CONSUMER RIGHTS
CONSUMER RIGHTS
Morally Bankrupt
The United States credit card industry rakes in $2.5 billion a month in profits – largely in fees and interest charged to the American consumer. But its thirst for additional profits is insatiable. Credit card corporations are showering Congress with cash in an attempt to squeeze every last dime out of those who can afford it least to by making it harder for them to get out of debt. The industry is pushing for a bill that would deny bankruptcy relief to "people with low or moderate incomes who have fallen on hard times because of illness, job loss or divorce." Meanwhile the bill does nothing to stop "abusive lending practices by credit card companies." (Share your thoughts on the bankruptcy bill at ThinkProgress.org.)
INCREASED BUREAUCRACY: The bankruptcy bill is an attempt to prevent people from filing Chapter 7 bankruptcy – which gives people a clean slate – and make them file under Chapter 13, which requires continued payments to the credit card companies. Already, judges can deny Chapter 7 protection if they think the law is being abused. The bankruptcy bill would require consumers to complete a complex array of forms to "prove" they qualify for Chapter 7. The law would also require those seeking Chapter 7 protection to "obtain counseling from a court-approved counseling center before filing." But according to the American Bankruptcy Institute, a nonpartisan research organization, just "3 percent of people who file under Chapter 7 could continue to pay under a court-supervised plan if they filed under Chapter 13." So the real impact of the bill would not be to prevent abuse of the system but to "make filing for bankruptcy much more costly" for those who genuinely need it.
PUNISHING THE SICK: The overwhelming majority of Americans do not become bankrupt by purchasing Rolex watches and plasma TVs. The leading cause: getting sick. A Harvard University study found that half of all respondents "said that illness or medical bills drove them to bankruptcy." Three-quarters of that group had health insurance but "high co-payments, deductibles, exclusions from coverage and other loopholes left them holding the bag for thousands of dollars in out-of-pocket costs when serious illness struck." Many people who suffer debilitating illness lose their jobs and, eventually, their health insurance. Elizabeth Warren, the Harvard Law professor who headed up the study, argues "the problem is not in the bankruptcy laws. The problem is in the health care finance system." Passing the bankruptcy bill "would be no different than a congressional demand to close hospitals in response to a flu epidemic." A group of 1,700 doctors sent a letter to Congress opposing the bankruptcy bill because it "would remove protection from patients financially ruined by medical costs."
PUNISHING THE ELDERLY: Another group saddled with credit card debt – largely due to costs out of their control – is the nation's elderly. Between 1992 and 2001, "the number of older Americans filing for bankruptcy tripled." A new report by the Demos Network emphasizes "the growing presence of America's seniors in the bankruptcy courts should warn policymakers of the importance of safeguarding this difficult last resort."
PREDATORY LENDING PRACTICES: Credit card companies aggressively market their products to many consumers – such as college students, low wage workers and people already drowning in debt – that they know can't afford to pay off their balances. Last year, the industry "collected $11.7 billion in penalty fees." Even as the Federal Reserve has kept its target rate very low (2.25 percent), credit card corporations charged customers who miss one or two payments "with maximum rates that now exceed 28 percent." In April, a unilateral change in the agreement by Discover card allowed the company "to raise the interest rate to 19.99 percent, from as low as zero, for a single late payment." A late payment that was made anytime in the 11 months before the rule change could justify the increase.
THE PAYOFF: Why are members on both sides of the aisle willing to sell out the sick and the poor to pad the profits of the credit card industry? Follow the money. Over the last four years, credit card companies have contributed $24.8 million to congressional and presidential candidates. MBNA – the company leading the industry's hardball lobbying campaign – was the largest single contributor to President Bush's reelection campaign. MBNA contributed $240,675 to Bush through the company's Political Action Committee and individual contributions. It's a reasonable investment; if the bill passes it is expected to "add $75 million a year to MBNA's bottom line."
