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Tuesday, March 15, 2005

Raise your hands if you hate credit card companies 

I was just going to post some links to stuff about the bankruptcy bill that I've read recently, but I have to throw in this anectdote. I've never missed a credit card payment. I was accidentally late paying a few bills in colllege, but I haven't been late with anything since 1999 and nothing has gone on a credit report. I'm responsible. I have a joh that pays well. I made the mistake of cancelling a credit card with something like an $18,000 limit. You would think having $18,000 less in availbel credit would make me a better credit risk. But cancelling this card obviously meant that I was using a higher portion of my available credit and this gave MBNA "cause" to jack up my interest rate from 9% to about 15%. (To put this in perspective, two year Treasuries are yielding about 3.5% right now.) I'm gonna pay this crap off by May and then never do business with MBNA again.

Joe Lieberman said of the bankruptcy bill that the credit card companies bought:
I have always supported bankruptcy reform legislation in the Senate when it has reflected a bipartisan effort to enact a balanced bill for both debtors and creditors and I have opposed it when confronted with a bill that seemed one-sided. This is not a balanced bill. I voted against this bill because it failed to close troubling loopholes that protect wealthy debtors, and yet it deals harshly with average Americans facing unforeseen medical expenses or a sudden military deployment. The Senate simply rejected out of hand many worthwhile amendments that would have protected these and other working Americans who find themselves in dire financial straits through no fault of their own. As a result, I believe this is a seriously flawed bill and I am disappointed at its passage.
Joe voted against the bill, but he first voted for closing debate on the bill, which put it in position to be passed in the first place.

The Economist, which is hardly anti-business, sadi this of the bill:
In any case, the bill's means test (an average of the debtor's past six months of income) should catch those who can clearly pay up. But opponents fear that the test, which they think too harsh and arbitrary, will drag those who rightly belong in Chapter 7 unfairly into court.

More troubling is the part of the legislation that makes it harder for poorer debtors, not likely to be the abusers of the system, to file for bankruptcy. Some 84% of all filers are too poor to qualify for the new law's means test. But they will still be put through a great deal of rigmarole to get relief. For example, all debtors will have to get credit counselling before they file—a costly process, and one which does little to steer people out of bankruptcy. The bill also requires people to produce all sorts of paperwork, from payroll stubs to tax returns. Those who have not kept strict records will have to give up or pay for a lawyer to plead their case in court.

Other quirks of the legislation make one wonder why credit-industry groups are so keen on it. One loophole allows rich debtors to go on shielding assets in special trust accounts that are legal in a few states. And debtors' fancy homes in Texas and Florida will still be off-limits to creditors. The bill's backers say that fear of trampling on states' rights stopped them closing such loopholes. But it smells rather pervasively like special treatment for the rich.
The author seems a little dense here. Credit card companies couldn't get a bill passed that would close these loopholes, but they can pretty easily run roughshod over the poor.


This criticism is a little obvious, but it's worth pointing out that this bill isn't exactly Christian:
Yet for the banks, the inevitable surge in bankruptcies caused by these immoral business strategies hasn't slowed this fantastically profitable industry a whit. For all of the whining about deadbeats ripping off the system, credit card companies' annual pretax profits have soared 2½ times in the last decade, and last year was their most profitable in more than 15 years.

So why gut the bankruptcy law now? Greed, pure and simple. And, pathetically, this bankers' dream is becoming a reality through the support of Republicans who have decided, as they often do with social issues, to selectively pick and choose when to follow the teachings of the Bible.

A key sponsor of the bill, Sen. Charles E. Grassley (R-Iowa), actively opposes abortion and same-sex marriage on biblical grounds yet believes the Good Book's clear definition and condemnation of usury is irrelevant. The Old Testament, revered by Jews, Muslims and Christians alike, mandates debt forgiveness after seven years, as was pointed out earlier this month by an organization of Christian lawyers in a letter to Grassley.

"I can't listen to Christian lawyers," said the senator, "because I would be imposing the Bible on a diverse population."

Sadly, when it comes to serving the prerogatives of banks, you can forget about those family values that folks such as Grassley prattle on about. The bill he wrote placed mothers and their children behind credit card companies in the line for a bankrupt ex-husband's paycheck, for example, which is positively Dickensian. Expected to sail through the House and onto the president's desk in the next few weeks, the bill turns the federal government into a guardian angel of an industry gone mad, placing no significant restriction on soaring interest rates and proliferating fees.

One extremely modest amendment that was rejected by the Senate would have blocked creditors from recovering debts from military personnel if the loans had annual rates higher than 36%. Also killed were sensible amendments designed to protect those ruined by a medical emergency, identity theft, dependent-caregiver expenses or loss of income due to being called to full-time military duty through the National Guard or the Reserve.

In the end, these individuals are simply not powerful enough to earn the protection of our by-the-powerful, for-the-powerful government. Creditors can scam consumers, Enron can burn California, Halliburton can gouge the Pentagon, the rich can enjoy obscene tax cuts, our "conservative" president can run up the deficit like a drunken sailor — and none of it seems to faze our elected leaders. For them, "fiscal responsibility" is just a high-minded prescription appropriate only for the commoners.

-Daddy Brooklyn  21:59 EST | |

About us:

This weblog is an ongoing, if periodic, effort by several friends to stay in touch, in reading material, and in ideas.

Lucky Luciano is a former Italian Stallion real estate hustler and Benedict Arnold CEO turned shady lawyer-to-be. He lives in Denver.

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