ASSEMBLY FINANCIAL INSTITUTIONS COMMITTEE
STATEMENT TO
ASSEMBLY, No. 2348
STATE OF NEW JERSEY
DATED: MARCH 3, 1997
The Assembly Financial Institutions Committee reports favorably Assembly Bill No. 2348.
"The State Bank Parity Act," P.L.1981, c.4 (C.17:13B-1 et seq.), was intended to permit even competition among New Jersey lending institutions (banks, savings banks, savings and loan associations and credit unions) by permitting all of them to charge a rate of interest permitted to any one or more of them. The recent U.S. Supreme Court case, Smiley v. Citibank, 116 S.Ct., 1996, held that the Comptroller of the Currency has reasonably interpreted the term "interest" in 12 U.S.C. §85 to include late-payment fees. The Comptroller of the Currency, in the federal regulations found at 12 C.F.R. §7.4001(a), states that:
"the term 'interest' as used in 12 U.S.C. 85 includes any payment compensating a creditor or prospective creditor for an extension of credit, making available of a line of credit, or any default or breach by a borrower of a condition upon which credit was extended. It includes, among other things, the following fees connected with credit extension or availability: numerical periodic rates, late fees, not sufficient funds (NSF) fees, overlimit fees, annual fees, cash advance fees, and membership fees. It does not ordinarily include appraisal fees, premiums and commissions attributable to insurance guaranteeing repayment of any extension of credit, finders' fees, fees for document preparation or notarization, or fees incurred to obtain credit reports."
The recent enactment of Assembly, No. 1907 as P.L.1996, c. 137 (C.17:3B-29 et seq.) and of Assembly, No.2007 as P.L.1997, c.12 (amending sections of the "Market Rate Consumer Loan Act," C.17:3B-3 et seq.), makes New Jersey law consistent with the U.S. Supreme Court's holding with respect to the term "interest." This bill will apply parity across all State chartered depository institutions with respect to the meaning of the term "interest."