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General adds voice to chorus against raising rates on consumer loans

In a new op-ed piece distributed today to North Carolina papers, Brigadier General Paul Dordal, USAF (Ret.) says that raising rates on consumer loans “sends a strong negative signal to the military and military families living in North Carolina.”

The full text of Gen. Dordal’s powerful message appears below.

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Raising loan rates is bad news for military families

By Paul Dordal, Brigadier General, USAF (Ret.)

For the past few weeks, military commanders at installations in North Carolina have expressed their opposition to proposed bills introduced in the House and Senate that would allow finance companies to raise charges on their short term loans. In spite of this opposition, last week the House Banking Committee passed this legislation, which sends a strong negative signal to the military and military families living in North Carolina. Annual Percentage Rates on these loans can already go as high as 54 percent. Military members returning from deployments and struggling to make ends meet are especially susceptible and have been victims of these types of loans in the past. This legislation will only make matters worse when we can least afford it.

On Memorial Day we remember those who have given their lives fighting for our country, and it is also a time to remember the sacrifices of those who are fighting for our country today and ensure that we do everything that we can to support our military and their families. North Carolina has the fourth largest active duty military presence in the country and is home to hundreds of thousands of military personnel that, along with our NC National Guard and Reserves, are critical to our nation’s defense. While our troops are engaged in a War on Terror in Afghanistan, Iraq and other places, military families are faced with high deployment rates, often dealing with disabilities and death, and it is very difficult for a considerable number of military families to stay on top of their finances and make ends meet.

Increasing the interest rates and other fees that finance companies are allowed to charge for short term loans does not help soldiers or anyone else out of their financial problems and will only make situations more difficult for soldiers that are having financial problems to repay high interest debts. The NC Commissioner of Banks has determined that changing the law is unnecessary and that the industry is profitable. The only people that benefit from HB 810 are the finance companies. While they will reap millions of dollars in extra profits, military members will continue to suffer the consequences of these loans. Members that are unable to resolve financial problems are dealt with under the Uniform Code of Military Justice and regardless of their combat experience and value to their units, they do not last long in the military. We can’t afford to lose our combat experienced soldiers.

North Carolina wants to be known as the most “Military Friendly” state in the country, and we appreciate all of the efforts in the past to support our military and their families, but this recognition needs to be earned and it is imperative that all of us, including the members of the North Carolina General Assembly, do everything possible to assist and support our military and their families.  Military commanders and civilian leaders in North Carolina fought hard to restrict short term interest rates in the past and have shown that HB 810, if it is passed, will be extremely detrimental to the well-being of our soldiers, sailors, airmen, marines and the military families that reside in North Carolina.

As a former commander and retired General Officer, in concert with the active military commanders in North Carolina, I am asking the members of the House and Senate to oppose HB 810 and any legislation that is introduced that would raise rates and fees on these loans. We should be supporting and protecting the brave men and women that fight to preserve our freedom rather than helping finance companies prey upon them and their families for excessive profit.

 

13 Comments

  1. Chris McKinley

    May 31, 2011 at 8:35 am

    While the (Retired) General is quick to point out Commissioner’s Smith position on the rate change, he, along with al other opponents, completely ignore the Commisisoner’s statements that loans conducted under NC’s CFA are safe, affordable, and responsible. That there is absolutely no evidence about these loans being harmful, to either civilians are military.

    He, along with all other opponents, frequently cite 54% APR loans, yet there are less than 4,500 loans made under this section of the law that allows a 36% interest rate. The rest are made under the 30% interest rate cap. If that 36% was so profitable, there would be more.

    The fact is that much of the (Retired) General’s comments is rhetoric and not reality. And trying to draw in the honor of those who have given their lives to defend the freedoms we have into a disrespectful attempt to solicit support for their agenda is pathetic.

  2. Jeff Shaw

    May 31, 2011 at 8:44 am

    The Commissioner of Banks’ conclusion is that the law does not need to be changed to allow higher-interest loans. That’s the bottom line. Also, *every* military commander in North Carolina is vehemently opposed to this effort to charge more for loans.

    It’s very telling that the only people who think the law needs to be changed are the people with a direct financial interest in doing so. Everyone else — consumer groups, anti-poverty groups, the Commissioner of Banks, social justice groups, the military — says we should keep our current consumer protections.

