Bankruptcy Reform: The Shameful Disinterest of AARP and the AFL-CIO

Why is it that many of those who you would expect to be speaking out in opposition to B-”R” simply aren’t?

Let’s look at two obvious examples: AARP and the AFL-CIO.

AARP should care simply because seniors represent the fast-growing group of filers. Yet there is no mention of B-”R” on AARP’s home page or at its Legislation and Elections page.

The AFL-CIO should care because its blue-collar members are usually the hardest hit when plants close or companies go out of business. Especially under the new law, which essentially assumes that you will continue to earn the money you earned in the previous six months, terminated workers who were in well-paying jobs could face impossibly high Chapter 13 payment schedules. Despite the fact that the legislation was introduced in February, they’ve been mostly AWOL on the bill’s consumer provisions, and have certainly exerted no out-front leadership (to be fair, they have objected to some of the small-business bankruptcy provisions).

That is, until yesterday. This last -minute involvement is very unimpressive:

- They were nowhere to be found when the bill was considered by the Senate, as Debbie Stabenow (D, GMAC-MI) shafted her state’s heavily unionized workforce.

- I don’t recall hearing from them when Joe Biden (D, MBNA-DE) was selling out his alleged progressive principles in return for the campaign cash that has been showered on him by the lending industry.

- Even today, the AFL-CIO web site has NO references on its home page to the current B-”R” legislation, and there is no direct link to B-”R” from the “Issues and Politics” tab. If you do a site search on “bankruptcy,” you will find some entries, but the lack of prominence remains startling.

Both organizations may claim as an excuse that they oppose Social Security privatization and are devoting substantial efforts to that opposition. Phooey–these organizations can walk and chew gum, and are certainly big enough to put resources behind an anti-B-”R” effort if they so chose.

But face it, they haven’t. And the reason why is that they have been bought lock, stock and barrel by the credit-card issuers.

Both organizations have “co-branded” credit cards, both earn millions of dollars every year on what is known as “interchange,” and it is reasonable to conclude that both have compromised themselves to the point that it would be against their organizations’ best interest to speak out (or at least speak out loudly) against B-”R”.

AARP’s annual report for 2003 notes on Page 18 that (in 2003) “Bank One launched the AARP Rewards credit card, which is growing in popularity with more than a million members” (bold added).

If an average cardholder charges $3000 per year (well below the national average), that’s 3 billion dollars of volume. If AARP’s cut of that is 0.8%, which is a reasonable guess based on previous research, that’s $24 million, free and clear, straight to the bottom line. And in 2003 they were just getting started on a 35 million membership base. Just getting to 20% of their membership could yield over $160 million per year.

Bank One, the AARP card issuer, is now part of Chase, which has been aggressively charging penalty rates of 25% or more on cardholders, including the elderly, just because their credit score has gone down, even if it isn’t due to actually being late with payments to anybody. Somehow that doesn’t seem consistent with AARP’s mission of representing and protecting the elderly.

The AFL-CIO take is much bigger than AARP’s. According to 2000 Congressional testimony, there was a “remarkable 1995 financial arrangement between the AFL-CIO and Household International: In exchange for the right to issue an AFL-CIO emblazoned credit card, Household agreed to pay the Federation $75 million a year for 5 years for a total of $375 million.” Household is still the issuer (look at the copyright at the bottom of the page), and surely the annual payment is even higher today.

Of all the issuers for the AFL-CIO to pick: Household has just about the worst reputation for predatory lending and thuggish collection tactics. In fact, there’s a very busy web site dedicated to tracking Household’s predatory practices. So, go figure: Organized labor signs on with a card company that will go with a vengeance after its own members who fall behind. Zheesh.

Face it: When it comes to keeping the lending industry in check, everyday people cannot count on AARP or organized labor to look out for them.