Bankers Face Ruin If Limited to 36% Annual Interest Rate

[No Exit]

How will the innocent Daddy Bankers tell their suffering children that "No, Brooks, we just can't afford all those text messages you've been sending... These are hard times...Dear, it's possible you may have to do without your camera-cellphone for a few weeks..."

Banking groups urge Pentagon to narrowly apply law

By John Poirier
Reuters
Friday, January 5, 2007; 7:28 PM

WASHINGTON (Reuters) - Banking trade groups want the Pentagon to narrowly apply a law that caps interest rates and fees on military personnel to payday loans only and not to other credit services, according to a letter obtained by Reuters on Friday.

Congress recently passed legislation that imposes a 36- percent cap on annual interest rates and fees that lenders can charge on credit cards and other loans provided to U.S. military personnel. The law, passed last year, was tucked into a Defense Department authorization bill.

"Our primary concern is that a broad application of the legislation could have the unfortunate impact of ... harming servicemen and women and their spouses and dependents by limiting their access to credit or increasing their credit costs," the letter said.

(snip)

The law has financial institutions scrambling to find ways to avoid being affected by the cap, which lobbyists say sets a worrisome precedent that could spill over into financial products outside the military. (Gasp! swoon....) The letter, dated January 5, is signed by five trade groups -- American Bankers Association, Association of Military Banks of America, Consumer Bankers Association, Independent Community Bankers of America and America's Community Bankers.

(snip)

http://www.washingtonpost.com/wp-dyn/content/article/2007/01/05/AR2007010501649.html

NOTE: italicized part above is added comment from poster and bold print has been added.

This is an outrage! Soldiers may have to do without credit (above 36% APR)!

But thank heaven the noble American Bankers Association and other brave bankers organizations are prepared to fight to prevent the unconscionable "harming servicemen and women and their spouses and dependents by limiting their access to credit or increasing their credit costs"! :nopity:

[wakeme2008]

1. But in the real world they will not stopping giving credit

they are still too greedy to do that. Shit even 36% is crazy...

[unblock]

10. actually, they will stop

i used to work for a sub-prime car lender, and there were a few states we did not do business in because it wasn't economical even at 36%.

note that part of the problem is the specificity of the pool. if you lend to one big pool with a mix of credit, then 36% is way more than enough. but if you weed out the good credits and give them low interest rates in a separate pool, then put all the poor credits in one very risky pool, you need to charge very high interest rates just to cover the losses.

[nebenaube]

16. gee did you bankers ever stop to think...

That your FUCKING PENALTY INTEREST RATES IS WHAT CAUSES THE FUCKING LOAN DEFAULTS IN THE FIRST PLACE?

[unblock]

19. i'm very much aware of what causes defaults

and high interest rates are indeed ONE of MANY causes.

my point was that the situation can be resolved by changing the laws so that poor credits are merged with better credits to form a more viable pool. either that or accept that the poor credits shouldn't get loans at all.

[malaise]

2. I can't wait for the day when these bankers

jump out of buildings. They are beyond evil.

[Double T]

11. Agreed. The coming crash was wholly engineered and designed.......

by their own insatiable greed. Banks, bankers and their credit card divisions are the lowest form of corporate scum
and corporate malfeasance. Congress on BOTH sides of the aisle has aided and abetted these criminals.

[malaise]

20. Yep

they will jump just like their predecessors.

[TankLV]

3. Put it back to 12% MAXMUM FOR EVERYONE like it used to be

before raygun and the repukes came to power.

They made nice profits for a long time with those rates.

Not to mention what these rates do to the average joe/jane...

If they can't make profits at 12% a year, maybe they're in the wrong business.

DO AWAY WITH THESE MOB-STYLE USURY RATES!

That's what I want to see...

[judaspriestess]

6. and they wonder why bk's where at an all time high

sure, they have slowed down but you can still file a bankruptcy. You just have to go the a few more steps.

36% is bullshit and if you read the fine print, credit card companies reserve the right to increase your apr AT ANY TIME including monitoring your credit in case maybe you go over 50% on a different credit card.

[depakid]

9. Agreed

These folks are nothing but loan sharks and they OUGHT to be put out of business. In fact, if it were up to me, I'd put a special assessment on the so called "payday lenders" to compensate the taxpayers for the excessive burden that they place on the court system trying to collect on their usurious contracts.

[mcscajun]

14. Actually, it wasn't ever 12% max everywhere. Usury laws are a state matter

except for banks with "National" in their legal names, and the maximums vary accordingly. That's a good deal of the reason why many banks moved their legal Headquarters to bank-friendly states; for some, it was usury maximums, for others, right to work laws, for others, more obscure reasons.

I can recall when I lived in NYC well before the Reagan Administration, that the usury limit was 25% for NYS (that's since been reduced to 16%) but in NJ, where I live now, the usury limit is, get this: 30%! Many states have still have NO Limit on certain interest rates, shockingly.

All emphasis mine:

In some states we also have a "legal rate." In such states, as a general rule, if you have a contractual obligation that provides simply for interest without a specific term, or "interest at the highest legal rate" then the "legal rate" what applies. In other instances we have stated a "judgment rate." That's the rate that final judgments bear. In states without a usury limit, there still may be a federally imposed limit because at certain astronomical rates of interest "loan sharking" will be inferred by the federal government.

snip

DISTRICT OF COLUMBIA, the legal rate of interest is 6%; the general usury limit is in excess of 24%.

