Grace period on credit cards will be repealed

Jerry Kopel

1/14/2000

Someone with pleasant manners is said to have grace. We say grace before eating dinner. Grace was the proper name of George Burn's wife. We can be in someone's good graces. Many English nobility are referred to as Your Grace. And we presently enjoy a "grace period" for payment of credit card debt.

But the grace period for credit card debt allowed by Colorado statute may soon disappear. Here's a little history:

On May 15, 1981 the House repassed HB 1585 and sent it to Gov. Dick Lamm. The bill made a number of changes in the Uniform Consumer Credit Code (UCCC), most of them harmful to consumers. Credit card interest rates were increased from 18 percent to 21 percent. There was one condition attached to the higher rate, as reported by Bob Threlkeld, reporter for the Denver Post:

"...credit card companies such as those issuing Visa and Mastercard, will be able to charge a 21 percent interest rate as long as they give customers a 25-day interest-free grace period before charging interest.

"No more than 18 percent interest can be charged if the credit card companies elect to begin charging interest immediately without a grace period.

"Two-party cards, such as those issued by department stores, will also be allowed to charge a 21 percent annual interest rate, but without any requirement for a 25-day grace period.

"Bank officials testified at earlier hearings that about 40 percent of Colorado credit card customers pay off their bills during the interest-free grace period. There is no requirement in present law that the companies give customers a grace period before charging interest, although many companies allow one."

Death of the grace period is part of a major revision to the UCCC prepared by a UCCC committee established by Atty. Gen. Ken Salazar which met ten times from April through August. (See the Colorado Statesman Oct.8th issue.)

A final meeting was held on Nov. 12th, and for the first time, the credit card grace period was discussed. The committee had earlier decided to eliminate distinctions between credit sales and consumer loans. According to the final report of Nov. 30th:

"...the committee considered whether to apply the grace period to seller credit cards such as department store cards, or eliminate the mandatory grace period on lender credit cards.

"The committee chose the latter recommendation since a grace period is standard industry marketing practice and the restriction applies only to credit cards and not to closed-end credit transactions. Repeal of this requirement should not harm the consumer and will eliminate unnecessary regulation."

Repeal of the grace period was unanimously approved by the three member commission that governs the UCCC.

If the 25 day grace period is repealed, there would definitely still be some period allowed by most banks issuing credit cards, but it will likely be as little as 10 to 15 days. The incentive to reduce the grace period? Collecting an additional 10 to 15 days interest.

There is still an unresolved question. Does Colorado's 25 day credit card grace period govern banks with headquarters in other states? Under court decisions, Colorado interest fees and other charges are superseded by a bank's "home state" statutes.

But a grace period is not a finance or penalty charge. There are no relevant court decisions. These out-of-state banks doing business in Colorado may be presently violating Colorado's credit laws. Of course if the grace period is killed, the issue becomes moot.

* * *

The state demographer and the Census Bureau are having a "what-if" fight about whether Colorado's population in the 2000 census will be 4,200,000 or 4,125,000. In either case, Denver is going to lose two or possibly three of the 15 seats it presently holds in the 100 member House and Senate.

Ten of those seats are in the 65 member House and three of those 10 seats succeed (in the 1992 report of the Colorado Reapportionment Commission) only with the addition of a portion of Arapahoe County for Ken Gordon, Dan Grossman, and Jennifer Viega. In the Viega district, Denver is slightly a minority portion of the population.

In the 2002 election, using the Census Bureau "guess", it will take an average of 63,460 inhabitants to equal one House district. In 1992, the number was 50,683 people. If the Denver House members have "pure" Denver seats, there would be eight of them. Chances are Denver will keep nine seats, with five of the nine incorporating populations from Arapahoe and Jefferson counties.

Over in the Senate, there are five members from Denver. Four of them are "pure", representing Denver only. They are Rob Hernandez, Doug Linkhart, Pat Pascoe, and Gloria Tanner. The fifth seat held by Dottie Wham includes a small population from Arapahoe County.

In the 2002 election, again using the Census Bureau numbers, it will take an average of 117,770 inhabitants to equal one senate seat, compared to 94,126 in 1992. Denver will continue to have four "Denver only" seats. The fifth seat will be an Arapahoe or Jefferson County Senate district with the Denver portion containing no more than 35 to 40 percent of the population.

Thirty years ago, as the state prepared for the 1970 census, Denver had 18 House and nine Senate members. Denver will go from 27 members before election in November, 1972 to 13 members after the election in November of 2002.

There is a chance that Denver will hold its own in the 2010 census based on population in the land annexed from Adams County for the airport, plus the Lowry and Stapleton areas, but Denverites need to face the reality: Denver will never again have more than 13 to 14 seats in the 100 member state legislature.

Jerry Kopel writes a column for the Statesman based on 22 years past experience as a state legislator.