Governor to Veto 19.2% Interest on Credit Cards

Gov. George Deukmejian announced Saturday that he will veto legislation that would have kept maximum interest rates charged to consumers at 19.2%, saying the action will save Californians $60 million to $72 million a year.

Deukmejian’s refusal to sign the bill means that the ceiling on retail credit card finance charges will drop to 18% next year. The bill would have extended the 19.2% ceiling until Jan. 1, 1991.

The 19.2% rate has been in effect since 1980. Before that, an 18% maximum rate was in effect for more than 20 years.

The governor, during his weekly radio address, said current low prime interest rates of 8.2% did not justify the higher figure. He said the higher rate was put into law at a time when interest rates had soared to 21%.

“I am vetoing this measure because the evidence does not support the need to continue with this higher interest rate because the prime rate is no longer 21%, but is down to 8.2%,” Deukmejian said.

‘$50-Million Giveaway’

The bill’s author, Assemblyman Charles M. Calderon (D-Alhambra), had warned that if the extension was not granted retailers might be forced to drop some credit card customers because of the high costs involved in credit finance. But critics called it “a $50-million giveaway.”

Deukmejian, during his radio broadcast, again repeated that he intends to sign legislation that will overhaul California’s income tax system and align it more closely with recent revisions in federal tax codes. Under the legislation, the top tax rate will drop from 11% to 9.3%.

Deukmejian called the change “good news for California taxpayers.”

“Because it brings our state laws into close conformity with the new federal law, paying state taxes will be a lot easier for most Californians,” Deukmejian said.