Magazine article American Banker

Independent Bankers' Challenge Postpones Ruling on SD Card Bank

Magazine article American Banker

Independent Bankers' Challenge Postpones Ruling on SD Card Bank

Article excerpt

CHICAGO -- A Texas bank holding company seeking to establish a nationally chartered credit card subsidiary in South Dakota will have to wait awhile for a ruling from the state banking panel. The delay has been caused by a challenge from an independent bankers group, which questions the banking commission's authority to approve such subsidiaries.

The challenge was made last week by the Independent Community Bankers of South Dakota as the banking commission met to vote on an application for a credit card bank by First City Bancorp Inc. of Houston. First City, one of the largest Visa and MasterCard issuers in Texas, filed its application for the subsidiary in May.

Several banks have sought to move their credit card operations to South Dakota because the state has no usury ceiling and banks are allowed to charge annual membership fees for credit cards.

The Texas legislature last year lowered the interest rate on cards from a maximum of 24% and a minimum of 18% to a maximum of 22 and minimum of 14%. First City's current rate is 18.27%.

The independent bankers' challenge centers on their argument that the state banking commission doesn't have jurisdiction over national banks, said Paul Nordstrom, president of the group.

South Dakota banking officials counter that they are abiding commission must approve an out-of-state bank's operations in South Dakota.

On the federal level, the Douglas Amendment to the Bank Holding Company Act says that each state has the authority to allow out-of-state banks to operate within its borders.

In a telephone interview, Mr. Nordstrom said the independent bankers group is basing its challenge on a "couple of points in the Douglas Amendment that need to be clarified" and is not directly challenging First City.

The South Dakota banking commission has asked the parties to submit briefs. The commission is expected to make its ruling around July 9. Awaits Approval from Comptroller

First City still must win approval from the Comptroller of the Currency for its proposed bank and from the Federal Reserve Board to allow the holding company to acquire the proposed new bank. …

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