Morally Bankrupt
The United States credit card industry rakes in $2.5 billion a month in profits – largely in fees and interest charged to the American consumer. But its thirst for additional profits is insatiable. Credit card corporations are showering Congress with cash in an attempt to squeeze every last dime out of those who can afford it least to by making it harder for them to get out of debt. The industry is pushing for a bill that would deny bankruptcy relief to "people with low or moderate incomes who have fallen on hard times because of illness, job loss or divorce." Meanwhile the bill does nothing to stop "abusive lending practices by credit card companies." (Share your thoughts on the bankruptcy bill at ThinkProgress.org.)
INCREASED BUREAUCRACY: The bankruptcy bill is an attempt to prevent people from filing Chapter 7 bankruptcy – which gives people a clean slate – and make them file under Chapter 13, which requires continued payments to the credit card companies. Already, judges can deny Chapter 7 protection if they think the law is being abused. The bankruptcy bill would require consumers to complete a complex array of forms to "prove" they qualify for Chapter 7. The law would also require those seeking Chapter 7 protection to "obtain counseling from a court-approved counseling center before filing." But according to the American Bankruptcy Institute, a nonpartisan research organization, just "3 percent of people who file under Chapter 7 could continue to pay under a court-supervised plan if they filed under Chapter 13." So the real impact of the bill would not be to prevent abuse of the system but to "make filing for bankruptcy much more costly" for those who genuinely need it.
PUNISHING THE SICK: The overwhelming majority of Americans do not become bankrupt by purchasing Rolex watches and plasma TVs. The leading cause: getting sick. A Harvard University study found that half of all respondents "said that illness or medical bills drove them to bankruptcy." Three-quarters of that group had health insurance but "high co-payments, deductibles, exclusions from coverage and other loopholes left them holding the bag for thousands of dollars in out-of-pocket costs when serious illness struck." Many people who suffer debilitating illness lose their jobs and, eventually, their health insurance. Elizabeth Warren, the Harvard Law professor who headed up the study, argues "the problem is not in the bankruptcy laws. The problem is in the health care finance system." Passing the bankruptcy bill "would be no different than a congressional demand to close hospitals in response to a flu epidemic." A group of 1,700 doctors sent a letter to Congress opposing the bankruptcy bill because it "would remove protection from patients financially ruined by medical costs."
PUNISHING THE ELDERLY: Another group saddled with credit card debt – largely due to costs out of their control – is the nation's elderly. Between 1992 and 2001, "the number of older Americans filing for bankruptcy tripled." A new report by the Demos Network emphasizes "the growing presence of America's seniors in the bankruptcy courts should warn policymakers of the importance of safeguarding this difficult last resort."
PREDATORY LENDING PRACTICES: Credit card companies aggressively market their products to many consumers – such as college students, low wage workers and people already drowning in debt – that they know can't afford to pay off their balances. Last year, the industry "collected $11.7 billion in penalty fees." Even as the Federal Reserve has kept its target rate very low (2.25 percent), credit card corporations charged customers who miss one or two payments "with maximum rates that now exceed 28 percent." In April, a unilateral change in the agreement by Discover card allowed the company "to raise the interest rate to 19.99 percent, from as low as zero, for a single late payment." A late payment that was made anytime in the 11 months before the rule change could justify the increase.
THE PAYOFF: Why are members on both sides of the aisle willing to sell out the sick and the poor to pad the profits of the credit card industry? Follow the money. Over the last four years, credit card companies have contributed $24.8 million to congressional and presidential candidates. MBNA – the company leading the industry's hardball lobbying campaign – was the largest single contributor to President Bush's reelection campaign. MBNA contributed $240,675 to Bush through the company's Political Action Committee and individual contributions. It's a reasonable investment; if the bill passes it is expected to "add $75 million a year to MBNA's bottom line."
posted by T. Scott Brineman at 11:04 AM
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