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Saturday, December 6, 2008

Rounds, Thune Protect Predatory Lenders

—oops! I mean pillars of our community....

The lead story in this morning's Rapid City Journal (complementary copy greeting me at my motel room door here in Sturgis—thank you, Holiday Inn Express!—as I wake to judge State Interp) finds Governor Mike Rounds and Senator John Thune, good Republicans both, standing up to big government to protect South Dakota jobs.

At least that's how they would like the story to read. Unfortunately, the rules Rounds and Thune are opposing are new regulations, proposed by the Bush Administration (remember them?) in May, to provide some relief for folks with credit card debt. Included in these regs is a change that, according to Jeremy Fugleberg's report, would "bar credit card providers from charging fees up front and putting them on the first month's bill for the credit card. Instead, a provider would have to spread the charges out over 12 months."

Supposedly this one rule change could put South Dakota credit card companies like Premier Bankcard out of business.

Premier Bankcard—you know, where T. Denny Sanford made all of his money, handing out the plastic version of subprime mortgages to folks who maybe shouldn't have credit cards in the first place.

Ah, now things make sense:

The fee rule could upend the business model for South Dakota-based Premier Bankcard and other businesses involved in providing cards to high-risk borrowers.

"We're appealing to them to moderate this so we don't end up putting an important industry out of business here in South Dakota," Sen. John Thune, R-S.D., said.

If approved, the rule could be a "deal breaker" for Premier and similar banks, Roger Novotny, head of the state Banking Division, said.

...About a third of sub-prime borrowers default on their card account within the first few months, and the rule would bar credit card providers from charging them the fees that make that risky lending worthwhile.

"So there's a tremendous potential for loss there," Thune said [Jeremy Fugleberg, "Fed Rules Could Cost South Dakota Thousands of Jobs," Rapid City Journal, 2008.12.06].

Sanford, Janklow, Rounds, Thune, et al.—I guess you've got to give 'em credit for building an "important" industry on the idea that "you've got to give 'em credit"... and sock 'em with fees and rates that keep 'em in debt.

In other words, the GOP plutocracy has built South Dakota's "prosperity" on a fundamentally irresponsible, untenable industry that preys on our neighbors (also known to avid readers of the Bible as usury).

Premier Bankcard and the other lenders of last resort in our state have smart people working for them. One decent rule from Washington won't throw them out of business... although if it does, maybe they shouldn't have been in that business in the first place.


  1. On Saturday, Bob Edwards of NPR interviewed an economist. The guest "said it all" in a single statement. He said that we are currently witnessing a transfer of wealth from financially responsible people to financially irresponsible people.

    I would like to consider myself financially prudent. I pay my credit card off every month (as do many South Dakotans in a poll I saw in the Rapid City Journal). But every month around the 15th to the 20th, I have to check my P.O. box daily. When the bill comes for the single credit card I have, I write the check right there in the Post Office and mail it immediately. Otherwise I run the risk of getting hit with a late fee -- and having my credit score affected should the Postal Service fail to deliver the check within the narrow payment time window.

    I've been told that the solution to this problem is "electronic bill payment." That's like saying that the cure for a case of stomach flu is to drink a glass of battery acid.

    Oh, well. Maybe if I miss a few of those critical windows, my credit will be damaged so much that the government will start paying my bills for me. Sounds like a plan, Stan!

  2. Good morning, Stan!

    One nice thing about this proposed regulatory reform is that it doesn't actually transfer any wealth. It doesn't give a handout to irresponsible borrowers; it just limits the extent to which credit card lenders can take advantage of those irresponsible borrowers.

  3. I believe it was both our lenient regulatory climate and tax laws that made it so profitable in the first place. Citibank did give our state a jump start, but talk to people who work there. Everyone (minus one) says they burn out quickly. What does it say about SD if the companies we attract are exploitive. They will adapt to more fair rules. Doesn't sound like Green Tree in RC treats people so great either, and if I remember right lending on mobile homes is much less regulated than a traditional home. jh

  4. Just found an article on the Fox News Web site. Guess my concerns about short payment time frames have already been heard and heeded by Barney Frank et al.

  5. First of all, the line of credit that Premier Bank hands out for each of those credit cards is SO LOW depending on that person's credit, that it's hard for people to get in trouble. If you can't pay a 20/25$ minimum payment every month, than there is no reason to have a credit card in the first place. People just need to learn to LIVE WITHIN THEIR MEANS! Sometimes I think they should take an IQ test before handing these things out. Second, like with every credit card, Premier's fee's are stated clearly on the first offer. Yes, it is in small print, like EVERY other credit card. Third, the reason that card has high start up fees is because every single month, they report to all 4 major credit bureaus - Experian, Equifax, Transunion, and Innovis. The point of the card is to build credit. So if anyone ever ran into a hard times and took a hit to their credit, they could apply to this credit card that will boost their credit faster with only 20$ dollar payments every month. Sorry, but it costs A LOT money to do that every 30 days. So if credit means that much (which obviously it does considering the crisis this country is in) and you know how to read, than those fees should be no surprise. People seem to think just because they get a credit card offer, they HAVE to have it. What the real problem is, is stupid people that want to live out of their means, so they open credit cards they know they'll never be able to pay back. The fees Premier apply (late fees and over limit fees) ACTUALLY are not that bad when compared to other companies. Bottom line - stupid people are the reason we are where we are. If the education isn't there, it's going to be pretty hard to fix this on going problem of credit card debt.


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