Lobbyists Use All Weapons in Legislative War

A fiercely contested bill to triple late fees for bank credit cardholders was bottled up in an unsympathetic Senate committee last year--headed for defeat--when lobbyists for the bankers decided that their backs were against the wall.

It was time for an attempted hijacking.

The tactic would have melded the credit card fee with a distantly related measure, bypassed the hostile committee and taken the vote directly to the full Senate, where passage seemed likely.

But their effort failed and Senate Bill 1145, by Sen. Daniel E. Boatwright (D-Concord), which might bring $60 million a year to California banks, was put to a vote in the Senate Judiciary Committee this month and narrowly defeated. Even so, the battle continues.

The credit card measure is one of hundreds of bitterly fought bills introduced every year that are of deep concern to narrow interests but receive little if any public attention. Such bills pit one battalion of high-priced lobbyists against another in grinding legislative warfare enlivened by bold assaults and tactical surprises.

With huge sums at stake, lobbyists often reach for the bayonets and rifles of their trade--the “spot bill,” the “gut and rewrite,” committee shopping, closed-door negotiations and well-placed campaign contributions. Even an occasional “hijacking.”

The maneuvering over the credit card bill offers a glimpse at the process--at the strategies and tactics of lobbyists. Particularly when one powerful interest clashes with another, the noise can be overwhelming--and the voice of ordinary consumers can be lost in the din.

In this case the bill’s sponsor, the California Bankers Assn., is supported by some of the largest financial institutions in the country, including Bank of America, Wells Fargo, Citicorp and Household International.

On the other side are the nonprofit Consumers Union, publisher of Consumers Report, and the California Trial Lawyers Assn., with close ties to the Democratic legislative leadership.

The bankers’ bill was a reaction to a decade of class-action lawsuits that have cost the state’s banks more than $30 million in penalties and rebates. The courts found that many banks were overcharging credit card customers for making late payments or exceeding their credit limits--in violation of century-old California contract law that limits the banks’ recovery to actual damages.

The lawsuits have forced California-based banks to limit the penalties to about $5--a third of the $15 charged by many out-of-state banks.

Beaten in the courts, the banks decided to respond with a bill that would allow them to charge whatever late fees and over-limit penalties they chose.

The Spot Bill

Last year, Wells Fargo officials went to Boatwright and persuaded him to carry the bill, which was written by the California Bankers Assn. The bankers argued that California would lose thousands of jobs because credit card operations based here could not charge the same high penalties as out-of-state competitors. In general, banks may issue cards all over the country but are governed by the laws of their home states.

Without a bill to lift the limits in California, some banks said they would move their credit card units to friendlier states, such as Nevada and Arizona.

“The Wells Fargo credit card operation is located in my district,” Boatwright said. “I didn’t want to lose several hundred jobs in my district.”

But the five-line bill that Boatwright introduced in March had to do with disclosure of bank account charges and made no mention at all of late or over-limit fees. Opponents described the measure as “a spot bill,” trivial legislation intended to hold a place for the real bill to follow. Its real purpose was to make sure the bill got to a friendly committee.

Committee Shopping

Because the spot bill was strictly a banking measure, with no effect on credit card fees, it was referred to just such a sympathetic committee--the Senate Committee on Banking, Commerce and International Trade.

Boatwright is a member. And chairing the committee at the time was Sen. Wadie P. Deddeh (D-Bonita), for years a paid director of the Pacific Commerce Bank of Chula Vista.

Almost all the committee members had received significant contributions from the banks. The biggest beneficiary was Deddeh, who received $5,000 from the bankers’ political action committee for his unsuccessful 1992 run for Congress.

The Gut and Rewrite

In late April, just weeks before the banking committee was scheduled to hear the measure, Boatwright amended his bill--dropping all five lines and substituting language that would eliminate the ceiling on credit card late fees and over-limit charges.

In the parlance of lobbying, this was a classic “gut and rewrite,” taking the potential opposition by surprise while the bill sat in a favorable committee.

