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Only coordinators can ban manually. Moderators don't seem to have such authority.
Absolutely correct, and bothering the Creator every time is too much.
I think the system is ill-conceived, cumbersome, and inconvenient. Users with three and a half hundred points are walking around freely, while a moderator, out of spite, might give someone a penalty once every six months for something far-fetched.
It's not the system's fault.
Personally, I don't see anything wrong in this, as some users really like to distort usernames. I even think that the penalty for this should be increased and it should be considered an insult to the user.
In principle, what you describe, namely the deliberate distortion of a user's name with the intention of hurting them, can indeed be equated to an insult, so everything is fine. And if there is no malicious intent, then it really doesn't deserve more than five points.