Rep. Kristi Noem, whom do you support more, soldiers or bankers?
The Defense Department has proposed regulations to close loopholes in the Military Lending Act that allow payday lenders to exploit military families. Republicans, doing the work of bankers, are trying to block the military’s proposed usury protections by requiring another study (on top of five already done) that would delay implementation until after 2016. Democrats led by Illinois Rep. Tammy Duckworth managed to kill that proposal in House Armed Services on a narrow 32–30 vote, with the help of five Republicans.
But now Ohio Rep. Steve Stivers is trying to bring a new delaying tactic to the House floor for a vote. The Stivers amendment would require the Defense Department to certify its Military Lending Act database and make that data available to commercial information-services providers. Why the military should have to give private businesses information about its soldiers before protecting those soldiers from usury escapes me.
The White House calls the Stivers amendment what it is, an effort to “carry water for the payday loan industry, and allow them to continue to target in a predatory fashion military families who in many cases are already in a vulnerable financial state.”
Rep. Noem likes to stand next to soldiers for pictures. But she also likes to get campaign cash from the banking industry, which is her fourth-largest donor. With whom will she stand in this week’s vote?
Related: The Consumer Finance Protection Bureau is working on usury protections for the rest of us. CFPB has proposed making payday lenders act like the banks they claim they are and verify their borrowers’ income to make sure they can afford the interest payments.
I am betting she stands with the bankers.
The banking industry has been a major player in South Dakota for 30+ years, is there any doubt who Noem will side with?
Tammy Duckworth lost her first bid for elective office to a wingnut who accused her of being a “cut and run Democrat” after she lost both legs when her helicopter was shot down in dumbass dubya’s dirty little wars.
There is a difference between the “payday loan industry” and “bankers”. Most reputable banks (of which South Dakota is home to many) have no problem with the rules and regulations surrouding the financial products offered to servicemembers, because most reputable banks have very few (if any) products that would breach that 36% interest rate cap.
The only groups that balk and this type of legislation are the payday lenders, title loan companies, and check-cashing businesses which have fees and rates which equate to APRs in the 100, 200, even 500% range. Not only should Congress not defend these people, but they (Congress) should do everything in their power to limit their ability to prey upon the people because in truth all this does is shift the financial burden to the taxpayer since the vast majority of those who use payday lenders are of limited income who often times need taxpayer funded services to help to dig themselves out of the hole created by these predators.
This is one area where Rep. Hickey has it right. There really is no reason to allow this type of ‘lending’ (aka loan-sharking) to continue in our state.
I wish the regular banking industry would get behind these protections. I’m afraid their silence has been deafening.
I hate to go against Craig’s characterization of the nobility of banks in SD, but if memory serves, didn’t SD throw out usurer laws to open the door for ALL of the banking industry (not just to “good guys”)? That de-regulation was part of the “business friendly” attraction that now has SD home the largest banking assets in the US. Even the reputable banks are getting their hands into the predatory lending franchises.
It’s funny Nick – I’ve read the comments from a few of the bank lobbyists first such as the ABA, and although they talk about the regulations and even mention the astronomical fees and interest rates and never come right out against them. Nor do they use some lame excuse like “these products serve the needs of a select group of customers” etc. It is almost as if they acknowledge the issue but don’t have a strong opinion.
I suspect the lobbying firms probably represent some of these payday lending groups as well as traditional banks. I also suspect if you dig deep enough some of the traditional banks and credit unions probably have some service or fee somewhere which might require modification if these regs passed. So although they may not offer a loan or line of credit at those rates, maybe if you were to factor what a late check fee costs on an annual basis it would have some impact.
For example, let’s say Joe writes a check for $25 to pay for some gas, and due to Joe forgetting that his car payment was deducted from his account yesterday, he only has $22 in his checking account. So the check would bounce, but instead the bank processes it and charges Joe a $30 overdraft fee. So in actuality, joe was only short $3, but now he is slapped with a fee which equates to a 1000% APR. Wouldn’t that perhaps fall under the guidelines of predatory lending, or will their be loopholes for standard fees? If the bank couldn’t charge that overdraft what is the alternative? They could refuse to honor the check, and the check verification company then charges a $45 return check fee making Joe’s account even further in the red, and if he can’t pay that fee the gas station hangs up a copy of Joe’s check behind the register letting everyone know he passed a bad check and then his name is in the paper for writing bad checks etc. etc.
So you have this issue about some of the bank fees or products needing to be modified, but on the flip side you have a potential revenue stream from people of modest means just needing short term loans until their next payday. The problem is those types of people typically don’t qualify for credit cards (or they would have one already), and so a maximum interest rate of 36% might not include enough of a risk cushion to make those products affordable. So perhaps not all banks or credit unions are even willing to take the risk, and therefore they won’t have a new revenue stream and instead lose revenue from the fees they can no longer collect.
Therefore, could it be that the reason the banks and credit unions and traditional lenders are quiet is because they aren’t sure if this is a good thing or a bad thing? Or it could be that they are just against almost every type of regulation placed upon them so even when they see a good one they still pretend they don’t like it.
“Even the reputable banks are getting their hands into the predatory lending franchises.”
I haven’t heard that… care to name which banks?
Also, I agree not all banks are noble. I didn’t mention any by name, but if you have a credit card with a 79.9% APR, it seems logical to assume that is product built to generate revenue – not intended to serve the best interests of a customer.
Craig: “. . .it seems logical to assume that is product built to generate revenue – not intended to serve the best interests of a customer.”
