Credit Scam: Why is Congress So Intent on Helping
Lenders and Hurting Millions of Consumers?
by
Ralph Nader
Dissident Voice
March 3, 2003
When
the current Congress convened last year there were lots of promises to curb
predatory lenders that peddle credit on outrageous terms to poor, elderly, and
unsophisticated borrowers.
Not only is Congress
reneging on its promises, but it is also rushing to reward the lenders, whose
scams have devastated low-, moderate-, and middle-income families and forced
many into foreclosures and bankruptcies.
Congress's gift to the
predatory lenders is a scam artist's dream under the guise of "bankruptcy
reform." The sponsors hope this "lenders relief" bill can be
shoved through Congress in the last days of the session – before the American
public realizes its elected representatives are rewarding the banks, credit
card companies, finance companies, and other financial corporations that have
provided the Congress nearly $30 million in campaign contributions to promote
bankruptcy reform in recent years.
The financial industry –
along with allies like gambling casinos and car dealers – are attempting to
convert the nation's consumer bankruptcy law, which has served consumers and
business well for decades, into a punitive debt-collection enterprise that will
keep hard-pressed consumers in what amounts to debtors' prisons for years.
The lobbyists for the credit
merchants have consistently resorted to the tactics of the big lie, with claims
that the long-standing consumer bankruptcy protections are being abused by
deadbeats attempting to escape their debts. The hard facts gathered from
surveys of bankruptcy filings show that 90 percent of all bankruptcies are
triggered by the loss of a job, high medical bills, and divorce.
Bankruptcy law always has
been based on the principle that debtors facing impossible financial situations
be given an opportunity for a new start – a second chance to regain their role
as productive citizens rather than being thrown on a human trash heap to
satisfy the demands of the creditors.
Not only is this sensible
and humane for the family trapped in unforeseen financial troubles, but it also
makes the utmost economic sense for local communities and the nation as a
whole. Crushing families through a harsh bankruptcy law means more people on
welfare rolls, off tax rolls, and dependent on already hard-pressed local
charities.
Congressional supporters of
the repeal of bankruptcy protections know quite well that many of the money
problems faced by families today are the result of runaway credit card schemes
of the past decade, which have duped so many unsuspecting consumers. Credit
card offers have filled mailboxes with come-ons of easy credit. Introductory
offers of a low interest rate are quickly converted into double-digit charges
plus a mounting list of fees. As the cardholder falls deeper into debt, the
card companies continue to up the ante by offering bigger and bigger credit
limits. Ultimately, the consumer is sucked into cascading debt multiplied by
high interest rates and hidden and deceptive charges and fees.
And Congress – now so
anxious to enact a punitive consumer bankruptcy law – has consistently rejected
efforts to reign in credit card abuses.
Instead, Congress wants to
punish the poor to bail out the credit pushers. Congress's timing adds an extra
note of cruelty to the conversion of bankruptcy into a punitive anticonsumer
device. Thousands of workers are losing their jobs, savings, and pensions as a
result of fraudulent management at Enron, WorldCom, and other large
corporations. Many of those workers are left with only a few hundred dollars in
the bank, with no jobs, and facing outlays for mortgages, education,
transportation, and other necessities in an economy where unemployment is at 6
percent and rising.
Members of Congress have
turned out reams of news releases and uttered thousands of words of lament about
the workers caught in the whirlwind of massive corporate fraud. But now many of
these same representatives are ready and willing – and anxious – to enact a
bankruptcy law that will truly clobber these same workers. Next time you hear
your senators and representatives express sympathy for the victims of corporate
fraud, ask how they voted on the repeal of consumer bankruptcy protections.
And you might ask them how
they justify shredding consumer bankruptcy protections while leaving
corporations free to continue to avail themselves of an easy route through
bankruptcy, shedding investor equity and reorganizing as viable companies. A
soft, easy landing for corporate bankruptcy versus a harsh punitive rocky route
for consumer bankruptcy – an atrocious double standard.
How serious is Congress
about protecting citizens against corporate excesses and unfair, unscrupulous,
and deceptive lending practices? The vote on wiping out consumer bankruptcy
protections will come up in the Senate and in the House of Representatives in
September. It will be a major test of Congress's ability to summon the courage
to stand up to the massed lobbying forces of corporations. Forget the
well-honed news releases and speeches – watch for the actual vote of your
senators and representatives for or against repealing protections for consumers
on bankruptcy. This will be the hard, telling evidence of who your elected
representatives really represent in Washington.
Ralph Nader is America’s
leading consumer advocate. He is the founder of numerous public interest groups
including Public Citizen, and has twice
run for President as a Green Party candidate. His
latest book is Crashing the Party: How to Tell the Truth and Still Run for
President (St. Martin’s Press, 2002)