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Response to bucolic_frolic (Original post)

Thu May 7, 2020, 02:53 PM

4. South Dakota a Favorite State for Credit Card Companies

South Dakota is a haven for some financial shenanigans.

South Dakota a Favorite State for Credit Card Companies

Do you ever wonder why your Citibank credit card bill comes from South Dakota, and your payment goes there as well, when you know that Citibank is headquartered in New York? It is because of a combination of federal law and 50 different state laws that allow a bank in New York to use a South Dakota address to bill a customer in California.

Usury Laws

Many states have a usury law which limits the interest rate that a company may charge. Most of these laws capped interest rates at 18%. However, some states, such as South Dakota, do not have a usury law, allowing in-state businesses to charge as much interest as they want.

Congress has the power to regulate interstate commerce, which includes regulating nationally chartered banks which do business in more than one state. In the Supreme Court case Marquette v. First Omaha Service Corp. in 1978 the Court ruled that nationally chartered banks do not have to follow state law in which they do business, but only the law of the state in which the company is incorporated. Because state usury laws were not uniform this rendered all of them irrelevant as credit card companies picked up and moved to the states that allowed them to charge the highest interest rates.

After the 1978 ruling only national banks were exempt. If you banked with a bank which only did business in your state you were protected by your state's law. But a federal law now exempts state banks as well.

More at : https://resources.lawinfo.com/consumer-protection/credit-cards/south-dakota/

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bucolic_frolic May 2020 OP
MiniMe May 2020 #1
shanti May 2020 #2
Marrah_Goodman May 2020 #3
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