BANKRUPTCY BILL ON THE SENATE FLOOR WILL ERECT
HARSH NEW BARRIERS AND REWARD ABUSIVE LENDERS
By WWW.CONSUMERUNION.ORG

Washington, D.C. — As the U.S. Senate began considering bankruptcy legislation today, national consumer organizations called on Senators to reject the bill because it would favor creditors at the expense of Americans who have suffered genuine financial misfortune.

The bankruptcy bill (S. 256) would place numerous additional restrictions on Americans who attempt to declare either chapter 7 or chapter 13 bankruptcy (see attached for more information.) It does not, however, place any restrictions on abusive lending by creditors.

“While credit card companies urge Congress to erect new bankruptcy barriers for many families, their profits are soaring,” said Travis Plunkett, Legislative Director of the Consumer Federation of America. “This bill simply doesn’t balance responsibility between families in debt trouble and the creditors whose practices have contributed to the rise in bankruptcies,” Plunkett said.

A large body of evidence links the rise in consumer bankruptcies in the last twenty years directly to an increase in consumer debt. Revolving debt, most of which is credit card debt, increased nearly fifteen-fold from January 1980 through 2004, from $54 billion to $791 billion. The higher the level of consumer debt, the more likely a family is to declare bankruptcy when misfortune strikes.

Much of this lending boom was fueled by the extension of credit to vulnerable consumers, including young people, lower income Americans and minorities, and the elderly. Some lenders, such as those offering “predatory” mortgage loans, targeted these borrowers with often deceptive offers that had abusive terms.

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