Marine bankers battle regulatory hurdles

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NEWPORT, R.I. – Federal regulations were a big topic Monday during the National Marine Bankers Association conference here.

Michael Benoit, a partner at Hudson Cook LLP, told attendees that Title 10, or Dodd-Frank legislation, has made it possible for more government oversight and regulation.

The fear of earning unwanted attention from overseers will begin to limit the types of marine loans businesses can offer, NMBA president Karen Trostle told Soundings Trade Only. Ultimately, that will negatively affect dealers who are trying to get customers approved for boat loans.

“All these businesses are going to just offer vanilla loans,” Trostle said. “Lenders won’t have the ability to offer creative options for people.”

Punitive measures against Capital One for debt-protection programs that were instituted by that bank’s vendors prompted others to stop offering debt protection, Benoit said.

“Even though they were tactics used by third-party vendors, [the government] didn’t attack the products themselves, they attacked the way they were being sold, and that caused every other party in the country to stop offering debt protection,” Benoit said. “The lesson to take away from Capital One is that you are responsible for your vendors, so you need to vet them very carefully. You need to determine whether they have deep enough pockets if something goes horribly wrong. That’s the lesson, I think, from Capital One.”

In addition, regulators often don’t understand the subprime lending business, said John Haymond of Medallion Bank, a Utah-based lender that specializes in the niche of subprime lending in the marine industry, among others.

“Regulatory agencies don’t really like subprime [loans] because they don’t really understand them,” Haymond told attendees.

They have more understanding in Utah because that’s where many lenders operate, Haymond said. That’s because the state of Utah has “very unique bank laws that allow us to export Utah loans nationwide” without being subject to other state laws or requirements.

“Regulation agencies are still one of our biggest hurdles, particularly in the marine industry,” Haymond said.

Read more about the National Marine Bankers Association conference, which runs through Wednesday, in an upcoming issue of Soundings Trade Only.

— Reagan Haynes


4 comments on “Marine bankers battle regulatory hurdles

  1. Captain Gort

    “All these businesses are going to just offer vanilla loans,”
    “Lenders won’t have the ability to offer creative options for people.”
    “Regulatory agencies don’t really like subprime [loans] because they don’t really understand them,”
    …I don’t know about you, but comments like these seem to be at the very root of our current financial crisis…wherein, anyone who could fog a mirror ans scratch an “x” on a loan document was granted credit.
    Only creditworthy, responsible people should get loans…especially loans for boats, RVs, cars, etc….IMO.

  2. Doug Reimel

    What is so ridiculous is that the very lenders that made the bad loans and used bad business practices, were not forced to fail as they should have. Instead they get bailed out using yours and my hard earned money, in the form of taxes and higher fees. Then these same people who make bad loans, get bailed out, then receive a bonus for all the business that was done without any reprocussions or responsiblily.

    Wouldn’t that be great if you could screw-up, get bailed out, receive a bonus, all while getting paid handsomely to do that very thing. What a concept.

  3. yacht plumber

    I agree with Capt Gort. If someone needs creative financing to buy a boat they probably shouldn’t be buying it. They either have too much debt for their income, or they are not declaring all of their income to avoid taxes, in which case they should use their cash rather than end up with those of us that pay taxes picking up the tab in the next crisis. I don’t like government regulation either but stupidity begs for regulation.

  4. LTdealer

    I remember subprime boat loans going back 40 years. The subprime buyer usually paid a higher price for the boat and a higher rate on the loan. They were an intergral part of a dealers yearly sales. The fallout was an occational repo or two, nothing earth shattering. This economy needs lenders to make a certain amount of subprime loans. If the banks only lend to top tier buyers we’ll be sunk. WE NEED SUBPRIME LENDING. Not with reckless abandon like the RE fiasco but with a measured response.

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