Illinois Funds Withdrawn in Credit Protest

The treasurer of Illinois withdrew almost $220 million in state deposits from First National Bank of Chicago on Thursday to protest its 19.8% credit card interest rate.

“Illinois taxpayers will not help fund their gouging of consumers any longer,” said Jerome Cosentino, making good on a campaign promise 10 days after he took office.

It was the first such action by an elected official in the nation, according to a national credit card consumer group.

Cosentino, a Democrat who served a previous term as treasurer from 1979 to 1983, acknowledged the withdrawal was “a drop in the bucket” for First National, with total assets of $39.1 billion and deposits of $27 billion.

“It’s a moral decision,” he said at a news conference.

Bank Spokesman Replies

“It’s unfortunate that Mr. Cosentino felt compelled to remove some state deposits,” First National spokesman Peter Soraparu said. “We value all the business we do with the state of Illinois, and we will continue to serve various state departments we continue to have relationships with.”

First National, the largest issuer of bank credit cards in Illinois and one of the largest in the nation, continues to charge the high rate despite a 50% drop in its own interest rates over the past five years, according to the Bankcard Holders of America, a nonprofit group based in Washington, D.C.

During his campaign, Cosentino called for a cap on credit card interest rates of 3 percentage points over the prime rate, now 10.5%.

Plans More Withdrawals

He said Thursday that he planned to use more than $3 billion in state treasury funds deposited in Illinois banks to press for lower interest rates on bank cards, but did not specify a deadline or name banks that may be targeted.

Cosentino also announced that “several Illinois banks that are interested in state business have lowered their credit card finance charges to 13.8%.

“This will result in a major savings to their customers and to people who tear up their First cards and apply instead to these banks,” he said.

About 7 million Illinois residents are holders of bank credit cards.