The New Democrat Coalition, the largest Members’ organization in the House of Representatives, provided the key Democratic voting bloc to pass bankruptcy reform legislation today by a veto-proof margin of 313-108.

Eighty-three percent (52 out of 62 voting) New Democrats supported final passage of H.R. 833.

NDC Co-chair Tim Roemer (Indiana) explained that the bill is a response to the record-high number of bankruptcies. “There is record low unemployment and low inflation,” Roemer said. “Filing Chapter 7 bankruptcy should not be as easy as shopping at Seven-Eleven. At the same time, we must maintain protections for people with legitimate catastrophic problems.”

The New Democrat Coalition is chaired by Representatives Jim Moran (Virginia), Cal Dooley (California), and Roemer. The coalition of 63 centrist Democrats has made bankruptcy reform a top legislative priority for 1999.

H.R. 833, The Bankruptcy Reform Act of 1999, institutes a needs-based formula to require debtors who can afford to repay some or all of their debt over a five-year period to file under Chapter 13 instead of Chapter 7.

“Personal responsibility is a cornerstone of New Democrat philosophy,” said Washington state Congressman Adam Smith. “This bankruptcy reform legislation requires that people who can afford to repay some or all of their debt do so.”

NDC Co-Chair Jim Moran, an original co-sponsor of the Bankruptcy Reform Act, said the Act will provide much-needed consumer protection for individuals who have trouble repaying their debts. “Personal bankruptcy should be the last resort for individuals who, through hard luck or poor choices, find themselves legitimately unable to meet their financial obligations,” Moran said. “They should not be the refuge of high-earning people who want to wipe out their debts simply because they don’t want to be bothered with finding a way to pay them off.”

New Democrats also led efforts to amend the bill to provide for additional consumer protections.

The Dooley amendment, accepted by voice vote, requires the Federal Trade Commission to establish professional standards and guidelines for consumer credit counselors. Under current law, no such standards exist.

“As the opportunities for credit counseling would be significantly increased under this bill, we need to ensure from the outset that fraudulent and abusive credit counseling operations do not spring up to meet this new demand for services,” Dooley explained. “My amendment is designed to ensure that consumers have access to qualified, professional consumer credit counselors, and to prevent the proliferation of substandard counseling practices.”

An amendment sponsored by Moran would create a debtor’s bill of rights aimed at curbing abuses by so-called “bankruptcy mills,” which advertise themselves as debt counseling organizations or government-sanctioned sources of assistance for consumers having difficulties meeting debt repayments. The legislation would require debt relief organizations and bankruptcy mills to make disclosures to consumer debtors about the nature, costs, and consequences of their services, and prevent deceptive and fraudulent advertising practices.

“This would ensure that consumers are informed about what to expect in bankruptcy and protect them from the unscrupulous practices of those who ‘low-ball’ the price for a bankruptcy and then extract high fees after the case is filed to defend bankruptcy litigation,” Moran said.

The Moran amendment passed by a 373-47 vote.

An amendment offered by Moran, Dooley and New York Democrat Gary Ackerman would tighten up disclosure requirements for credit card companies regarding minimum payments, late payments, and “teaser rates,” or temporary introductory interest rates. “Many consumers believe they are doing the right thing by making the minimum payment on their credit card every month,” Moran said. “This may meet their legal obligation, but it makes their financial situation more difficult. Consumers should understand the consequences of their financial decisions.”

The Moran-Dooley-Ackerman amendment was accepted by a voice vote.

The legislation also improves current law’s treatment of child support repayment. “Previously, child support was seventh on the list of priorities under a bankruptcy filing,” said Oregon Representative Darlene Hooley. “This legislation moves child support to where it should be: first on the list of priorities.”