Consumers Union, which tries to keep track of all bills affecting consumers, spotted the change, and lobbyist Gail Hillebrand began making the rounds of legislative offices in an effort to defeat it. Her approach was the most basic form of lobbying, arguing the bill on its merits. At one point, she allowed a reporter to trail after her, acknowledging that she hoped his presence might slow efforts by the bankers to slip their measure through.

Her message was that the bill would hurt consumers and jettison a hundred years of established contract law. She often ended conversations with lawmakers or their aides by asking: “Is this the message you want to send? ‘You lose in court and you get it overturned in the Legislature.’ ”

Finding Allies

Lobbyists for the Consumers Union realized that their arguments alone were unlikely to carry the day. They sought out a powerful ally to defeat the bankers and found one--the California Trial Lawyers Assn.

Among this group’s members were a number of attorneys who had discovered a bonanza in filing class-action lawsuits against banks. Leaders in the field were two association members, James and Patricia Sturdevant, a San Francisco husband-and-wife team, who had been awarded more than $3 million in attorney fees in a series of cases filed against Wells Fargo Bank. The Sturdevants hired a lobbyist, Richard E. Damm, who worked closely with the trial lawyers’ lobbyists against the bankers’ bill.

The lawyers group is one of the most influential in the Capitol. Its political action committee donated $671,778 to state races during the 1991-92 legislative session--almost twice the $343,100 from the California Bankers Assn. Many lawmakers are attorneys sympathetic to the trial lawyers’ positions.

But even the united forces of consumers and attorneys had little hope of killing the credit card bill in the Senate Banking Committee.

Shopping Again

So opponents went to Sen. Bill Lockyer (D-Hayward), then chairman of the Senate Judiciary Committee.

Trial lawyers’ lobbyist Donald C. Green asked Lockyer to have the measure referred to his committee, where the bill stood little chance of passage. An attorney, Lockyer has long enjoyed the financial backing of the trial lawyers, who gave his campaign $11,000 in 1992.

In an interview, Lockyer, now Senate president pro tem, was quite frank about the tactics of committee shopping. “One of the games that people play,” he said, “is to introduce a bill and have it assigned to a committee regarded as friendly and then amend it in ways that, if originally written that way, it would have gone to a different committee.

“It’s obvious that the banking community has a lot of influence with the banking committee,” he said. And he admitted that the trial lawyers have similar clout with the Judiciary Committee.

Because of the new subject matter, Lockyer agreed with the lawyers and said the bankers’ bill belonged in his committee. Making sure it got there, he said, was “part of my job as chairman.”

So on the same day that the Senate Banking Committee voted 6 to 1 to approve the bankers’ measure, the Senate Rules Committee, which assigns bills to committees, unanimously agreed to send the bill to Lockyer’s committee as well.

Every committee vote is another opportunity for opponents to kill a bill and the bankers knew their bill would be in trouble in the Judiciary Committee. “We didn’t want to be in two committees,” California Bankers Assn. lobbyist Gregory O. Wilhelm said.

Private Negotiations

What followed was another round of intensive conversations with lawmakers.

Wilhelm contended that failure to act would cost the state 20,000 jobs. The assertion was based on a series of studies, all funded by the credit card industry.

The banking lobbyists also got out the word that both lawyers and consumer groups had directly benefited from the class-action lawsuits. Last year, a judge awarded Consumers Union $703,000 in a late-fee overcharge case against Wells Fargo Bank.

Lobbyist Hillebrand countered that her group was willing to compromise--setting reasonable fee limits and shielding the state’s banks from lawsuits.

Using his power as committee chairman, Lockyer insisted on a compromise.

During a break in a May hearing, Lockyer ordered lobbyists from both sides to meet in the tiny Senate Judiciary Committee law library and work something out.

Presiding over the meeting was committee consultant Gene Wong. But no lawmakers attended the closed-door session, and the public was not invited.

The bankers were unyielding.

