The Shelby Star
Star Editorial
Opinion

1 February 2002

By O. Max Gardner III

For the past five years, these voracious card sharks have delivered more than "generous" campaign contributions to lobby the United States Congress for a new bankruptcy law that would make it tougher for consumers to secure their Constitutionally guaranteed debt-relief in appropriate cases.  At the same time, these predatory lenders have rejected and strongly opposed any suggestions that they stop encouraging irresponsible credit practices by conducting a full-blown assault on the average American with hundreds of thousands of pitches for more credit cards.  The business and marketing practices of these lenders would make the late Phineas Taylor Barnum look like a raw novice pitchman or at best a less than effective barnyard showman.  For example, these card sharks now offer the green cards, the silver cards, the gold cards, the platinum cards, the titanium cards, and not to be outdone the latest and greatest "limited edition" made for the very big spenders-the one and only American Express "black card." 

And, regrettably, these unprecedented lobbying efforts on Congress are on the verge of producing huge financial dividends for these purveyors of plastic money.  In fact, the only issue that is holding up an agreement on the new bankruptcy legislation is a provision in the Senate bill that simply prohibits anti-abortion protestors from using the bankruptcy laws to escape debts incurred as a result of violent and sometimes deadly protests at these medical clinics.  The House bill, on the other hand, seeks to allow such debts to be canceled in bankruptcy.  The dispute is basically between the Senate Democrats led by Senator Charles E. Schumer of New York and the House Republicans led by Representative Henry J. Hyde of Illinois.

The fact that a dispute on abortion rights might kill the legislation is clearly the opposite of what should be expected from our elected Representatives.  Rather than the right to cancel debts incurred as a result of violent and in some cases criminal actions, the real debate should be focused on the burden this so-called "bankruptcy reform" places on hundreds of thousands of struggling American families.  The legislation, in a nutshell, simply makes it more difficult, more time-consuming and more expensive for consumers to obtain relief under the bankruptcy laws.

At the same time, this "reform bill" does absolutely nothing to redress the unfairness of requiring onerous payments from low-income families in financial trouble while allowing someone like Burt Reynolds to protect his 2.5 million dollar estate from his creditors after running-up 10 million dollars in debts.  Or, in another example of the lack of equity in the new bill, it would allow a former Enron executive to protect his Texas homestead (i.e., his mansion and 100 acre cattle farm) regardless of the value from his creditors while forcing a former Enron hourly employee to pay back some of his debts over 60 months rather than filing complete bankruptcy.  The Senate Democrats wanted to place a maximum value on the amount a debtor could protect in his or her home but the House Republicans, especially the ones from Texas and Florida, would not consider such an outrageous proposal.  So, the House and Senate agreed to have no cap on the state homesteads in those few states where the wealthy go to file bankruptcy.  As a result, they have agreed on everything the credit card sharks want with the sole exception of the abortion clinic bombers and what to do if they file for bankruptcy relief.

The credit card sharks have argued that this legislation is needed to make it more difficult for consumers to file for Chapter 7 bankruptcy, which generally allows them to cancel and discharge credit card debts and other unsecured loans.  Under the proposed bill, more consumers would have to file under Chapter 13, which would require greater and stiffer repayment schedules than is currently required under the existing law.  Almost every Federal Bankruptcy Judge and hundreds of Law School Professors have notified Congress of their serious reservations and general opposition to the proposed new law.  In addition, advocates for children have notified Congress that child support claims could take a "back seat" to the repayment of credit card debts as a result of forcing the supporting parents to go through a Chapter 13 repayment plan. 

The promoters of the new bankruptcy law have either ignored or simply discarded these "clear and present danger" warnings from our Bankruptcy Judges.  They contend that the current law is being abused by "wealthy deadbeats."  However, a 1999 study by the Federal Bankruptcy Judges found that the median income of debtors seeking bankruptcy protection was $21,500.00, or approximately the amount Burt Reynolds earns for every 30 second TV commercial.  Furthermore, other independent studies have found that the primary reasons behind consumer bankruptcy filings are layoffs, divorces, and medical emergencies. 

The so-called bankruptcy reformers have also ignored the alarming increase in the overall debt-load incurred by the middle class as a result of these aggressive new loan placement programs.  The extent of the current consumer debt crisis is demonstrated by recent data released by the Bureau of the Census.  This data indicates that between 1980 and 2000 the total amount of non-mortgage consumer debt increased from approximately 55 Billion to 664 Billion dollars.  And, during this same period of time, the total homeowner income-to-debt ratio increased from 62.50% to 198.19%.  The magnitude of these increases in the average family debt load is both staggering and extremely alarming.  For most middle class families with this much debt, it only takes one bump in the road such as unemployment or underemployment to create a very serious family financial disaster.

The real discrepancies and contradictions in the position of the promoters of the new bankruptcy law and the true facts can also be found in a recent study by the Consumer Federation of America.  This study found that the credit card sharks and their banking friends have virtually flooded American consumers, including college students with no independent means of support, with more than 5 Billion credit card solicitations in 2001.  This represented a 43 percent increase over the 3.4 Billion solicitations in 2000.  This study also found that these solicitations were also routinely issued to consumers who were debtors in active bankruptcy cases.  Is this sort of conduct by the credit card sharks and their banking buddies the type of responsible, selective marketing that encourages more savings and thrift by the American public?  Or, on the other hand, is this conduct more like the story of the man who cried "wolf" after he allowed - and even encouraged - the wild animal to go on in and attack the helpless little chickens?

There is blood in the water and only time will tell who will end up with it all over their greedy little hands!