FLORIDA, the legal rate of interest is 12%; the general usury limit is 18%. On loans above $ 500,000 the maximum rate is 25%.

snip

MASSACHUSETTS, the legal rate of interest is 6%; the general usury rate is 20%. Judgments bear interest at either 12% or 18% depending on whether the court finds that a defense was frivolous.

snip

NEW HAMPSHIRE, the legal rate of interest is 10%; there is no general usury rate.

snip

TENNESSEE, the legal rate and judgment rate of interest is 10%. The general usury limit is 24%, or four points above the average prime loan rate, WHICHEVER IS LESS.

http://www.lectlaw.com/files/ban02.htm

[noahmijo]

4. Pfft these bastards make the Soprano crew look like the fuckin Salvation Army

[Warpy]

5. Unable to get predatory lending legislation passed in NM,

the state AG, Patricia Madrid, took to the airwaves in PSAs pointing out the 300% per year interest rates and that these outfits were mostly located right outside the gates of military bases in this state.

These people are total scumbags and usury was illegal until the GOP took over. Thanks a lot, Newtie, we really appreciate your party's legalization of loan sharking.

[Rosemary2205]

7. What? No discussion of RAISING military pay?

They are risking their lives to "spread freedom" but they make such miserable pay that they are tempted by payday loans?

Gawd.........

[unblock]

8. i have 1 card with 29.24% interest -- and i have near perfect credit

i've NEVER paid late, no negative anything on my credit report. the only reason my score is not even higher is that i carry some low interest balance transfers, like 0% or 1.9%.

and yet some cards have normal interest rates over 25%, one as high as 29.24%!! of course, i would never carry a balance at such a ridiculous rate. it's one thing when you charge high interest to someone with bad credit; it's another thing to charge it for people with perfectly good scores and histories.

[Rosemary2205]

17. Your rate is high BECAUSE you don't carry a balance.

I've had the same card for 27 years. My rate was under 8% but I have never carried a balance. About 6 years ago they raised my rate to 17% and when I squealed they flat out told me it was an effort to get me to cancel the card because they were not making enough money off me in interest.

Now I'm in a whole other situation due to a car wreck and my whole financial situation is different, but even back in those days the banks were getting aggressive.

[unblock]

21. that's just silly, they can lower your limit at any time.

if they really wanted to get rid of you, they would sell your account or lower your limit to next to nothing.

it's true, though, they don't like people who pay in full on time each month. they call us "deadbeats". so they raise interest rates just in case we slip up, and if they lose the account, they don't care because they're not making much money off us anyway.

sorry to hear about your car wreck. been there, done that. very, VERY expensive in many ways.

[quiet.american]

12. Just about the entire credit industry has become an out-of-contol scam. n/t

[Robbien]

13. The only way for banks to stay alive is to have huge bottom line growth

This new law has the potential to hurt banks and therefore should be declared illegal.

Corporate profits rule.

</irony>

[Tierra_y_Libertad]

15. "Sacrifice" for the war effort. Troops, their lives. Banks, their profits.

Call me sentimental, but I do believe the troops have more to lose.

[mcscajun]

18. Any bank that needs a 36% interest rate to survive *should* fail

and the sooner, the better. When the Prime rate changed every week (1980) and reached a high of 21.50%, and those of us who worked in banking were making nearly daily phone calls to notify retail lending areas of the latest rates to be charged our clients, the banks raised all of the credit card rates accordingly; they had to make a profit, doncha know. However, no one failed to notice that when the Prime Rate dropped, except for 0% financing promotions, most didn't lower their rates one iota.

Now the Prime Rate is at 8.25%, and there's no reason for them to charge Four Times that to anyone. No Reason except blatant greed.

[SoCalDem]

22. Used to be.. interest rates like that were enforced by guys named Vinnie

and usually were enforced with FORCE..

[NorthernSpy]

23. 36% interest? Anyone who wants to rob me like that will have to use a gun!

"Bankers Face Ruin If Limited to 36% Annual Interest Rate"? Oh, we can only hope!

[Squatch]

24. Some soldiers are among the worst abusers of credit I've ever seen.

Some 18-year old joins the military, gets stationed at XYZ, and is promptly assaulted by credit card offers, furniture companies, car dealerships, who immediately extend credit to them because of their steady (and predictable) income. As a result, soldiers easily get overextended on credit (regardless of APR), fail to make payments, start bouncing checks, etc...and then the Army gets involved and the soldier's career is in jeopardy.

[WHAT]

25. question? is there anyway military personnel...

could collate and form their own banking system? I don't know if there are laws against it or why it hasn't happened. It just seems like there are a lot of smart people in the military who could organize and establish such a service that could be profitable or useful to both the lender and lendee. Peer pressure could be brought to bear on those irresponsible and scrutiny would be democratic. Say, limit loans to important stuff like appliance replacement, auto repair, humane emergencies like death in the family, birth, etc.

If such a thing were in place, I'd say let the banks who can't survive without usury tactics go belly-up. Would there be problems standardizing loans from state to state? Could legislation be passed for uniformity in military co-op banks to allow for facile administration? Banking could become a family affair with compassion, skepticism, humour, flexability...pooled resources among members that could be beneficial to all and vested interests to promote oversight.

I'm just asking...

I don't know why people don't solve the problem for themselves when there are common traits to it that impact the whole group.