Got a Credit Card? Read This

The way Governor Rose Mofford sees it, Arizona credit-card customers are going to get screwed anyway. So she and state lawmakers might just as well help the process along in the name of economic development.

Mofford supports legislation drafted by lawyers for Security Pacific Bank to "clarify" state banking laws on credit-card fees. The way the governor's office explains it: Arizona law needs some minor changes to "clearly delineate allowable charges" for credit cards, as two other states have already done.

Exactly what are some of those "allowable charges" in the proposed legislation? Well, there is one that would let the bank charge its credit cardholders a fee every time they use the card. Another would allow the bank to impose a minimum-interest charge each month, no matter how low the balance. Then there are fees for late payments, returned checks and instances where the cardholder has gone over the limit.

And if you don't like those charges and want to get rid of your card? The legislation would allow the bank to charge a fee for closing the charge account.

The governor doesn't see any problem with all that. "The [state] banking department evaluated the proposal and concluded it would have little impact on consumers," contends Mofford press aide Vada Manager.

The reasoning behind that logic, Manager explains, is that South Dakota and Delaware already allow such charges. And there's nothing that prohibits Security Pacific--or any other bank in Arizona, for that matter--from setting up a branch in either of those states to issue their credit cards and charge the fees to Arizona residents.

"Whether the service is in Delaware or Arizona, you still get charged," Manager says. "So you may as well have the jobs."

Those jobs are the carrot Security Pacific is using to entice Arizona lawmakers and the governor into changing state banking laws in the special legislative session later this month. Security Pacific--the multistate bank which bought Arizona Bank several years ago--has promised to move its credit-card operation from California to Arizona if the law is changed. That means 677 jobs, most of which will be full-time, with salaries ranging from $14,000 a year for nineteen embossing clerks to $48,000 for three customer-service managers. Another 148 people would be customer-service representatives earning $19,100 a year.

The lion's share of jobs will be workers handling collection services, with 262 employees each earning $22,700 annually. That is about $1,500 higher than the average salary for all people employed in Arizona. Mike Smith, a private lobbyist under contract to Security Pacific, says the bank wants to move because California has a cap on credit-card interest rates. Arizona has no such limit. Smith says it also costs Security Pacific more money to operate its credit-card center in California than it would in Arizona, where both labor and office-space costs are cheaper.

But Smith says that if Arizona won't change its laws to allow the new fees, the bank will take its business to another, more cooperative state. The likely candidate is Nevada.

"The issue [for banks] is to find the state where you can have the clearest and most permissive credit-card laws," says state banking chief Hank Rivoir. He, like the governor who appointed him, supports the bill.

Smith concedes that some of the proposed charges might be considered a little outrageous. For example, when asked about the per-transaction fee he responds, "That's insane to me."

Smith says that he doubts any bank--including his client--would impose all of those fees, saying they would scare off potential customers. But Smith's argument ignores the reality of how many banks get people to carry their credit cards.

Would-be cardholders fill out an application, either one they pick up in person or get in the mail. Sometimes the mail solicitations guarantee a certain line of credit or pre-approval.

It isn't until after the application is approved that the card--and the contract with all the rules and fees--comes in the mail. The bank works on the legal presumption that if you sign the card and start to use it, you've read and agreed to all the conditions. But even Rivoir says that he doubts many people actually read these contracts.

When pressed, Rivoir admits he's not overly enthusiastic about everything Security Pacific wants changed. Take that charge for each transaction, for example. "I have pointed that out to the governor's office," he says. And the fee for canceling the credit card? "You're right. It's not a very consumer-oriented kind of deal."

But none of that dampens Rivoir's endorsement of the bill. He echoes Mofford's reasoning that Arizona won't be the only one with such a law.

It's the same kind of "but-Johnny-does-it" logic a child uses to justify some risky venture. A wise parent probably would respond, "Well, if Johnny jumped off the roof, would you follow?"

It's not the same thing, Rivoir insists. "It's not a question of you voluntarily jumping off the roof. You're going to get all these rates and charges no matter what. The only question is if you're going to jump off your roof or Johnny's roof. My point is, it doesn't make a damn bit of difference what's in the bill."

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