Monday, January 01, 2007

Pentagon Seizes Control Of Banking Rules

There's an interesting article this week in Businessweek. I'll spool it out and comment on it as the story continues:

Saving Private Ryan From Greedy Lenders
A crackdown on gouging soldiers creates a new regulator: The Pentagon
Businessweek: 1/08/2007

The Defense Dept. is about to become a major financial regulator, and that's throwing lenders for a loop. Pentagon officials and consumer advocates pushed Congress this summer to help the many thousands of service members incurring excessive debt, some of whom have lost security clearances as a result, making them ineligible under Defense rules for deployment to Iraq.
Ah, so here we have the primary motivation to fix the problem, disguised by the public-relations propaganda. In the Propaganda, it's all about "Helping Our Troops," while in reality, the true reason anyone gives a shit about these people getting into crippling wage-slave debt is that it makes our soldier-cogs ineligible to go fight for our attempts to seize Iraq's oil. Gotcha.
The main culprit, the Pentagon said, are so-called payday lenders, which cluster around military bases and charge as much as 800% interest to provide soldiers with cash advances against their paychecks. Congress gave the Pentagon broad new authority to cap interest rates on most consumer loans to more than 1.4 million active-duty personnel and their families. Not surprisingly, payday lenders objected that they will be hurt and that their customers, who often have poor credit, will be left with no place to turn.

Now even mainstream lending institutions and traditional financial regulators say they fear the hastily written law will have unintended consequences. "From our perspective, the scope of the measure that was enacted is so broad that we're still trying to get our arms around it," says Diane Wagner, a spokeswoman for Bank of America BAC . Among the uncertainties: whether the law applies to existing loans, and also what happens when any of the 1.2 million reservists or National Guardsmen are called to active duty.
Sob, sob... those poor payday lenders won't be able to charge 800% interest any longer! Is this justice, I ask you? If you prick us, do we not bleed? Feh.

Why should military members receive special civilian-life protections that normal American civilians don't deserve?

What's so horrific and disgusting about this law is that Congress has now stated in legislation that soldiers should be protected from predatory lending, but that there's absolutely NOTHING wrong with payday lenders charging ordinary American civilians loanshark-shaming 800% interest. This law sets up a two-tiered system for America's working poor and lower-middle class: if you're just Joe Blow: 800%, but if you're G.I. Joe: 36%.

Well, Fuck That Unamerican Bullshit. I'm all for supporting our troops, but giving them special protection from evil banking corporations that the rest of America doesn't qualify for is NOT the answer to the problem. The answer to wage-slavery and indentured debtitude is to outlaw bullshit like 800% payday loans. Oh... but it gets worse:
Lenders and regulators say the measure's rate caps put in doubt the legality of debt consolidation loans, credit-card cash advances, student loans, overdraft protection, and other types of finance for soldiers and their dependents. "Every day a lightbulb goes off in the lending community with ways this could limit or restrict credit to our military," says Andrew Barbour, a lobbyist for the Financial Services Roundtable, which represents such institutions as Wachovia WB , American International GroupAIG , Merrill Lynch ML , and Capital One Financial COF.
America's largest corporations demand answers: why can't we fuck THESE people as well? Haven't we paid Congress enough in bribes? Haven't we spread around the wealth from offshoring middle-class jobs and selling America's infrastructure out from under it? Get with the picture, Congress, we want to suck America's soldiers dry as well!
Kevin Mukri, spokesman for the Office of the Comptroller of the Currency, which regulates national banks, adds: "To my knowledge, this is unprecedented—giving consumer credit regulation to the Defense Dept. I wouldn't know how to write a regulation for bombers."
Oh, right, the Office of the Comptroller of the Currency... the same motherless sons of rats who greenlit Congress' utter destruction of bankruptcy protection. The same slimey sacks of filth who refuse to force the credit card companies to raise their credit rating criteria, so poor people aren't offered more credit than they can feasibly handle. The same snot-lickers who refuse to force the credit card companies to raise the percentage due each month so that people can't become enslaved forever to their credit card debt. The same scum-suckers who refuse to force the credit card companies to make clear what the REAL percentage rate on those credit cards are, to disclose their true fees, etc.

Well, of course THOSE donkey-suckers are furious. Someone's trying to help out a consumer somewhere! The Office of the Comptroller of the Currency was created to screw the little guy, not to help him... and here suddenly these soft-hearted saps at The Pentagon want to go easy on poor suckers just because they're in the military? Nosirree, not on OUR watch!
Outgoing Senate Armed Services Committee Chairman John Warner (R-Va.), however, stands by the law, which he backed. "Congress has an absolute responsibility to protect members of the military and their families from such unfair practices," says a spokesman.
"Congress has no responsibility to protect the average consumer from these same unfair practices," the Senator mumbled as he cashed his paychecks from MBNA, Citibank and Capital One.
The law, which was attached to a defense bill last fall and will take effect on Oct. 1, 2007, establishes a 36% cap on interest rates for most loans to military members and their families. Unlike most credit regulations, the new law requires the annual percentage rate for military loans to include all fees. Factoring in fees can push the APR beyond the law's cap. Home mortgages, auto loans, and credit secured by personal property are exempt.

So it's -totally- cool for predatory lenders to disguise closing costs, early pay-down charges and other vampiric fees when dealing with the general public, but our soldiers need to have these things spelled out for them in simple language with a cap of 36% on such fees and interest?


Oh, right, because Joe Biden got paid a bajillion dollars by the Credit Card Industry in the last election cycle.
Lenders say stiff penalties for violations of the new law may scare off institutions. If a lender unwittingly provides a loan with an improper rate to a service member's spouse, the loan becomes invalid and doesn't have to be repaid. If the lender "knowingly" violates the law, it is subject to fines, and its employees can even get jail time. Avoiding these missteps could be complicated by separate laws that prohibit lenders from asking about marital status.

One lender worrying about such ambiguities is Cooperative Bank in North Carolina, which serves Marines and their families at Camp Lejeune, south of the Outer Banks. CEO Rick Willetts says of the new law: "This is a well-intended idea that is opening Pandora's box."