After an hour, Lockyer ducked in, asking whether there had been any progress. When told there had been none, several of those present said he replied: “Well, I guess the bill’s dead.”

Back in the hearing room, Lockyer postponed the vote indefinitely and berated the banks publicly for being “unnecessarily rigid. We want to keep your jobs in this state. . . . We don’t want a repeat of the S & L debacle where consumers were ripped off.”

The Hijacking

In the final days of last year’s legislative session, the bankers made a desperate effort to revive their bill with a “hijacking.”

They approached Assemblyman Sal Cannella (D-Modesto), who had a bill to stop credit card issuers from disclosing information to telemarketers and others unless cardholders were given a chance to stop them.

The Cannella bill had won approval by the Senate Judiciary Committee and was awaiting a final vote by the full Senate.

“I don’t want people thinking they were gangsters in the night,” Cannella said. “They didn’t threaten to kill my bill or anything else.”

But Cannella said he went to Lockyer, who told him that unless a compromise could be worked out on the late fee issue, the consumer protections in his bill could also go down to defeat.

Cannella turned the bankers down.

“You never give up,” banking lobbyist Wilhelm later explained. “As long as the Legislature is in business, you’d like to see if you can advance the ball.”

Trying Again

The bankers had no choice but to wait out the four-month legislative recess. In January, at another hearing of the Senate Judiciary Committee, the bankers offered a modest compromise. They would amend their bill, putting a limit on late fees and over-limit penalties, but setting them at $15--triple the amount most California banks are now charging.

The trial lawyer and consumer lobbyists countered with a proposal of their own--allowing late fees of $3 or $6 depending on how tardy the payments were.

Lockyer and Sen. David A. Roberti (D-Van Nuys), then Senate president pro tem, proposed a middle ground--limiting penalties to $10, but adding a 10-day grace period for credit card customers.

In a series of votes, the committee rejected all the compromises and then defeated the Boatwright bill.

However, every lobbyist knows that no bill is ever dead as long as the Legislature remains in session.

And the bankers are considering introducing the same measure all over again--in the Assembly.

The Lobbyist’s Vernacular (Southland Edition, A20)

Every profession has its own coded vocabulary to deal with day-to-day business. Lobbying is no different. Here is a brief glossary of terms used by lobbyists and legislators in the Capitol.

* Lobbyist--In common usage, anyone paid to influence the actions of legislators or other government officials. But rules established by the Fair Political Practices Commission define lobbyist much more narrowly. In California a lobbyist is anyone paid $2,000 or more in a month to influence legislative or administrative action, or who is paid any amount and makes 25 contacts with government officials in a two-month period. Many people who lobby can rightfully say they are not “lobbyists” under the definition and thus escape most regulations.

* Third House--The lobbying corps in the Capitol, so-called because of its pivotal role in the operations of the Legislature. The first two houses are the Assembly and the Senate.

* Author--The legislator whose name appears on a bill. Often, the real author of a measure is a lobbyist or an attorney for a special interest. In some cases “authors” freely admit that they are carrying a bill for a constituent, corporation, trade group or labor union, and will bow to the wishes of a special interest on questions of strategy or amendments. Other “authors” insist on maintaining control over bills and reserve the right to reject any changes.

* Sponsor--The special interest that is the moving force behind a bill. It could be an association of doctors, a large company or an environmental group like the Sierra Club. Increasingly sponsors are writing their own legislation and supplying all the staff work, even scripting speeches for legislators to deliver on the floor when the bill comes up for a vote.

* Spot bill--A measure of little or no consequence, introduced and moved through the Legislature so that it can later be stripped and rewritten, often into a bill that does a great deal.

* Gut and rewrite--An amendment that totally changes the character of a bill by removing all the old language and replacing it. This is done with a spot bill when its sponsor is ready to move ahead.

* Hijacking--Seizing a bill and using it for a completely different purpose than originally intended. Hijacking most often occurs near the end of a session or at crucial deadline times in order to bypass parliamentary rules and enact a measure quickly.