Rate Deregulation Has Cost Consumers $100 Million

California’s largest retailers have increased revolving credit rates by an average of about 2 percentage points, to 20%, since rate ceilings were lifted in January, a survey released Thursday by Consumers Union contended. The boosts have cost the state’s consumers an extra $100 million per year, it said.

Meanwhile, retailers in the inner cities of the Los Angeles, San Francisco Bay and San Diego areas are charging rates as high as 27%, according to a companion study by the California Public Interest Research Group.

As a result, Consumers Union, publisher of Consumer Reports magazine, called on the state Legislature to reinstate the Unruh Act credit interest rate ceiling that prohibited retail charge rates from rising above 18%. The ceiling was lifted Jan. 1 partly in response to retailers’ contentions that it would lead to greater competition in rates and services.

“They said rates would go down, but they’ve done just the opposite,” said Harry Snyder, director of Consumers Union’s western regional office in San Francisco. He added that inner-city retailers--primarily furniture and appliance stores--are “just testing the waters to see how high they can go.”

‘No Legal Limit’

The study showed that of the state’s 15 major retailers, only Mervyn’s did not raise rates. Twelve--including Buffum’s, Bullock’s, Carter Hawley Hale, J. C. Penney, J. W. Robinson’s, May Co. and Nordstrom--upped rates by just under 2 points, to 19.8%. Montgomery Ward raised its rate to 21.6%.

As for inner-city retailers, CalPIRG said it found that rates ranged from 10% to 27%, with the higher rates resulting from “monopolistic pricing” of firms taking advantage of consumers with limited transportation to shop elsewhere.

“These outrageous rates are a cause of great concern because there is no legal limit to how high the rates can go,” the survey said.

The survey also found that late payment fees are more widely used by large retailers since the ceiling was lifted.

DEREGULATING RATES

The following list shows retailers that raised their revolving credit rates after deregulation took effect Jan. 1, 1989, the new rate, and the effective date. Rates previously had been capped at 18%.

Company Rate Date Montgomery Ward 21.6 Mar. 1 Neiman Marcus 19.8 May 1 J.C. Penney 19.8 Apr. 1 Saks Fifth Avenue 19.8 Mar. 1 Buffum’s 19.8 Mar. 1 Nordstrom 19.8 Mar. 1 Carter Hawley Hale 19.8 Mar. 1 Bullock’s 19.8 Feb. 1 Gottschalks 19.8 Feb. 1 I. Magnin 19.8 Jan. 1 Macy’s 19.8 Jan. 1 J.W. Robinson’s 19.8 Jan. 1 May Co. 19.8 Jan. 1 Sears 19.2 Jan. 1

Source: Consumers Union