Banks, big credit lines and consumer bankruptcy
Debra J. Saunders
3/14/2001 12:00:00 AM - Debra J. Saunders
It Arrived in the mail last month -- a credit-card solicitation that offered me a credit line "of up to $250,000." The letter continued, "In our experience, that is often as much credit as most people need. If it's not enough for you, we may be able to arrange other financing totaling up to $1 million."
A newspaper woman getting an offer to apply for up to $1 million in credit? Some thing is very wrong with this picture.
Don't bother calling or e-mailing to ask me the name of the bank. I won't give it out. It's bad enough when banks entice hard-working folk to spend more money than they have -- and for luxury items. (The solicitation mentions how card services can be used to procure a catered lunch for 15, a "left-handed 9-iron with a hickory shaft" and cruise vacations.) I'm not going to help them.
Alas, Congress has nothing better to do than give succor to greedy banks. Last week, the House passed a bankruptcy bill, HR 333 -- consider it 666 halved -- that ought to be named the Help Us Poor Banks After We've Crushed People into Crushing Debt bill. The vote was 306 to 108, with Republicans voting overwhelmingly in favor and Democrats split. If the Senate passes it, President Bush is expected to sign it.
Philadelphia bankruptcy attorney Henry Sommer fears that by making it harder for debtors to go into Chapter 7, -- which provides complete relief from bankruptcy -- and by requiring that more debtors adhere to onerous repayment schedules under Chapter 13, HR 333 is "going to limit (banks') risk, and some people think it will make them do more loose lending," he noted.
More loose lending, more bankruptcies. Right?
The Yes side argues that HR 333 would make it harder for deadbeats with assets to declare bankruptcy. They point to a provision in the bill designed to protect debtors who earn below their state's median average.
Rep. Ellen Tauscher, D-Calif., explained why she voted for the bill: "I believe that for a long time there was a balance between the social stigma of bankruptcy and the law, and essentially it worked for a very long time. Over the last decade, the social stigma of bankruptcy had evaporated. Almost to the point where if you were the only on your block not to file Chapter 7 or Chapter 11 (another bankruptcy law), you didn't know the secret handshake, you didn't know how to play the game."
And: "The opportunity here is to close these loopholes so that all consumers are not funding the errant ways of irresponsible people." Tauscher wants the law to promote "personal responsibility."
Great, but the bill does not promote personal responsibility among bankers. The banks give students and poor people credit that encourages them to spend more money than they have; the banks hand out unsecured credit as if it were candy; then the banks whine to the government that the government should pass laws to make up for their bad lending decisions.
When I told consumer activist Ralph Nader about the $250,000 offer, he exclaimed, "This is the ever-escalating seduction of Americans into over-extending their credit."
More over-extended credit-card holders, more bankruptcies. Right?
Travis Plunkett of the Consumer Federation of America recently described the lure-and-whine strategy of lenders as such: "Credit card issuers are brazenly lobbying for new bankruptcy restrictions at the same time their aggressive marketing and lending practices are pushing many families closer to the financial brink."
In the mail, they whisper: Charge a yacht. Then when the boat sails away, they whine about personal responsibility.