Wednesday, August 4, 2010

Regulations!

Today a credit card offer came in the mail for one of my roommates. It was addressed from South Dakota, so if she applied for and received a credit card, then had a dispute with the company she'd have to settle it in a South Dakota court. South Dakota, as I understand it, has a legal system that's pretty friendly to the credit card industry — that's why so many such companies set up shop there.

From time to time there's a debate about how various state and Federal laws here in the US should affect companies offering services across state lines. In many cases a consumer is expected to settle any dispute in a court where the company is located. In other cases, like health insurance, companies aren't allowed to operate across state lines. Politicians (for example, Obama in one of his debates with McCain a few years back) say that if health insurers could operate across state lines there would be a race to the bottom for consumer protections.

And, staring at the credit card offer, I had this thought. Why not just have companies offering services across state lines settle disputes in the courts where the offer was accepted? A business-owner might complain about being bound by lots of different legal systems. But today consumers have to worry about the same thing. If I have a problem with some tech-industry product I probably have to go through courts somewhere near San José (if you read EULAs and warranties they usually list the specific venue for disputes), but it might be Austin or Boston or Redmond or Rochester. If it's with a credit card provider I might be looking at Sioux Falls... but it could be New York or Omaha.

Anyway, there are a lot more of us than them. Why not concentrate the complexity of dealing with regional regulations in big companies with lawyers on retainer instead of spreading it around to people that really have no idea how to deal with it?

I wonder how far I could go avoiding businesses that make me agree to resolve disputes in out-of-state courts. Seattle is well-situated for it; Amazon and Microsoft are in-county, even. I don't know enough about how credit cards work; I know lots of direct-mail offers come from Sioux Falls, but banks have to be incorporated in each state they operate in. So if I apply for a credit card at a local bank branch, I don't know if they would technically issue it from Washington or South Dakota.

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