First Premier Bank and Premier Bankcard have emerged victorious from their first round of lawsuits against the federal government. This, with a preliminary injunction preventing a new provision of 2009’s Credit Card Accountability and Responsibility and Disclosure Act from going into effect. U.S. District Judge Karen Schreier signed the ruling.
“First Premier has sufficiently demonstrated that it is ‘likely’ to succeed on the merits of its claim because the board acted in excess of its statutory authority,” wrote Schreier according to the Argus Leader.
Marketed to specifically to consumers with poor credit, Premier Bankcard has been struggling since last year when the Credit Card Accountability, Responsibility and Disclosure Act went fully into effect. Because the new regulations restrict the card issuer’s ability to charge customers according to their level of risk, they have found it difficult to bring in new business and have been forced, as a result, to reduce their work force.
Over this past summer, Premier Bankcard and First Premier Bank cut their workforce in half, from 3,000 employees to 1,500, when they shut down their Spearfish location.
According to president of the South Dakota Bankers Association, Curt Everson, the preliminary injunction is a good thing for both South Dakota and the economy as a whole.
“They are a large employer, a good employer, pay good wages, provide good benefits and have proven to be a good community supporter. It hurt the Spearfish community when they had to close down their facility,” said Everson according to Argus Leader.
Court transcripts reveal that Premier made the case that, should the preliminary injunction not be granted, it would suffer “irreparable harm” that would lead to a further reduction in its work force and considerable shut-down costs.
The losses Premier predicted amounted to some $1.2 million per month if the amendment were to go into effect. This number is based upon the assumption of a typical account remaining open for the duration of 24 months.
The amendment, slated to go into effect on this October 1, would have limited the amount a company could charge a new cardholder prior to issuing them a card to only 25% of the line of credit.
“I think if they can’t get clarity on a product they can offer into the subprime market, clearly their business has to shrink,” said Curt Everson, president of the South Dakota Bankers Association, as reported by Argus Leader.
“That would be a real adverse impact on the state economy and not only impact them, but other subprime lenders in our state.”