PIRATES OF THE CREDIT SEA — Part 5: I write to the President of CitiBank Customer Service

My saga to recover my credit card treasure continues. Previous articles have covered the particulars of my situation, and I will not repeat them.

In summary, for fifteen years I have always done my best to conform to my AT&T Universal credit card contract administered by Citibank. Citibank billed two minimum payments in October 2006 — one of which was an auto payment that failed. Citibank had never succeeded in getting auto payments to work over a four month period and has never told me why. Citibank put my account into default, even though the minimum payment due had been paid by check on the same account as the failed auto payment, the minimum payment was posted two weeks prior to the deadline, and that check had cleared. Citibank has not made restitution. I have written and have been rejected without any explanation. I have called and have been stonewalled.

I have written again, and I am now working my way up the executive chain at Citibank. At some point, I hope to find some responsible person at Citibank who, at a minimum, will at least respond to the facts of the situation. Time and persistence should tell. I have now written to Ken Stork. I understand that Mr. Stork is the President of Customer Service for Citibank in South Dakota.

For a summary of the overall situation, go to Part #1: My Treasure Is Taken!

For an article about your rights to correct billing statements that you receive from financial institutions, go to Part #2: What are my rights?

For an article summarizing how Citibank “managed” my initial written appeal go to Part #3: I want my treasure back!! (Please)

For an article about Citibank’s credit card customer service stonewalling see: Part 4: Hitting the Citibank Stone Wall in Polite Conversation

Why do I have to do all this to get Citibank to adhere to its obligations and to correct this situation? I believe that Citibank has been administratively incompetent in the management of my credit card account. I believe that I have been stonewalled. I pity the poor person who runs afoul of Citibank’s credit card operations and who cannot escape, as I have by paying my loan balance in full.

I have written to Mr. Stork and mailed my letter with return receipt requested for a confirmation of delivery. I have not yet heard back, but the time has been too short to expect a reply. I will give him a couple of weeks. I am hoping for the best. I hope that someone somewhere at Citibank will respond with:

a) a reason why my account was put into default even though I had paid the minimum balance due by check on time and
b) full credit of the default interest taken from me plus some compensation for all this inconvenience.

Who knows what will happen? I have no crystal ball.

When I got Ken Stork’s address, I wondered why the heck is a Citibank executive in South Dakota? Normally, I do not care where a bank’s or any other corporation’s headquarters is, as long as they are efficient and responsive and meet their product and service commitments. However, this situation has forced me to learn more about Citibank’s corporate structure.

I grew up in Iowa and went to a summer debate program at the University of South Dakota, when I was in high school. Iowa and South Dakota are swell states. But, why a national bank in South Dakota of all places?

When I think of the financial hubs of the world, I think New York, London, Frankfurt, Tokyo, Hong Kong, Zurich, etc. It would have to be a very, very long list of places, before I would think to add South Dakota to the list. Is there some geographic virtue to having a U.S. bank centrally located in the U.S.? With instant global telecommunications, probably not. I really doubt that geography is the reason.

Is there some gold for Citibank in South Dakota similar to the gold that was discovered in the Black Hills in the late 1800’s? Apparently, yes. There is gold in South Dakota for Citibank but not of the buried, metallic kind. Corporations are usually very thoughtful about where they locate their headquarters. Most often, there are critical legal reasons why a corporation chooses one place over another for a headquarters location.

I do not have access to information to research all the reasons why Citibank might be in South Dakota, but I did run across a tantalizing bit of explanatory information in the NCLC study that I referenced in my first article in this series, Part #1: My Treasure Is Taken! This excellent study about abusive credit card company practices is entitled: “The Credit Card Market and Regulation: In Need of Repair.” (This is an Adobe Acrobat .pdf file. Give it some time to load.)

This study was written by Carolyn Carter, Elizabeth Renuart, Margot Saunders, and Chi Chi Wu, who all are lawyers with the National Consumer Law Center. Published in March 2006, “this paper was originally one part of comprehensive comments submitted by the National Consumer Law Center (NCLC) to the Federal Reserve Board. The comments were submitted on behalf of the low income clients of the National Consumer Law Center, a variety of other national advocacy groups, and individual members of the Board’s Consumer Advisory Council.”

