Bankruptcy Bill or Welfare for Usurers?
Abuse Prevention and Consumer Protection Act passed by the Senate
last month illustrates once again that it is easier to pass a
bad bill in Washington than it is to pass a good one. Make no
mistake about it. This is a bad bill -- which is why the House,
no doubt, will pass this bill this week and why President Bush,
to his discredit, will sign it.
would make it harder for debtors to file for bankruptcy under
Chapter 7, and push more debtors -- it targets those who earn
more than a state's median income -- into Chapter 13, which has
tougher repayment standards. That sounds fair enough, except that
the Senate wasn't interested in making banks act more responsibly
by dispensing with venal lending practices, such as lending money
to people who have just filed bankruptcy and enticing college
students with easy credit.
this: The Senate rejected a measure to cap credit-card interest
rates at 30 percent. Now, I ask, why should Washington want to
protect lenders, who charge desperate people as much as 36 percent
in per annum interest?
lobby -- Big Borrow-mongers -- claims that it needs protections
against deadbeats, who file for bankruptcy without even trying
to pay off their debts. I would sympathize ... if the money lenders
weren't so rapacious -- shameless, really -- about fleecing the
Consumer Law Center argues that consumers often want to pay off
their debt, but can't keep up with lenders' late fees, penalties
and exorbitant interest. The center cited the tale of Ruth Owens
of Ohio. By the time Owens stopped using her credit card for purchases
in 1997, she had racked up a balance of $1,963. Over the next
six years, she made $3,492 in payments, but not a dime went to
pay off the principal. Thanks to a 21 percent interest rate, fees
of $1,518 for exceeding her credit limit and $1,160 in late fees,
Owens paid the bank all that money and still owed the bank a whopping
As the Law
Center noted, Owens would have been better off if she had become
a deadbeat in 1997 -- if she had simply stopped paying her credit-card
bill until the bank sicced a collection agency on her -- instead
of honestly trying to pay off her debt. Rather than helping her
to work out the debt, the bank simply drove her deeper into the
I wrote on this bill ("Don't bank on it," March 17), arguing that
the federal government shouldn't bail out banks for their own
bad lending practices, I received a number of e-mails from people
in the credit business who agreed with me. A minority of those
in the business who e-mailed me complained that the very folks
who criticize the financial-services industry for gouging poor
lenders would be kicking the industry if it did not lend to the
urban poor. They have a point: Consumer advocates do push banks
to loan money to the often-overlooked urban poor, so that they
can buy first homes and start their own businesses.
I have yet to hear any consumer advocate say banks owe it to the
poor to charge predatory interest rates -- as high as 36 percent
-- as well as exorbitant late fees and over-limit penalties.
the industry's woes suggest that Washington should make it easier
to file for bankruptcy, in order to protect the banks from themselves.
As Travis Plunkett, legislative director of the Consumer Federation
of America noted, lenders "have it within their power to control
the bankruptcy rates by controlling their practices."
As a Republican,
it disappoints me to say this, but I understand why people call
the GOP the party of big business. When Washington pushes for
more responsibility among debtors, but not loan-shark-like lenders,
when its "ownership society" principles don't make big corporations
own up to their role in the bankruptcy problem, the GOP is toadying
to big business. (Ditto the 18 Democrats and one independent senator
who voted for the bill.)
expects the House to pass the bill. Plunkett said some House members
are having second thoughts, but they figure there is no percentage
in voting no, and displeasing a political contributing class.
They figure, "Why anger the credit industry when they know they're
going to lose?"
is a reason to anger the credit industry - to represent your constituents.
If readers want the House to kill this turkey, they should let
their congressional representative know that they oppose this
bill. This bad bill probably will pass anyway, but citizens who
care about good government and good business practices should
at least make those lawmakers who vote for the measure sweat.
2005 Creators Syndicate
This Article to a Friend