Card Disclosure Bill Vetoed in California

A bill that would have required credit card issuers to notify customers each month how long it would take to pay off their balance if they made only the minimum monthly payment was vetoed by California Governor Gray Davis (D) at the end of September. The disclosure provision resembles language contained in federal bankruptcy reform legislation, which has been stalled in a House-Senate conference committee since last summer.

Opponents of the disclosure bill in California argued that the legislation would have been expensive to calculate given that the results would be meaningful to only a very small percentage of cardholders who revolve a balance and consistently make only the minimum monthly payment. They point to a recently released Federal Reserve study for supporting evidence. The Fed surveyed the payment behavior of over 2,000 consumers in a series of interviews in 1999 and early 2000. Those consumers who would benefit the most from a disclosure requirement like the one proposed on California (and in the Federal bankruptcy legislation) would be consumers who 1) regularly revolve a balance, 2) regularly make only the minimum monthly payment, and 3) do not make additional charges on the card during the next month. The Fed surveys found that only 4% of bank-type cardholders fit this description.

In a letter to state lawmakers explaining his veto, Gov. Davis agreed with industry representatives that the disclosure requirement was excessive given the small number of consumers for whom it would be meaningful. He wrote "While this bill is well-intentioned, it cast too broad a net by requiring detailed information to a vast number of consumers who are not minimum payers, thus adding extra cost to consumers' credit." He encouraged the legislature to revisit the issue next session with narrower language that would require more targeted disclosure to minimum payers. Greg Wilhelm, director of government relations at the California Bankers Association, told the American Banker that more narrowly focused bill suggested by the Governor "is one I think the industry could live with."