In March 2007, NCLC presented this study to the U.S. Senate. The Senate’s Permanent Subcommittee on Investigations of the Committee on Homeland Security and Governmental Affairs held hearings on the business practices of credit card companies. To find the Permanent Subcommittee on Investigations and read their materials on credit card abuses, use this link. This webpage for the Permanent Subcommittee on Investigations also lists the members of this subcommittee and provides links to their offices.

In their study, Carter, et. al. say that “credit card companies were not always so free to engage in such abusive behavior. Credit card deregulation, and the concomitant spiraling credit card debt of Americans, began in 1978, with the Supreme Court’s decision in Marquette National Bank of Minneapolis v. First of Omaha Service Corp. This case gave national banks the green light to take the most favored lender status from their home state across state lines and preempt the law of the borrower’s home state. As a result, national banks and other depositories established their headquarters in states that eliminated or raised their usury limits, giving them free rein to charge whatever interest rate they wanted. Therein lies the reason why so many of those credit card solicitations sent by mail every week come from Delaware or South Dakota: credit card issuers moved there to export those unregulated states’ lack of consumer protections nationwide.”

In an associated footnote, Carter, et. al, comment that “South Dakota and Delaware, at the beginning of the explosive growth of the financial services industry around 1980, sought to attract that industry as part of their economic development strategy. They wanted to “provide [their] citizens with the jobs and benefits a large national credit card operation can provide (attracted by the ability to export limitless credit card rates to other states),” while, it should be noted, protecting their local banks from competition with the exporting banks. … It worked, too. South Dakota’s tax revenue from banks went from $3.2 million in 1980 to almost $27.2 million in 1987, with the comparable figures for Delaware rising from $2.4 million to almost $40 million.” (Carter, et. al., pages 33-34)

One wonders whether the good people of South Dakota really understand how their state’s policies have facilitated the abusive credit card company practices documented by Carter, et. al. In their paper’s conclusion, Carter, et. al. and the various consumer advocacy groups that supported the NCLC study proposed the following corrective measures to the Federal Reserve Bank and to the U.S. Senate:

҉ۢ A cap on all periodic interest rates, for example, prime plus 10%.
• A cap on all other charges, whether considered a finance charge or not, to an amount the card issuer can show is reasonably related to cost.
• No unilateral change-in-terms allowed.
• No retroactive interest rate increases allowed.
• No penalties allowed for behavior not directly linked to the specific card account at issue.
• No over limit fees allowed if issuer permits credit limit to be exceeded.
• No improvident extensions of credit – require real underwriting of the consumer’s ability to pay.
• No mandatory arbitration, either for consumers’ claims or for collection actions against consumers.
• Meaningful penalties for violating any substantive or disclosure rules that provide real incentives to obey the rules.
• A private right of action to enforce section 5 of the Federal Trade Commission Act, which prohibits unfair or deceptive practices by businesses, including banks.” (Carter, et. al., pages 55)

If any of the good citizens of South Dakota are concerned about the welfare and consumer protection of the customers of the credit card companies that South Dakota allows to be headquartered there, then perhaps they might support the NCLC’s proposals and tell their politicians to do so, as well. It is probably not reasonable to expect that South Dakota itself would adopt unilateral corrective legislation that would just drive the credit card companies to another state with weaker laws to export nationally. However, South Dakotans could support a uniform national consumer protection standard based upon the NCLC’s recommendations.

If you live in South Dakota, and you think that allowing the credit card companies in your midst to continue to abuse their customers is too high a price to pay for the tax revenues that your state and local governments receive, you could also let the U.S. Senate know your opinion. Just go to the beginning of “Part 4: Hitting the Citibank Stone Wall in Polite Conversation” and read how to make your opinion know to the U.S. Senate’s Permanent Subcommittee on Investigations, which is currently looking at federal laws (or the lack thereof) related to credit card consumer protection.

Also, for an interesting PBS Frontline history that documents the movement of credit card companies to South Dakota, see the “Secret History of the Credit Card: The Ascendancy of the Credit Card Industry” by Robin Stein.

See the last part:  Default under the Citibank Credit Card Contract, when I actually get all my treasure back!

Click here to get more information about: Personal Finance Calculator