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February 28, 2005
The credit card industry's assault on American families hits the Congress this week as the Senate considers bankruptcy legislation written by and for the credit card lobbyists. Instead of addressing the most significant causes of financial stress for families-loss of employment and huge medical costs-the industry and its political shills are more concerned with shielding credit card profits.
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Congress should focus on helping struggling families rather than hugely profitable credit card companies. Credit card companies raked in $30 billion in profits last year and now they want to squeeze even more from Americans. The bankruptcy bill is an attempt to prevent people from filing Chapter 7 bankruptcy - which gives people a clean slate - and make them file under Chapter 13, which requires continued payments to the credit card companies. In order to qualify for Chapter 7, Americans would be forced to complete a costly and bureaucratic means test. Even after they complete the test their status could be challenged, forcing expensive litigation that most debtors can't afford.
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Abuses by the credit card industry run rampant and unchecked. The surge in bankruptcies has been brought on, in no small part, by the credit industries own predatory lending practices. In 2001, credit card companies sent 5 billion solicitations for credit to American homes. Between 1993 and 2000 the industry increased credit extended to the public from $777 billion to almost $3 trillion. Once the consumer accepts, the companies are allowed to change their interest rates at any time for any reason. Many follow a practice of "universal default" which means any drop in your credit score - which can be triggered by missing a single payment on your electric bill - can lead to a significant rate increase.
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This bill does nothing to address the underlying causes of bankruptcy-primarily, job losses and massive health care bills. Many Americans families are struggling because median income is stagnant, health care costs are skyrocketing, college tuition has exploded and child care costs are up. Nine out of ten bankruptcies occur because of health costs, loss of employment or divorce-not irresponsible personal behavior and poor financial planning as the industry maintains. Once families are hit with big medical bills or lose their job bankruptcy is often their only option. This bill does nothing to address these long term causes of financial stress.
Daily Talking Points is a product of the American Progress Action Fund.
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Daily Talking Points is a product of the American Progress Action Fund. |