    In the worst economic crisis since the Great Depression, well-paid lobbyists for an already profitable industry are trying to extract still more money from cash-strapped families in North Carolina — funds that would primarily benefit big out-of-state lenders. The only people in favor of that are the very few people who are going to financially benefit.

  3. Mary Waggoner

    May 31, 2011 at 9:54 am

    The bi-partisan House Banking Committee of the North Carolina General Assembly knew what they were doing in voting yes to the small increase requested for Consumer Installment Lending in North Carolina. This is vital to the financial health of this state. Top experts in NC and the rest of the country acknowledge the vested interests of opponents of this bill. The rate increase is small after 28 years with little consideration for the rising cost of goods. The military certainly want to keep loan costs as low as possible, but not if it means losing this important option. In response to HB 810, military families, retired military and others have spoken out to say how important it is to keep access to this responsible consumer lending option. They have NO vested interest. They understand that this lending option is really the most responsible available with a one-on-one meeting and financial discussion. Yes, that “high-touch” lending may appear to cost a bit more, but it is so valuable especially to military members who need that face-to-face discussion of budget, ability to pay, and loan terms. It is silly, really quite disingenuous to try to criticize the small increase requested of the legislators based on patriotism. The military personnel who came to speak on behalf of this loan product talked about how it helped their families in a time of need and the loans were paid back without any issue. With due respect, the retired general is misusing patriotic dedication in discussing a very simple, responsible and reasonable request of our North Carolina legislature.

  4. Jeff Shaw

    May 31, 2011 at 10:02 am

    My favorite talking point that industry lobbyists are pushing is “the rates haven’t increased in 28 years.” Well, yeah: they’re PERCENTAGE RATES. They aren’t fixed fees. The rising price of goods doesn’t matter at all.

    If loan providers can’t make a profit charging 54 percent interest, I don’t know what to tell ‘em.

  5. LegalLender

    May 31, 2011 at 11:26 am

    Well Jeff, thats probably why there is only $5 million in total loans under that 54% APR (thats a top rate of 36% interest) out of $1.3 billion of CFA consumer loans. That 54% is only $56 in total interest or roughly $9 a month with a $25 processing fee on a $500 six month loan.

    Also the interest rates are fixed. Fact.

    And by the way, the only thing you have is talking points and no facts.

    And lets not forget that at last count the North Carolina Justice Center has 12 registered lobbyists.

    With a $4 million dollar plus annual budget (of which 80% is employee salaries & benefits), its kinda hard to understand that you would object to business owners, who are having to spend their time actually running tax paying businesses, in having their own representation in Raleigh to counter to unsupported rhetoric put out by the Center.

    So its a little disingenuos to see your feigned outrage when lobbying is practically a full time for your group.

  6. Jeff Shaw

    May 31, 2011 at 11:55 am

    I’m not “outraged” that folks on the other side of this issue use lobbyists; I’m outraged that people are trying to raise consumer loan costs to vulnerable people, and that doing so would mostly benefit huge, profitable out-of-state corporations.

    That’s the real issue. Everyone from the Commissioner of Banks on down doesn’t think the law needs to be changed, because it would help profitable companies extract still more money from people who can’t afford it.

    As for the Justice Center, we work on housing issues, consumer issues, education, immigration, health care, public benefits, second chances for ex-offenders, the state budget, transportation, and the odd federal issue here and there. That’s a huge range of issues for our two full-time lobbyists.

    Again, though, the main issue is that this bill would just allow profitable out-of-state business to charge average North Carolinians more for loans. That’s bad for the state.

    (Not that this is a surprise to anyone, but “LegalLender” is also Chris McKinley, unless someone else is using Chris McKinley’s email address. It’s kind of odd you’d post twice in the same thread under different names, but OK, whatever floats your boat.)

  7. Nathan

    May 31, 2011 at 12:04 pm

    I will voluntarily listen to one hour of Glenn Beck’s radio show if it can be proven to me that the pro-bill commenters here are not themselves either lobbyists or otherwise employed by the lending industry. Who writes like that except someone copying from talking points?

  8. Chris McKInley

    May 31, 2011 at 12:16 pm

    Sorry. Accidently used my alter ego. It happens sometime.

    Your “out of state” commentary is really quite funny.

