The state of Delaware has held great significance in the history of the credit card industry. Many of the major banks
and credit card companies have either started roots in Wilmington Delaware or relocated to the state to reap the many benefits that have been afforded to the credit card industry over the years. The state of Delaware continues to impact rules, regulations and legislation in the industry. It has long been known as a haven for banks and card issuers, in part because of their flexible laws, liberal interest rates and low taxes.
Despite the new credit card regulations, Delaware still has a great deal of control over the industry. In the 1970’s because of the job losses in the state following the war, Delaware began a mission to bring new business into the state. State government changed the tax laws to allow banks the freedom to control the interest rates as they saw fit. This freedom drew many banks and credit card companies to the areas in and around Delaware. In 1988, Delaware strengthened its laws to protect credit card companies headquartered in the state from the potential for hostile takeovers that were becoming commonplace around that time. These stronger laws issued by the state protected those credit card lenders that had a Delaware address. These protections are what drew many of the big name companies to the area and kept them there.
What Delaware Laws Offer to Credit Card Companies
Large banks such as Chase and the Bank of America, Barclays and ING direct have all found a long term home in the state of Delaware. Delaware offers banks the freedom to charge high interest rates and low taxes which provide them the ability to maximize on profits. With higher interest rates the credit card companies can take more risks by allowing individuals with no or poor credit to borrow at a high interest rate. Most states tend to be more conservative with who they lend to, charge lower interest rates, and have higher taxes; which cap the banks and credit cards ability to lend and earn a significant profit.
What Delaware Laws Offer to Consumers
Congress has instituted a law to cap interest rates at 30% nationally. Prior to the Credit card act states and cities have been allowed to create and impose their own rules and regulations on credit cards. The state of Delaware has been proactive in protecting the credit card industries in the state from the changes and laws put in place to impose restrictions on the industry. Although they must abide by national laws Delaware still has some power and flexibility with the longstanding state laws that have governed the Delaware based companies over the years.
Consumers can be sure that many of the unsolicited credit card offers received with have a Delaware address. It is important that consumers read the fine print in the offers. The rules listed in the fine print can offer some insight into the deal that a consumer may be getting. Those with no credit, poor credit may be subject to an interest rate that is significantly higher than that of a company based somewhere else in the country. . Look at the information to identify if the offer is subject to change at any given time, or if fees or charger can be issued or changed at the liberty of the lender.
Those consumers who find themselves in the situation of having poor credit may have limited choices to shop around for the best credit card rates. Consumers who need a credit card and do not have the advantage of having a good credit history will more than likely have more of a chance to land a card from a company that is headquartered in Delaware. Although the Delaware laws tend to support and protect the industry rather than the consumer, it is because of these laws consumers who are considered a risk to a lender are more likely to be approved for a card from a Delaware based company. The laws allow the company to charge a high rate to offset the risk they may be taking lending to high risk consumers. The controversial credit card laws in Delaware offer benefits to the industry and to some consumers; each party must be aware of the consequences that may come with these benefits.
The implementation of the credit card reform act is sure to have some impact on the routine practices of states such as Delaware that have been accustomed to having the freedom to control the market. As with any law, regardless of the implementation, it takes years for all involved to get on board and work out the kinks of any new legislation. The truth for the industry is that Delaware still holds significant power over the credit card industry because of the immense control it has over the market.
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