more on New Citibank Changes allow 30% Interest rate on credit cards

[David Farber <dave () farber net>]

Begin forwarded message:

From: Dan Shoop <shoop () iwiring net>
Date: May 31, 2005 2:47:46 PM EDT
To: dave () farber net, Ip ip <ip () v2 listbox com>
Subject: Re: [IP] New Citibank Changes allow 30% Interest rate on  
credit cards


For IP:

I used to work for CitiCorp Credit Services, the group responsible  
for management of Citibank credit cards, marketing, credit analysis,  
and portfolio management. Citibank Card Products, the processing unit  
and the legal business location for all Citibank card products, was  
moved to South Dakota (in the 1980's IIRC) because that state offered  
incentives for doing business there, specifically that they offered  
to change the usury laws to allow for higher interest rates (along  
with incentives for moving business to the state like reduced taxes,  
cheap labor, etc.)

At 8:15 AM -0400 5/31/05, David Farber wrote:

> Aren't there any laws which prohibit rates that high?

Yes, and these vary from state to state and cover operations of  
companies that have business units there. So what is considered usury  
in one state may be not be in another. When you agree to the terms  
and conditions you are bound into a contract governed by the state in  
which the business resides, in this case South Dakota.

If you think these rates are too high you have little recourse except  
if you are a citizen of South Dakota and can convince your legislator  
to change these rates.

IIRC as part of Citibank Card Products moving to South Dakota the  
state agreed to change the usury laws so that the rates could move as  
high as 29.99%, and some accounts have had such high rates. Rates for  
your particular card are tied to the specific agreement. These  
agreement rates are normally determined by the credit portfolio of  
the specific card product (e.g. Visa branded as XYZ corp or  
organization, Mastercard w flyer miles, et al) and some have had such  
rates as their standard rates.

Rates are usually tied to the portfolio based on the credit  
worthiness of the portfolio as a whole. More risk means higher rates.  
So the issue isn't so much about bleeding money from you as it is  
that the portfolio you're in is more risky and higer rates are needed  
to make the portfolio perform.

Don't like the rates on your current card? Call Citibank and see if  
they offer a card product with lower rates that you qualify for.  
Calling your banker to get the best banking services to meet your  
needs should be self-evident.


> Is there any legal recourse, say if your payment was delayed due to  
> the post office, and they raise your rates anyway?

Payments are due by their due date, and banks always suggest you send  
them in advance so that they have plenty of time to arrive by the due  
date, at least 7 days in advance. Failure for a payment to be  
received in a timely manner is only the fault of the sender. Citibank  
would probably also point out that you have methods other than by  
mail to pay your credit card bill, such as using an ATM to make a  
transfer payment, direct payments from checking accounts, automatic  
payments from accounts, and in a pinch Western Union and other  
payment services.
--

-dhan

------------------------------------------------------------------------
Dan Shoop                                                   AIM: iWiring
Systems & Networks Architect                     http://www.iwiring.net/
shoop () iwiring net                                 http://www.ustsvs.com/

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iWiring provides systems and networks support for Mac OS X, unix, and
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