill Frick’s Credit Card Bill

Senator Rob Garagiola (D-15), a member of the Senate Finance Committee, sent us this statement on Delegate Bill Frick’s (D-16) credit card bill.


First, the bill would have covered every conceivable contract beyond just credit cards. We heard from many industries who said that they would be affected under the bill as passed by the House and expressed concerns about unintended consequences. Delegate Frick said that was not his intent so he went back to the drawing board and had some suggested amendments drafted to his bill. He presented them before a work group (a handful of Senate Finance members), which included me. However, the amendments would have brought in all regulations of the Federal Trade Commission, Federal Reserve, and I am not sure which other federal agencies, since the beginning of time - and did it by reference to a federal statutory provision - rather than by saying specifically which federal regulations we wanted the State Attorney General’s office to enforce.

His bill as it came before us, and the suggested amendments that he presented, were both overly broad beyond what he was trying to accomplish. He essentially acknowledged that his original language was overly broad by trying to remedy it with an amendment. Unfortunately, his amendment was also overly broad and we were not presented answers to questions about what federal regulations we would actually bring under the enforcement of the State Attorney General if we passed the bill with his amendments. He could not answer what regulations he was essentially bringing under Maryland law via simple statutory reference.

Delegate Frick stated that he was aware that the Federal Reserve considered thousands of pages of comments on their proposed regulations on credit cards (the same issue Delegate Frick sought to address with his bill) prior to the Federal Reserve deciding to make such regulations final. The federal regulations on credit cards will be effective on July 1, 2010. Was there reasoning for such delay? Did the Federal Reserve consider all sides when deciding upon an effective date? One has to assume that the Federal Reserve saw a problem, studied it, promulgated proposed regulations, took in thousands of pages of comments, and issued final regulations because they wanted to do something to protect consumers. I am for protecting consumers. Was there some balancing of interests in having an effective date on July 1, 2010? Are there issues with timing to get national banks to comply in a shorter time period?

Finally, there were concerns about whether state law would be preempted under the notion that the state can’t impose its laws on federally chartered banks. It is my understanding that last year, Delegate Frick had an Attorney General letter that said such state law would be preempted. It is my understanding that his bill last year only focused on credit card interest rates and not broad contract law that this year’s bill was drafted to do. This year, he said he had an Attorney General letter saying that it was not preempted, perhaps because it was more broadly drafted to affect contract law in multiple other industries (not just credit cards). Nevertheless, there were still concerns by Committee members.

Delegate Frick’s legislation, even if it wasn’t so broadly drafted to affect industries he did not intend to impact, had an effective date of October 1, 2009. So Delegate Frick wanted us to pass a bill that sought to remedy problems with credit card interest rates being changed on consumers nine months earlier in Maryland. It’s not that the overwhelming majority of members of the Senate Finance Committee are anti-consumer - in fact, we crafted model mortgage lending legislation in 2008 that the federal government used for national legislation, and I could cite other multiple examples of consumer-friendly legislation worked on by the Senate Finance Committee - it was that Delegate Frick’s bill was too broad without knowing fully what the implications of it would be. Perhaps there would have been support for legislation that said “do just the federal regulations on credit card interest rates in Maryland 9 months earlier,” however, in isolation without a broader contract impact, it may have been preempted by federal law. The Committee was not willing to pass legislation that had a broader impact or unknown impact (with his amendments).