    Given that a majority of businesses in this state that are for profit businesses and are “out of state”, your argument that profits will leave the state and that is bad is comical at best. What do you want, no companies who are not headquartered in this state are not allowed to make a profit? Truly a statement from a non-profit advocate.

    By the way, those companies have roughly $800,000,000 million invested in the states economy with their consumer loans. Thats money that is spent in this state for goods and services.

    But for someone who lives off grants and contributions, I can understand the position (though I obviously don’t agree with it).

  9. gregflynn

    May 31, 2011 at 5:24 pm

    Mr McKinley, stop digging and drop the shovel. You don’t seem to have a problem with “someone who lives off grants and contributions” when they support your position, like Dallas Woodhouse and AFP. Attacking people as you do does not make you out to be a responsible lender.

    Is your line of work somehow more noble because your income derives from people in a tight spot? It took a lot of effort to get these loans to the position you describe as “safe, affordable, and responsible” here in NC. Now you would weaken that position.

    On second thought, keep digging. You make the case against your industry so much stronger.

  10. AdamN.

    June 1, 2011 at 2:57 am

    Well, financial reforms really bring a lot of changes and increasing rates are not the most pleasant, in fact. Interest rates for some small consumer loans would more than double under a bill that cleared the House banking committee — despite opposition from consumer groups and top commanders of the state’s military bases. Opponents of the bill say the vote came after pressure from Republican leaders on behalf of an industry that helped bankroll the GOP takeover of the chamber. Backers of the bill say small lenders haven’t been able to raise their rates or fees since 1983, meaning they’re working on slim profit margins. The bill has faced a tumultuous path through the General Assembly this year and has had numerous stops and starts. Banking Committee chairman Johnathan Rhyne, a Lincolnton Republican, pulled the measure last week after remarks from Sicinski curdled support. It seems to me that this measure is not the last one and the “natural law” stating that the poor bocome poorer is still working.

  11. Chris McKinley

    June 1, 2011 at 8:24 am

    AdamN. There are no loans under HB810 whose interest rates are doubled. It is obvious that you do not understand the Consumer Finance Act blended rate schedule. So you are either repeating previously inaccurate statements or you know the information is incorrect and choose to continue the falsehoods in order to promote opponents’ agenda. It can only be one or the other. If you would like the facts, I would be glad to provide the rate schedules according to the current HB810 legislation. If you want to disagree with the bill simply because of a rate increase, fine. But it cheapens your position when you are promoting it with inaccurate information.

    GregFlynn. My work is noble because I see it everyday in the eyes of grateful consumers who are sincerely appreciative of our services and what we do for them. That is why the Commissioner of Banks survey and the UNC Center for Community Capital survey show that our industry has one of the highest levels of consumer satisfaction out there. That’s why with over 1 million loan transactions in the last three years, the State’s AG office received only 274 complaints. There are no problems with these installment loans.

    While many of the opponents of HB810 like to portray our customers as mindless cattle who are financially desperate, I personally know them as responsible, average hard working consumers who have choices, make rational decisions, and believe personal responsibility and accountability are very important.

    What drives opponents of this industry crazy is that the facts are on our side. That’s the reality. Opponents have nothing more than rhetoric and have demonstrated, as evidenced on this very website, their willingness to use any means, regardless of how factually inaccurate it is, to achieve their political agenda.

    And while I do not deny that I have my shovel out, it pails in comparison to the rather large shovels that are used by proponents of this blogs political agenda. Denigration, sarcasm dripping with unsubstantiated innuendo, juvenile name calling have been par for the course with some blog writers’ posts. I would welcome the day when shovels can be put away and the actual facts are debated and discussed and that conclusions are drawn from reasoned dialog. Maybe that is just wishful thinking on my part. Maybe that’s the intention of NC Policy Watch.

  12. gregflynn

    June 1, 2011 at 9:58 am

    Chris, before “the last three years” we had companies like Compucredit and Advance America lobbying against the laws that provide the stability and “consumer satisfaction” that you refer to. Now you, and they, want to weaken those laws. It starts with a crack and a wedge, and returns us to the days before “the last three years”. If “the last three years” have been so great why mess with the existing laws?

    There are bad operators out there and we need laws to curb the abuses. If you choose to defend the abusers don’t be surprised when you get painted with the same brush. You say “There are no problems with these installment loans.” If it ain’t broke, please don’t fix it.