OUCH!: Putting Credit Card Companies First

With all the great issues pressing the nation -- a slowing economy, concern about the solvency of Medicare and social security, 40 million people lacking health insurance, the rising cost of prescription drugs -- the House of Representatives acted swiftly and decisively on Thursday to pass ... bankrutpcy reform?

For more than two years, the credit card industry has been leading the charge in the nation's capital for reform of the country's bankruptcy laws, arguing that they lose too much money from people who run up their debts irresponsibly and then declare bankrutpcy, leaving credit card companies to pick up the slack. On Thursday, March 1, the House of Representatives voted 306 to 108, including 93 Democrats, to pass H.R. 333, sponsored by Rep. George Gekas (R-PA), which will make it tougher for overextended consumers to reduce their debts, forcing many to file under a section of the bankruptcy code where they are more likely to lose their homes and cars.

But before you feel too happy about the credit card industry receiving its just due, or chalk a victory up for the credo of personal responsibility, consider the following facts. At the same time credit card companies have been lobbying hard for tougher bankruptcy laws, they have been increasing dramatically their marketing and extension of credit to consumers, while at the same time reaping record profits. Credit card companies mailed out 2.5 billion solicitations to consumers through the third quarter of 2000, and the amount of credit they extended was up by 13 percent, according to the Consumer Federation of America. Meanwhile, Bank card profits were at the highest level in five years in 2000. Furthermore, bankruptcy filings actually declined by five percent in 2000, according to recent data released by the Administrative Office of U.S. Courts.

"I'm a letter carrier. I see first-hand the incredible number of credit card solicitations mailed out to every one of my customers on my mail route," testified Charles Trapp before the House Judiciary Committee last month. Trapp filed for bankruptcy after running up debts after his daughter, Annelise, was diagnosed with myopathy, a muscle disease that is like a rare form of muscular dystrophy. "Is it right for these lending companies to offer revolving credit to college students or families -- and this may have included my own family at a certain point -- who can ill-afford to take on additional debt?"

So why the mad bipartisan rush to pass bankruptcy reform? Consider that rare is the Member of Congress whose campaign coffers do not contain political contributions from credit card companies, which are among the most generous political donors. Commercial banks, finance and credit companies gave out $37.7 million to federal candidates and parties in 2000, 61 percent to Republicans, up from $21.3 million in 1998. Meanwhile, MBNA America Bank, the nation's largest credit card issuer, was the top donor to President George W. Bush's campaign, bundling him $240,700 in hard money. MBNA CEO Charles Cawley is a Bush "pioneer," one of the volunteer fundraisers who raised at least $100,000 for the campaign. President George W. Bush has indicated that, unlike President Bill Clinton, who vetoed it, he would approve a bankruptcy bill.

Personal responsibility clearly is an important societal value. People should live up to their obligations, financial and otherwise. But credit card companies must accept their responsibility when they push credit on people who can't afford it. And representatives in Congress and our president ought to think about whom they 're responsible to˜big donor bank executives, or the ordinary people who voted for them who might, one day, have a sick child like the Trapps, or lose a job, and need a fresh start.

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