Issuers in Sioux Falls Watch Card Reform Efforts

Credit card issuers are vital to the economy of Sioux Falls, S. D., and business leaders there are watching Capital Hill carefully as it considers new laws regulating the companies, according to an article today in the Sioux Falls ArgusLeader.com.

Card issuers flocked to South Dakota more than 25 years ago after lawmakers gave banks greater freedom in setting the interest rates charged on the cards. Citibank, HSBC, Wells Fargo, and subprime issuer First Premier Bank and its First Premier Bankcard subsidiary are some of the financial institutions with operations in the area, the paper reports.

The local chamber of commerce ranked Citigroup as the third largest employer in the area with about 3,200 staff, while Wells Fargo, with 3,048 is fifth. First Premier and Premier Bankcard, with 1,105 employees, are ninth, and HSBC, with 875, is 12th. A Citi spokesperson told the paper that the company has a $120 million payroll in the Sioux Falls area.

Cards and finance have become the second largest business in the area behind healthcare. And healthcare has grown to some extent because of the success of First Premier. T. Denny Sanford founded the company which has grown by issuing cards to consumers with troubled credit histories. Premier Bankcard has 3.2 million accounts, and the average balance is $300, Miles Beacom, president of the issuer, told the ArgusLeader.com. About 40 percent of the cardholders improve their credit and get a card with another issuer, another 30 percent remain with First Premier, and 30 percent are charged off, according to Beacom.

T. Denny Sanford went on to found Sanford Health, Sioux Falls’ largest employer with 6,424 staff.

University of South Dakota economist Ralph Brown said the diversification of Sioux Falls "into an economy with a small manufacturing base and a broad range of services including finance, retail and health care has been the story behind its performance."

Early this month in Congress, the Chair of the Subcommittee on Financial Institutions and Consumer Credit released a set of guidelines for the credit card industry. Rep. Carolyn B. Maloney, a Democrat from New York, called her plan the “Gold Standard Credit Card Principles.”

Maloney suggests that issuers determine the terms that fit individual cardholders and her ability to repay debt; clearly explain account features, terms, and pricing; provide cardholders with notice and choice when terms of the card account change; and encourage the responsible use of cards, especially by new cardholders and customers with special needs.

Sioux Falls Mayor Dave Munson conceded to the ArgusLeader.com that there is “room for improvement” in the way card issuers explain card contract details. Munson used to work for Citibank. But Dana Dykhouse, president of Premier Bank, suggests that legislators keep in mind that subprime issuers serve a special purpose among card issuers, lending to those that may not be able to get credit elsewhere.