National Products Experience
Davenport Evans has a long-standing record of providing complex legal services to financial institution clients to help them deal with the growing complexity of regulations, contractual relationships, and other issues involved in the offering of consumer financial products nationwide. Over the years, South Dakota has become a major center for financial services, starting with a major credit card issuer’s decision to move its credit card operations to South Dakota in 1980. That move precipitated a large in-flow of banking talent to South Dakota, and many bank employees went on to pursue careers with other financial institutions in the state. This spawned a growth industry of credit card and related servicing and processing businesses as well as an entrepreneurial energy focused on the development of nationally-marketed financial products.
Davenport Evans has been there from the beginning and assisted many banking clients in matters relating to the development, marketing, and issuance of a variety of national products. We have routinely provided legal services in connection with the following types of programs:
1. National Credit Card Programs. For many years we have provided a variety of services with respect to credit card programs, including consumer compliance analysis, negotiating and drafting of contractual relationships with third party marketers, processors, and service providers, and the structuring of off-balance sheet relationships. We also assist bank clients in connection with the securitization of credit card receivables. Finally, we have represented bank clients in many litigation-related matters spawned from these programs including, but not limited to, litigation arising between banks and their card marketers and disputes between banks and their regulators.
2. National Payday Lending Programs. We assisted several South Dakota banks with national payday lending programs. Under these programs, the Bank would contract with a third party marketer who would market payday loans to be issued by the Bank in states with strict usury laws limiting payday lending. Exporting South Dakota’s lack of a usury limit, the loans were written at interest rates consistent with the normal risks of default in payday lending. Following issuance and funding, the third party originators would purchase the loan and all receivables from the Bank. Our legal services related to these programs included extensive compliance work in connection with the loan documentation and marketing materials (both on the federal and state-by-state level), the negotiation and drafting of agreements with the marketers and receivables purchasers, counsel in class action litigation, and assistance with a variety of regulatory matters arising from the programs. Banks were effectively pushed out of this model of lending by the federal regulators in 2005.
3. National Prepaid Card Programs. Our firm has assisted multiple banks in developing, marketing, and implementing national prepaid card programs. We assist banks with consumer compliance issues, state law compliance including money transmitter licensing requirements, contract drafting and negotiation, and program wind downs and post-termination litigation. Our experience includes the representation of virtually all of the primary card issuers with physical locations in South Dakota.
4. National Payment Systems. Our firm regularly represents our banking clients in connection with national payments systems programs. This representation includes high volume ACH programs utilizing layered third party senders. We counsel banks in structuring these programs, including documentation of the ever-increasing levels of due diligence required and expected by regulators for banks to maintain these programs.
5. National Student Loans. Our firm assists banks making student loans in the private student loan market. These services include compliance-related matters in connection with advertising, loan documentation, and state and federal disclosures, as well as all of the contractual arrangements related to the servicing and processing of the accounts.
6. ATM Administration and Cash Funding. We represent several South Dakota banks in matters relating to the ownership and administration of ATMs. We also provide legal counsel in connection with national ATM cash funding programs in which a bank provides the currency to be held by the owner of an ATM pending disbursement.
In addition to providing counsel related to the above-described specialized “national product” matters, Davenport Evans handles all general aspects of banking law, including acquisitions, branching, establishment of new banks in lending, creditors’ rights, and commercial litigation. The firm represents banks in all phases of state and federal banking regulation and deals extensively with state and federal banking regulators. Annually, our firm hosts a banking seminar attended by approximately 100 bankers from across central and eastern South Dakota.