In the waning hours of the
105th Congress, proposed consumer bankruptcy legislation (H.R. 3150)
expired without enactment. Speaking on behalf of the National Consumer Law Center's
low-income clients, attorney Gary Klein said, Consumers dodged a bullet this
year, but there is no doubt that the credit industry lobbyists will be back
next year with all guns blazing.
In the final analysis, cooler
heads prevailed and prevented enactment of a bill with potentially disastrous
consequences for low and middle-income consumers. The White House, the First
Lady, Senator Durbin of Illinois and Congressmen Nadler and Conyers emphatically
rejected efforts to punish consumers with real financial problems for the abuses
of a few high income debtors. According to Klein, a bankruptcy specialist and
co-author of the book Surviving Debt: A Guide for Consumers, Congress
needs to step back next session and craft narrowly tailored and balanced legislation
which addresses abuses by both debtors and lenders. Efforts by lenders and some
Senators to characterize radical new bankruptcy limits as good for consumers
are wrong-headed and misplaced. Especially with our unstable economy, every
American family is vulnerable to the type of financial difficulties which can
lead to bankruptcy. Our society needs the safety valve which a fresh start in
bankruptcy can offer.
The lending industry paid economists for a study which concluded that the cost
of bankruptcy is passed on to American consumers in the form of a $400 per-family
bankruptcy tax. The General Accounting Office, NCLC, and others have pointed
out that this analysis is not valid. According to Klein, the real problem is
that some lenders have indiscriminately made loans to consumers which are beyond
their ability to pay. Since the family budget is a fixed pie, even if there
were no bankruptcy system at all, a great deal of debt simply won't be paid
back. Moreover, as numerous observers have pointed out, if bankruptcy legislation
saves the credit industry money, there is no likelihood, given the push for
higher profits, that rates would be lowered or prices would be dropped.
and NCLC