Copyright 2001 The Washington Post
The Washington
Post
February 28, 2001, Wednesday, Final Edition
SECTION: FINANCIAL; Pg. E01
LENGTH: 776 words
HEADLINE:
Foes of Bankruptcy Bill Point Finger at Credit Card Issuers
BYLINE: Kathleen Day, Washington Post Staff Writer
BODY:
A consumer group that blames
credit card marketing tactics for pushing many Americans over their heads in
debt says the industry greatly increased mail solicitations and lines of credit
last year, even as it sought legislation to make it harder for consumers to wipe
out debt through bankruptcy.
"Credit card issuers are brazenly lobbying
for new bankruptcy restrictions at the same time their aggressive marketing and
lending practices are pushing many families closer to the financial brink,"
Consumer Federation of America lobbyist Travis Plunkett said at a news
conference yesterday.
The House is expected to vote on the
industry-backed legislation to revamp bankruptcy as early as tomorrow, the
Senate early next week.
The nonprofit consumer group released a report
showing that in addition to shipping an estimated 3.3 billion mail offers last
year, up from 2.87 billion in 1999, the credit card industry expanded available
credit beyond consumer demand. Lines of credit card debt increased 15 percent,
to $ 2.43 trillion, in the first nine months of 2000, the latest numbers
available, compared with $ 2.11 trillion for all of 1999, according to the
report. Outstanding consumer debt for the same period of 2000 grew to $ 531
billion, a 4 percent increase over all of 1999.
The group says that
aggressive sales tactics, coupled with a decline in consumer bankruptcies and
uncollected debt last year, were key reasons credit card profits have soared
nearly 50 percent in two years and are at a five-year high.
"This is the
same thing they have been saying for the last four years," said Edward L.
Yingling, chief lobbyist for the American Bankers Association.
"I'm
dumbfounded that a group that purports to be concerned about low- and
moderate-income people would be opposing legislation designed to force wealthy
people who can afford to pay some of their debts to do so rather than sticking
lower- and-moderate income people with their tab," he said.
The study
was released in the morning, a few hours before the Senate Judiciary Committee
began considering the bankruptcy legislation.
If versions of the bill
pass the House and Senate, which they are expected to do, they would then have
to be reconciled before a final vote. The legislation would then be sent to
President Bush, who has indicated he would sign it.
Both chambers passed
the legislation last year, the Senate by a vote of 70 to 28 and the House by
voice vote. But President Clinton said it was unfair to consumers and vetoed it.
Whether the legislation becomes law this time around depends on whether
its supporters can ensure that the House and Senate versions remain essentially
unchanged from last year, when broad support was won only after carefully
crafted compromises were hammered out. Even slight changes could unravel
support, opponents and supporters of the bill agree.
Senate Democrats,
including many who oppose the bill, plan to offer dozens of amendments on a
variety of topics, including how valuable a house a bankruptcy
filer can keep, whether someone charged with abortion-clinic
violence can use bankruptcy laws to avoid paying penalties, and
what privacy rules govern customer lists at bankrupt companies. If such
controversial amendments are added to the Senate version, many lawmakers in the
House and Senate who voted for the legislation last year could withdraw support
and it could once again die.
The Consumer Federation and other consumer
groups that oppose the bill say it is too hard on debtors who face financial
hardship because of divorce, illness or job loss.
The credit card
industry -- which made more than $ 6 million in campaign contributions in the
first half of last year -- argues that bankruptcy law needs to be revamped to
force those who can afford to repay some of their debt to do so. They say that
while bankruptcies declined slightly last year, they still numbered 1.4 million,
a steep increase from the 348,000 filings in 1984. And so far this year,
bankruptcy filings are running ahead of last year's pace, and some lobbyists for
the credit industry predict they could rise 10 percent to 20 percent for the
year.
"If they are up," said Plunkett, "then a major factor is the
economy, not abuse by consumers."
A study by the American Bankruptcy
Institute, a nonpartisan research and education organization, found about 3
percent of people who file under Chapter 7 bankruptcy, which effectively wipes
out debt, could afford to repay a portion of their debt under Chapter 13
bankruptcy. Lobbyists for the credit card industry say the figure is closer to
10 percent.
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