Elizabeth Warren, in a column on The Center For American Progress website titled “Kicking the Middle Class When It’s Down”, writes about a bill currently making its way through Congress that isn’t getting much media attention. The bill, written by lobbyists for the credit industry, wants to make it a lot harder for people in deep financial trouble to declare bankruptcy.
The bankruptcy bill is more than 400 pages of virtually impenetrable text, with literally hundreds of changes to an already-complex statute. A well-financed lobbying effort has reduced it to a tasty sound bite: People should repay their debts if they can. The problem, of course, is that the sound bite deliberately obscures the reality. The biggest problem is not people who can repay, it is people who are desperately trying to repay and who can’t make it — families filing bankruptcy to try to make up mortgage payments and past-due car payments but who don’t have steady enough incomes to make even a minimal repayment plan and keep groceries on the table. But the proposed bankruptcy bill would impose more than a hundred new constraints on all families — whether they are trying to repay or not — increasing costs, decreasing protection, and leaving creditors with more leverage than ever to squeeze a few dollars more out of all these families.If this bill passed, who would pay the price? First, families with children. Today, people with children at home are nearly three times more likely to file for bankruptcy. Married couples are in trouble, and those trying to raise a child alone are in even more trouble. A single woman raising a child is nearly four times more likely to file for bankruptcy than a single woman alone. Divorced dads are having a hard time too, heading into bankruptcy at much higher rates than their single friends without children.
Among older Americans, the most likely filers are those who cannot pay for prescription drugs or meet other medical costs. Older Americans are also more likely to have been the victims of fraud and unscrupulous lenders who are trying to trick them out of their homes. For a growing number of seniors, bankruptcy is their last hope.
Naturally, a time when “consumer debt [is] higher than ever, many thousands of middle class families face financial disaster[, and h]ome mortgage foreclosures, car repossessions, and credit card defaults are all at record levels” is a perfect time for the Republicans to want to pass a bill making it harder for us to get any relief or protection from creditors who have been, shall we say, less than honorable?
The biggest chunk of this unpaid debt belongs to credit card companies, the same companies who moved their headquarters to South Dakota because SD allows them to charge much higher interest rates than any other state in the Union–as much as 28%. Now, you don’t suppose usurious interest rates had anything to do with the fact that we find it difficult or impossible to pay them, do you? And the bill was written by the same lobbyists who have so successfuly torpedoed any attempt by the national govt in the last 20 years to outlaw those usurious rates. Warren points out that there is nothing in the bill whatever to suggest that the credit industry has any culpability for the worsening situation.
Real abuses, however, escape attention in this legislation. Despite all the provisions to make personal bankruptcy more difficult, the amendments were carefully tailored to preserve loopholes for corporate executives because they have “business debts” instead of “consumer debts.” Similarly, provisions to protect multimillion dollar homes in Texas, Florida, and other states remain virtually intact. Special exemptions for the rich remain because they rarely owe credit card debt, while the bill zeroes in on ordinary, wage-earning families.This bill treats bankruptcy as something debtors alone create; creditors are treated as innocent victims. Last year, the credit industry mailed five billion credit card solicitations, but the bill imposes not a single new constraint on the credit industry. Instead, the House has embraced a bill that is widely described as “a creditor’s wish list” to help companies increase the odds of collecting from even the most financially troubled families.
To whom, perhaps, they should not have given cards in the first place? The fact that they’ve been known to give cards worth as much as $1000 to 12-year-olds doesn’t suggest that their greed is a little out of control?
I have a friend who is a cook and makes less than $30K/yr; his wife is a court clerk who makes about the same, maybe a little less. Last year he showed me a pile of valid cards with $15-20K credit limits–platinum cards that are supposedly only given to those with AAA ratings. I asked him where they came from and he said he had applied for one, been accpted, and that a few weeks later all the others had come in the mail, pre-approved and pre-stamped. He had over $100K worth of credit–at 23%+ a pop–in his wallet. He thought it was amusing because he’s a gambler, is constantly in debt, has a terrible credit rating, and was turned down for a car loan by his bank the same week. “They couldn’t have seen the same credit report my bank saw,” he said. “Could they?”
Maybe they did, The truth is that credit card interest rates are so ridiculously high that even if you get in trouble and can’t pay it all, the creditor likely is going to collect much more from the interest than the amount you owe in principle. Despite what industry lobbyists call a “epidemic of bankruptcies”, this is still a very profitable business. Loan-sharking usually is, which is of course what their insane interest rates amount to.
In addition, the credit industry spends $$$Millions$$$ every year in advertising aimed at convincing you that you can’t live like a True American unless you’re doing it on credit, although they’re not accepting any responsibility for that, either. If you’ve seen that advertising on tv, in your mailbox, or on your computer, you know that the interest rates are often hidden in the fine print along with the extra charges, the high penalties that kick in if you miss a payment by as little as a day, and the “interest-on-the-interest” trick if you pay the minimum which can double the already unconscionably high legal limit. You also know that the front-page come-ons they use to persuade you that their credit card is cheaper or easier to get than the others are often a fingernail-width from legal fraud.
But none of that matters because Republicans are the creditors, and, like the plutocrats of the Ancient Roman Senate, their POV is “It’s all your fault!” The way we’re going, poorhouses will be next.
Have you had enough yet?