Wednesday, October 22, 2014

Support The Troops

Remember 10 years ago, when that slogan was everywhere and if you weren't falling all over yourself honoring the men and women in uniform you were "with the terrorists"? My, how times have changed.

With States' Help, Predatory Lenders Target Military:

Lenders have come under fire in Washington in recent years. Yet one corner of the financial industry — lending to people with poor credit scores — has found sympathetic audiences in many state capitals.

Over the last two years, lawmakers in at least eight states have voted to increase the fees or the interest rates that lenders can charge on certain personal loans used by millions of borrowers with subpar credit.

The overhaul of the state lending laws comes after a lobbying push by the consumer loan industry and a wave of campaign donations to state lawmakers. In North Carolina, for example, lenders and their lobbyists overcame unusually dogged opposition from military commanders, who two years earlier had warned that raising rates on loans could harm their troops.
Because we pay the troops so little for their service (a median annual salary in 2013 of $33,000), they are targets for the bottom-feeding subprime loan industry. And several states are rolling over, making it easier for them to screw the troops in the process.
The lenders argued that interest rate caps had not kept pace with the increased costs of doing business, including running branches and hiring employees. Unless they can make an acceptable profit, the industry says, lenders will not be able to offer loans allowing people with damaged credit to pay for car repairs or medical bills.

But a recent regulatory filing by one of the nation’s largest subprime consumer lenders, Citigroup’s OneMain Financial unit, shows that making personal loans to people on the financial margins can be a highly profitable business — even before state lending laws were changed. Last year, OneMain’s profit increased 31 percent from 2012.

OneMain, which has 1.3 million customer accounts, offers its borrowers unsecured, installment loans with interest rates of up to 36 percent. Borrowers pay both interest and principal in monthly installments until the loan is paid off, usually within a few years. But many of its borrowers refinance their outstanding balance.

About 60 percent of OneMain’s loans are so-called renewals — a trend one analyst called “default masking” because borrowers may be able to refinance before they run into trouble paying back their current balance.

In pushing for the changes, the North Carolina Financial Services Association, which represented OneMain and Springleaf, as well as lobbyists for dozens of smaller, locally based lenders, argued that lending caps had not been updated in years. “Rents are higher, electricity costs more, gasoline costs more,” the group’s lobbyist, Richard H. Carlton, said in an interview. “But the rates hadn’t kept pace.”
LOL. If you can't make a profit off loan sharking at 36% interest (which btw is higher than what a standard Mob-backed "vig" runs), maybe you need to be capped, er, put out of business. Permanently.

But it's bad when you have military brass, not exactly what one would call a "liberal" group, backing more financial regulation to protect their soldiers.
Commanders from Fort Bragg, home of the Army’s Special Operations Forces, and Camp Lejeune, the Marine base, rarely come out so publicly to denounce a bill, some lawmakers said. But they made an exception for installment loans. One commander worried that “out-of-control debt” could jeopardize soldiers’ security clearances.
Not to mention, create an undue hardship on the troops which leads to higher rates of divorce, domestic violence, and so on.

As I mentioned in a post last month, if you think the bottom-feeders on Wall Street (the OneMain lender mentioned above is a subsidiary of CitiGroup), went away after the Great Recession and financial reform that followed, think again. 

The loan sharks are still preying on the poor, single women with children, members of the military, and other down on their luck working class folks, taking the proverbial blood from the poor stone.  Talk about a new form of terrorism.

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