TOPDOG08.COM

« Is Warren Buffet an enemy of freedom? | Main | Frist for President »

March 09, 2005

Talk about kicking people when they're down

Well, it's as good as law. Biden and Lieberman among others voted for cloture, so not even a change of heart on their part can save the 50% who file for bankruptcy due to medical expenses, now.

Professor Elizabeth Warren sums up the bankruptcy bill:

The bill is more than 500 pages long, all in highly technical language. But the overall thrust is pretty clear:

• Make debtors pay more to creditors, both in bankruptcy and after bankruptcy, so that a bankruptcy filing will leave a family with more credit card debt, higher car loans, more owed to their banks and to payday lenders.

• Make it more expensive to file for bankruptcy by driving up lawyers’ fees with new paperwork, new affidavits, and new liability for lawyers, so that the people in the most trouble can’t afford to file.

• Make more hurdles and traps, with deadlines that a judge cannot waive even if someone has a heart attack or an ex-husband who won’t give up a copy of the tax returns, so that more people will get pushed out of bankruptcy with no discharge.

• Make it harder to repay debts in Chapter 13 by increasing the payments necessary to confirm in a repayment plan, so that more people will be pushed out of bankruptcy without ever getting a discharge of debt.

There are people who abuse the system, but this bill lets them off. Millionaires will still be welcome to use the unlimited homestead exemption. And if they don’t want to buy a home there, they can just tuck their millions of dollars into a trust, a “millionaire’s loophole” that lets them keep everything—if they can afford a smart, high-priced lawyer.

I don’t get paid by anybody on any side of this fight. I just think it isn’t fair.

Kevin Drum provides the motive:

"According to R.K. Hammer Investment Bankers, a California credit card consulting firm, banks collected $14.8 billion in penalty fees last year, or 10.9 percent of revenue, up from $10.7 billion, or 9 percent of revenue, in 2002, the first year the firm began to track penalty fees."

That's a $4 billion increase in penalty revenue in two years in case you're keeping score at home.

And you have to love this: that penalty rate of 30-40% can be imposed for missing a single payment — in fact, in can be imposed for missing a single payment on a different account, like your telephone bill — but a card spokesman said this was perfectly reasonable because it was "clearly disclosed on account applications." Something tells me that their idea of "clearly disclosed" is a wee bit different from most people's.

Bottom line: credit card companies now make half their profits from penalties and late fees. They actively seek out customers who are likely to miss payments and end up in a penalty fee spiral, and they make a fortune from them. In a normally functioning market there's at least a small incentive to limit loans to these high-risk customers, namely the possibility that they might go bankrupt, and the bankruptcy bill before Congress is a brazen attempt to remove even that small but annoying incentive to act responsibly.

Credit card companies want the ability to make risky loans, but they also want federal protection that protects them from bearing the risk that goes along with making those loans. That's a pretty cushy setup, as long as you can buy yourself enough politicians to make it happen. Apparently they can.

The worst parts?

Amendment Number: S.Amdt. 28 to to S. 256 (Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 )

Statement of Purpose: To exempt debtors whose financial problems were caused by serious medical problems from means testing.

YEAs 39
NAYs 58
Not Voting 3

Biden (D-DE), Nay (MBNA headquarters located in Wilmington.)
Carper (D-DE), Nay (JP Morgan Chase also located in Wilmington.)
Johnson (D-SD), Nay (Citibank headquarters located in Sioux Falls.)
Nelson (D-NE), Nay (First National headquarters located in Omaha.)

And this:

Amendment Number: S.Amdt. 37 to to S. 256 (Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 )

Statement of Purpose: To exempt debtors from means testing if their financial problems were caused by identity theft.

YEAs 37
NAYs 61

Posted by Mike at March 9, 2005 10:15 AM

Trackback Pings

TrackBack URL for this entry:
http://www.topdog08.com/cgi-bin/mt-trackback.cgi/618

Comments

Post a comment