Exhibit A–Why Bankuptcy “Reform” Without Lending Reform is a Sellout
So, why would the National Consumer Law (NCLC), as noted in a previous post, care so much about the lack of adequate Truth-in-Lending disclosures, and even more about the failure to curb lender abuses, in the Bankruptcy “Reform” bill?
Here is an egregious example of why (if this doesn’t make you turn the walls blue with anger, you’re a better person than me–link requires free registration; also, since this is a week old, apologies for lack of recognition to other bloggers who may have already posted on this):
John Rao, staff attorney of the National Consumer Law Center, one of many consumer groups fighting the bankruptcy bill, says the plight consumers face was illustrated last year in a bankruptcy case filed in Northern Virginia.
Manassas resident Josephine McCarthy’s Providian Visa bill increased to $5,357 from $4,888 in two years, even though McCarthy has used the card for only $218.16 in purchases and has made monthly payments totaling $3,058. Those payments, noted U.S. Bankruptcy Judge Stephen S. Mitchell in Alexandria, all went to “pay finance charges (at a whopping 29.99%), late charges, over-limit fees, bad check fees and phone payment fees.” Mitchell allowed the claim “because the debtor admitted owing it.” McCarthy, through her lawyer, declined to be interviewed.
Alan Elias, a Providian Financial Corp. spokesman, said: “When consumers sign up for a credit card, they should understand that it’s a loan, no different than their mortgage payment or their car payment, and it needs to be repaid. And just like a mortgage payment and a car payment, if you are late you are assessed a fee.” The 29.99 percent interest rate, he said, is the default rate charged to consumers “who don’t met their obligation to pay their bills on time” and is clearly disclosed on account applications.
If I were Providian, I would have been ashamed to try to collect more than a couple thousand in court (I’m sure others would start the bidding a lot lower). The Judge (Mitchell), who obviously felt his hands were tied in this instance, will have even less discretion under the new bill. Under the new law, all of the high-interest charges and penalty fees go into the “debt pool,” and if he could supposedly “afford it,” the guy could be forced to pay the entire $5,357 “owed” (most of which is really “leeched”) over the next 3-5 years. BALONEY (I said I’m turning the walls blue, not this web post).
OF COURSE, you can argue that they guy was dumber than a box of rocks, and yes, we may not know the whole story. But who in the world, if this guy under the new law would be forced to make full repayment in Ch. 13 (again, because if his income is above the median “he can afford it”), thinks that this would equitable and fair?
And people wonder why we don’t show a little more love for the moneychangers.
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UPDATE: Politology has been on the “what do we do?” beat consistently. Go there.
Also, thanks to All Spin Zone for the link and nice words.
Blogrolls for the both of you.