Is there any other purpose of a company/corporation? The idea of social conscience and responsibility is long gone – sacrificed to the alter of profit. So many comments here show that; banks point out the obscene rates charged, yet fall short of advocating against them or pushing for industry reform because there is profit to be made and that profit is not the main concern, but the singular concern.
it is too bad that the plight of servicemen and women is needed to shine the light of predatory practices used on far too many of the poor, but in the political theatre of the absurd, this is what it takes to get focus on an issue.
Maybe the question ought to be, “Why would a US serviceman or woman NEED to look to usurer rate loans?”
Sorry Craig, I left out the answer to your question:
Major banks provide over $1.5 Billion in credit available to fund major payday lending companies.
The major banks funding payday lending include Wells Fargo, Bank of America, US Bank, JP Morgan Bank, and National City (PNC Financial Services Group).
All together, the major banks directly finance the loans and operations of (at minimum) 38% of the entire payday lending industry, based on store locations.
The major banks indirectly fund approximately 450,000 payday loans per year totaling $16.4 Billion in short-term payday loans.
Wells Fargo is a major financier of payday lending and is involved with financing companies that operate one third (32%) of the entire payday lending industry, based on store locations.
All of these above mentioned banks received TARP bailout funds in 2008-09 and have benefited from accessing capital at exceptionally low interest rates from the Federal Reserve.
Major banks access credit from the Federal Reserve at 0.5% or less, these banks extend an estimated $1.5 Billion annually to eight major payday lending companies, who in turn use this credit to issue millions of payday loans to consumers every year at average rates of 400% APR.
http://npa-us.org/research/payday-lending
Well I see what you’re getting at, but I don’t buy the argument that banks offering financing to payday lenders somehow results in their being to blame for those loans.
Banks have offered financing to firearms manufacturers but I don’t blame them when someone gets shot. They offer financing to tobacco firms but I don’t blame them for the marketing those firms have used to attract underage smokers. Banks offer financing to churches who might push a discriminatory message I strongly disagree with, and they offer financing to Casinos, Liquor Stores, and fast food franchises which one could argue are just as damaging to society as payday loans.
As a taxpayer, my funds are used to fund wars I disagree with and used to spy on my fellow citizens – but yet I don’t blame myself for those actions. I place blame directly where it belongs. Thus, without a more direct link than a bank providing financing for a company (regardless of what that company sells) I’d have a hard time drawing that line to place “blame”. I suspect there is much more to the story here, because if the big players in the banking industry really wanted to profit from payday lending they would offer it themselves directly. The other question is if payday lending is so profitable then why would those lenders need additional financing from other institutions? Again – probably more to the story.
I’ll also state that some of those “facts” on that site are unsubstantiated and only half-truths. They also are rather clever with their wording by saying there is “credit available to fund” or that banks are “involved with financing companies” which fund payday lending.
I’m all for ending predatory lending, but you have to know where to aim.
“Why would a US serviceman or woman NEED to look to usurer rate loans?”
That is the question. The obvious answer is that we pay our lowest ranks of enlisted members wages which put them below povery levels so that is worthy of addressing. I also feel some of it boils down to financial knowledge. I’d put money on the fact that enlisted members are much more likely to seek out this type of product than Officers, and not just because of income level but also because of education.
We need to do a better job of educating the public about financial matters, because if you don’t have $150 to pay the electric bill today, what makes you think you will have $400 to pay for it next week?
Granted we will always have people who are poor at managing money. We will always have people who find money for material possessions and who are willing to go into massive amounts of debt in order to have just the right car and the nice flatscreen TV and the newest iPhone. We will also have people who struggle to find money to pay for their car payment but have no trouble getting a new tattoo or spending all Saturday night at the club. We know this – and we are powerless to prevent it, but at the very least we should be able to do what we can to prevent people from taking advantage of those who are down and out through no fault of their own.
If someone is making minimum wage and their water pump goes out on their 12 year old car, it is a dramatic, stressful life event because they know they HAVE to fix that car in order to continue to make money to feed themselves and their family, and they might not be able to wait until payday to get the car serviced. For someone making six figures a year, a broken water pump is a minor inconvenience but one that won’t have a lasting impact upon them.
We, as a society, should demand more from one another. We should care more about each other than we do about our stock portfolios or bank balances. However, I admit this is a problem with isn’t easily resolved because we are so disconnected from where our money comes from and what struggles others are facing. We sometimes don’t realize what impacts we have when we shop at a local store or buy a certain product because it doesn’t resonate with us. Many people might know child labor in a sweatshop is responsible for producing that new pair of Nikes, but unless society starts looking down upon those wearing them… a pair of shoes at 30% off is still too good of a deal to pass up right?
It’s human nature to only care about the things we can have a direct impact upon – and perhaps we aren’t at that point where we recognize the direct impact. Social media has helped in this regard, and there are connections being made. Perhaps this trend is a good thing.
Craig: “Well I see what you’re getting at, but I don’t buy the argument that banks offering financing to payday lenders somehow results in their being to blame for those loans.”
I agree that some of this banking relationship is arm’s-lenght and some is closer than that. The issue is that we give banks such low interest access to Fed money, that we also then have the ability to regulate how that money is in turn used. When we found banks laundering money and financing terrorist organizations, we did hold them accountable for those actions. Maybe extreme in the example, but still to the point.
As for paying our servicemen and women a better wage and having a better educated public on the matters of credit, I could not agree with you more on both counts.
“The issue is that we give banks such low interest access to Fed money, that we also then have the ability to regulate how that money is in turn used.”
I have zero disagreement with you. Regulations have rarely harmed the consumer.
It seems to me that years ago when predatory pay day loans were first examined, some of the major banks actually owned the predatory pay day loan outfits. My memory may be wrong however.
O is right about the big banks financing usurious payday lenders. His source is sound and the information is not new.