Tag Archives: credit card industry

Randy Brock puts on the red light

Note: This post would not exist but for the work of “BP,” one of the regular contributors to Green Mountain Daily. Several weeks ago, he wrote an insightful piece looking at the dark side of the captive insurance business, which has found a receptive home in Vermont. Now, with Randy Brock citing captive insurance as a model for state policy, it’s important that we have a clear picture of the pluses and minuses of such relationships. 

Randy Brock, Republican candidate for lieutenant governor, recently threw out a tantalizing hint of a forthcoming policy initiative. He claims this great idea will create $100 million a year in new state revenue.

Brock said Thursday that he was looking to promote ideas that are similar to the push the state made to corner the captive insurance market. The state created a regulatory environment to make Vermont a leader in that industry.

… In addition to captive insurance in Vermont, he pointed to examples in other states, such as Delaware, which has laws that are friendly to corporations so many register there. South Dakota, he said, has created a niche for the credit card businesses.

Brock’s call had previously been made in even broader terms, but to little notice, by gubernatorial candidate Phil Scott:

The state has enjoyed significant benefits from the renewable energy industry and captive insurance, he said. “Imagine if we had a governor’s office that treated every sector in the same way,” Scott said.

That is, frankly, a radical idea that didn’t make it through our media’s Phil Scott Filter.

I’m not sure we want to emulate South Dakota and the credit card industry, especially not in an across-the-board fashion. A “welcoming” state regulatory climate has been responsible for some outrageous, predatory practices by credit card issuers. One could also cite Liberia as a flag of convenience (and cover for outrageous practices) in international shipping, but discretion was the better part of embarrassment there.

And that’s the problem with this kind of regulatory carve-out for a certain  niche business: it’s an open invitation to a “race to the bottom,” because the most relevant enticement a state can offer is a business-friendly approach to regulation and enforcement.

The captive insurance industry looks like a great thing for Vermont. And it is portrayed as an unvarnished good by politicians of all stripes. But there is, in fact, a dark side to the industry that is rarely mentioned in polite circles.

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