SIOUX FALLS, S.D. -- In the early 1980s, rising inflation and a prime rate hovering around 20 percent put South Dakota's farm economy in a crisis.

Meanwhile _ some 1,300 miles to the east _ New York-based Citicorp was struggling to stay afloat amid usury laws that prevented banks from charging more than 12 percent on most consumer loans, said Kendall E. Stork, Citibank South Dakota's president and CEO.

"Citibank's credit card operation was losing hundreds of millions of dollars," he said. "The money that we had to fund our portfolio was costing more than what we were able to charge customers because of usury laws in New York."

A deal between then-Gov. Bill Janklow and Charlie Long, the bank's executive vice president at the time, helped boost the financial outlook for both the company, known as Citigroup Inc. since 1998, and South Dakota.

"Those two talked and met, and on a handshake agreed to move the business to South Dakota," Stork said.

The deal also ushered in a new era of consumer spending, and, some consumer advocates say, a troubling rise in personal debt and bankruptcy.

Total consumer credit rose to a record of $2.16 trillion in February, up from $356 billion a quarter century earlier, according to Federal Reserve statistics. More than $800 billion of that figure is revolving debt, meaning the average American household now carries an outstanding credit card balance of more than $7,200.

On Wednesday, Citibank South Dakota celebrates 25 years since its move to Sioux Falls, then a small Midwest city with a meat packing plant as its largest employer. The company since has grown into the state's third largest employer, with 3,200 people servicing 118 million credit card accounts in a sprawling 400,000-square-foot campus north of downtown.

Both Long and Janklow, who was later elected to the U.S. House but resigned his seat after being convicted of manslaughter for a traffic death, are scheduled to attend the anniversary gathering. The event will also feature speeches by Gov. Mike Rounds, members of South Dakota's congressional delegation and Chuck Prince, chief executive officer of Citigroup.

In remarks prepared for his speech Wednesday, Prince said the company's future was looking bleak before South Dakota stepped in. "Believe it or not, Citibank was bleeding to death," Prince said.

The progression that brought Citibank's accounts to South Dakota actually started some years earlier. A 1978 U.S. Supreme Court decision in Marquette National Bank of Minneapolis v. First of Omaha Service Corp. ruled that banks could export interest rates to other states, regardless of limits in the borrower's state. Janklow then led the South Dakota Legislature in 1980 to pass two bills to entice financial service companies to set up shop in South Dakota.

One bill did away with South Dakota's usury law, lifting the cap on the interest rates credit card companies could charge consumers. The other let out-of-state bank holding companies create subsidiaries in South Dakota.

Citibank South Dakota was chartered as a national bank on Feb. 19, 1981, and the company transferred 3 million credit card accounts to its Sioux Falls unit. The operation began with a handful of employees working out of three floors of rented office space in downtown Sioux Falls.

The Sioux Falls Area Chamber of Commerce estimates the bank and credit card industries now employ more than 8,000 people in the area. "It essentially put Sioux Falls and South Dakota on the map as far as the financial services industry," said Evan Nolte, chamber president.

The Supreme Court ruling and subsequent relocations mark a critical turning point in the growth of the credit card industry, but they also ended states' control over retail banking pricing policies and led to a steep rise in consumer debt, said Robert Manning, a business professor at the Rochester Institute of Technology and author of "Credit Card Nation."

"This precedent of 25 years ago has been extraordinarily profound," Manning said. "It certainly has been the driving force in terms of raising the cost of credit for working and middle-class people."

It also has helped accelerate the rate of personal bankruptcies, he said. Bankruptcy petitions filed in federal courts totaled 2,039,214 in 2005, up from 1,563,145 in 2004, according the Administrative Office of the U.S. Courts.

Much of that one-year jump has been attributed to consumers getting in under the gun of last year's bankruptcy reform bill, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. But Manning said it also hints to a changing attitude by people who once felt that paying their bills to the best of their ability was a moral obligation.

"They are now abrogating their moral obligation because banks have ripped them off so badly and have given them so little flexibility in trying to figure out the best way to pay their bills if they lose their job, or have medical problems or get divorced, etc.," he said.

Credit card companies and other creditors who supported the bill had argued that the old system was being abused by people who ran up big debts and then wiped them out by filing for bankruptcy.

Credit used responsibly is good for the economy, Stork said, and Citibank South Dakota does its best to educate people about using it appropriately.

"Being able to use credit in a wise way has allowed many people to achieve dreams, whether that be home mortgages or other sort of purchases," Stork said. "And I think all in all, used correctly, it's allowed a lot of the country, really, to have tremendous economic growth."

This story ran on on April 11, 2006.