[IP] more on New Citibank Changes allow 30% Interest rate on credit cards
Begin forwarded message:
From: Dan Shoop <shoop@xxxxxxxxxxx>
Date: May 31, 2005 2:47:46 PM EDT
To: dave@xxxxxxxxxx, Ip ip <ip@xxxxxxxxxxxxxx>
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
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