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South Dakota Dems and the Credit Card Bill

May 12, 2009 - by Donny Shaw

Looking at the Credit Cardholders’ Bill of Rights Act of 2009, which is being debated right now in the Senate, I see that I missed something interesting in the voting from when the bill went through the House. The vote to pass the bill in the House was strongly bipartisan, with 82 percent voting in favor, including 105 Republicans. As I look back at the vote now, the thing that surprises me is that the Democrats were not unified in their support of the bill. A single Democrat voted against it — Rep. Stephanie Herseth Sandlin [D, SD-0] (pictured at right).

The Sioux Falls Argus Leader has Sandlin’s explanation for her vote:

“In a time of economic instability and decreasing credit availability, I think it’s essential that we consider the full impact of limiting access to credit,” she told reporters before her vote. “People need access to credit while at the same time striking at the deceptive and unfair practices that we know have been going on, and this bill, in my opinion, doesn’t strike the right balance.”

She also was the only Democrat in the House to vote against a similar bill last year. Sen. Tim Johnson, D-S.D., broke from his party as well in March when he joined Republicans on the Senate Banking Committee in voting against a similar measure.

It’s not a coincidence that the only two Democrats in Congress who oppose this legislation are both from South Dakota. That’s where Citibank is located and where several other big credit card providing companies – Great Western Bank, Total Card Inc., BankFirst, Capital Card Services, HSBC, PREMIER Bankcard, and Wells Fargo – are officially incorporated.

Why South Dakota? Well, ever since the Supreme Court’s 1978 ruling in Marquette v. First Omaha Service Corp., big national banks haven’t had to follow state usury laws for the states they do business in, just the state they are incorporated in. So, for example, Massachusetts may have a usury law capping interest rates at 20 percent, but since Citibank is technically based out of South Dakota, which has no restriction on usury, they can can charge their Massachusetts customers whatever rate they want.

It will be interesting to see how Sen. Tim Johnson [D, SD] votes on the modified version of the credit card bill in the Senate. Last month he voted “no” on an amendment to the budget resolution “to provide for a deficit-neutral reserve fund to establish a national usury law,” but so did 24 other Democrats.

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