The Senate Opens Fire on U.S. Consumers 3-9-05

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Wed, 09 Mar 2005 15:13:24 -0800

The Senate Opens Fire on U.S. Consumers 3-9-05

 

 

" Arianna Huffington " <arianna

 

 

 

 

THE SENATE OPENS FIRE ON U.S. CONSUMERS

 

By Arianna Huffington

 

U.S. consumers and freed Italian hostage Giuliana Sgrena found

themselves in the same position this week: under fire from those put

in place to protect them.

 

For Sgrena, the bloody barrage came from jittery U.S. soldiers. For

consumers, it was jaded U.S. senators who pulled the trigger, about to

pass a bankruptcy bill so hostile to ordinary American families that

it could only have come about in a place as corrupt, cynical and

unmoored from reality as Washington, D.C.

 

In a normal world, those elected to represent the interests of the

people would have fought for bankruptcy legislation that would, well,

represent the interests of the people. But not in Beltway Bizarroland.

Instead of cracking down on predatory lending practices, closing

loopholes that favor the wealthy, and strengthening the safety net for

working people, single mothers and elderly Americans struggling to

recover from a financial setback, the Senate put together a nasty

little bill that reads like a credit industry wish list. Rubbing salt

in the wound, Sen. Charles Grassley, the bill's chief sponsor, labeled

it the Bankruptcy Abuse Prevention and Consumer Protection Act of

2005--even though it does nothing to prevent bankruptcy abuse or

protect consumers.

 

So what does the bill do? It makes it harder for average people to

file for bankruptcy protection; it makes it easier for landlords to

evict a bankrupt tenant; it endangers child support payments by giving

a wider array of creditors a shot at post-bankruptcy income; it allows

millionaires to shield an unlimited amount of value in homes and asset

protection trusts; it makes it more difficult for small businesses to

reorganize, while opening new loopholes for the Enrons of the world;

it allows creditors to provide misleading information; and it does

nothing to reign in lending abuses that frequently turn manageable

debt into unmanageable crises. Even in failure, ordinary Americans do

not get a level playing field.

 

Credit card companies have been feverishly lobbying for this

legislation for nearly a decade--and it looks like the $34 million the

finance and credit industries have contributed to political campaigns

since 1996 is finally about to pay off. On Tuesday, the cloture vote

on the bill was 69 to 31. The House passed similar legislation last

year and GOP leaders are hoping to bypass the conference committee

deadlocks that have derailed similar measures in the past and have the

bill on President Bush's desk in short order. The president, well

aware that credit card giant MBNA is one of the Republican Party's

largest donors, has promised to sign the bill as soon as someone hands

him a pen.

 

Make no mistake, the inequitable nature of the bill--bending over

backwards to help the credit card industry while sticking it to

American working people who fall on hard times--is no accident. Time

and again over the last week, the Senate shot down amendments that

would have made the bill a bit less mean-spirited. They denied

proposals that would have made it easier for military veterans, the

sick and the elderly to qualify for bankruptcy protection. They even

rejected an amendment that would have put a 30 percent ceiling on the

interest rates credit card companies can charge. Thirty

percent--that's more than Paulie Walnuts charges. But 74 U.S.

senators--including John Kerry, Harry Reid, Barack Obama and Dick

Durbin--clearly thought that wasn't high enough. Quick, somebody send

those guys a Bible bookmarked to Deuteronomy 23:19: " Thou shalt not

lend upon usury to thy brother. "

 

For years, credit-card companies have been claiming that tougher laws

are needed to reign in high-flying customers using bankruptcy to game

the system. But the truth is that the vast majority of people who file

for bankruptcy are middle-class folks who can't pay their bills

because they've lost their jobs or been hit with high medical bills or

gone through a divorce.

 

Indeed, a recent study by Harvard University found that half of last

year's 1.6 million bankruptcies were the result of crushing medical

bills. Put another way: Every 30 seconds, someone in this country

files for bankruptcy in the wake of a serious illness. How's that for

a shocking stat? Here's another: Three-quarters of the so-called

medically bankrupt had health insurance. It just wasn't enough to

cover the dramatic rise in health-care costs.

 

But instead of adapting to this harsh new reality, where hardworking,

college-educated, middle-class folks can be financially destroyed by a

sudden illness, the Senate is about to approve a one-size-fits-all law

that treats a family man who has sunk into debt because of a heart

attack the same as a con artist who maxes out his MasterCard, then

refuses to pay up.

 

Worst of all, the bill does absolutely nothing to protect consumers

from the aggressive tactics credit-card companies have devised in

recent years--tactics that have proven hugely profitable. Along with

sending out over 5 billion solicitations a year, they are constantly

developing new ways to stick it to the people they've already lured

into the tent. For instance, companies now routinely jack up a

cardholder's interest rate when their payment is late--and, presto, a

" fixed " 7 percent APR is suddenly transformed into a cash-gobbling 30

percent loan.

 

There has also been an explosion in the fees that credit card

companies charge: late fees, balance transfer fees, cash-advance fees,

over-the-limit fees. Such fees bring in billions and are partly

responsible for the fact that, even as personal bankruptcies in

America have steadily increased, so have the profits of credit card

companies--which reached a whopping $30 billion last year.

 

So tell me again: Just who is gaming the system?

 

It's one thing for credit card companies to exact their pound of flesh

even as their profits soar. But shouldn't we hold our elected

officials to a higher standard? The bankruptcy bill is morally

bankrupt. And so is any senator who votes for it.

 

© 2005 ARIANNA HUFFINGTON.

DISTRIBUTED BY TRIBUNE MEDIA SERVICES, INC.