LEXIS-NEXIS® Academic Universe-Document

LEXIS-NEXIS® Academic

October 18, 2000, Wednesday, FINAL EDITION

SECTION: EDITORIAL PAGE, Pg. 4B

LENGTH: 551 words

HEADLINE: BAD BILL FOR A REAL PROBLEM

BODY:

The House of Representatives last week sneaked a bankruptcy reform bill through its chamber that looks for all the world like a payoff to the banking and credit industries. The measure is too hard on credit card users who may be in legitimate financial distress and it fails to acknowledge the industry's responsibility for the nation's bankruptcy rate, which, in fact, is falling.

The measure now goes to the Senate where it seems likely to pass. Fortunately, President Clinton promises a veto. The concept of bankruptcy reform is not without merit. As Rep. George Gekas, a Pennsylvania Republican, noted, there are people who use the nation's bankruptcy laws as a financial planning tool, running up debt on extravagances, knowing full well they will never have to repay it. It's an unconscionable abuse that drives up costs for everyone, and a law that targeted it would be welcomed by most Americans. This bill wouldn't do that.

Instead, this is a blunderbuss measure that makes little effort to distinguish between those who are shirking their obligations and those who are suddenly unable to meet their responsibilities because of job loss, divorce or some other upheaval.

Under current law, Americans whose credit card debt becomes unpayable file under a section of the law that wipes out the debt. Under the bill passed by the House, those debts would now be subject to a complicated formula that determines how much of the debt they would have to pay.

On the surface, that seems reasonable, but the bill is riddled with inadequacies. For example, it offers no protection to a divorced mother who may have trouble supporting her children, let alone repaying a debt that suddenly became unmanageable.

On the other hand, the bill favors wealthy homeowners in certain states, by allowing them to maintain expensive homes while filing for bankruptcy. And while the bill comes in response to pressure by the retail, banking and credit industries, which cited growth in consumer bankruptcy filing, it did virtually nothing to recognize the large share of blame that lies with those industries.

For years, financial companies have been hawking credit cards like peanuts at a ballgame, eager to hook as many Americans on easy and expensive credit as they can. Now they're shocked that bankruptcy rates are high?

What's more, although the bankruptcy rate was on the rise through much of the 1990s, it plunged in 1999, suggesting that the need for this bill is not as urgent as its supporters suggest.

The industry also successfully fought to defeat a clause requiring it to include on each monthly statement an easily produced warning, tailored to the card-holder's account balance, such as, "Your debt of $ 1,000 will take seven years to pay off if you make only the minimum payment at the current interest rate of 17 percent." That's a factual example, by the way. No wonder the credit industry doesn't want to advertise it.

Instead, the bill would require a more general warning.

So why is Congress so beholden to the banking, retail and credit card industries? Why is it so interested in siding with those who encouraged careless debt? Could it have anything to do with the $ 6 million in political donations those groups made in the first six months of this year alone?

LOAD-DATE: October 20, 2000