Bankruptcy Bill Now Screwing Credit Cards as Well As Consumers
A long time ago, I read a wonderful science fiction story, which might have actually been the basis of a “Twilight Zone” episode.
The story was set far in the future in an economic dystopia. Most people are unemployed, sustained by the government, and there is a long waiting list for even the basest manual labor. The main character comes home to tell his wife he’s finally got a job: it’s nothing excited, just screwing bolts into girders, but it’s a job so they invite the neighbors over to celebrate. Turns out the neighbor’s husband got a job too. As the celebration goes on, you realize that while the main character’s job is screwing in bolts, the neighbor’s job is unscrewing those very same bolts.
I couldn’t help but reflect on that story as I read this little blip from atrios:
Credit card issuers have discovered that maybe it’s sometimes in their interest to forgive a portion of credit card debt. They’ve realized this after they lobbied hard to make bankruptcy a worse deal for consumers. Instead of declaring bankruptcy, people now just walk away from their debts. Now they want the government to make it easier for them to forgive credit card debt by making the tax treatment of forgiven debt more generous.
With defaults on credit card debt spiraling amid a global financial downturn, banks already reeling from the mortgage crisis are losing billions more from unpaid credit card bills.
Big banks have formed an unusual alliance with consumer advocates to urge the government to allow huge portions of credit card debt to be forgiven, a turnabout from recent years when the banking industry lobbied strenuously to make it harder for consumers to erase their credit card debts in bankruptcy…
In an increasingly tough economic climate, banks and other mortgage lenders already have been agreeing to modify loans of distressed homeowners to help them avoid foreclosure. Now, banks making credit card loans have reached a point where they can lose less by forgiving part of the debt than seeing the consumer walk away entirely.
Credit cards — the ubiquitous plastic rectangles that have become an integral part of American life and the economy — now look to be the latest domino to drop in a financial crisis that started with subprime mortgages and continually takes new twists.
Completely self-inflicted, I remind you, thanks to the Bankruptcy Bill of 2005. As I’ve written:
The whole idea behind the policy was to enrich credit card companies and banks by ensuring that debts couldn’t be paid off without a series of hefty fees and usurious interest rates. It is as if no one considered what would happen if a large mass of customers couldn’t pay those debts. And no one seems to have considered, as I am happy to point out over and over again that when people are shackled to their credit cards, they walk away from their mortgages, which just happen to be owned by the same banks that hold the credit cards.
I mean really, how fucking stupid can a person be? And how did so many stupid people become CEOs of multinational corporations?
CEOs got greedy, and couldn’t see farther than their own compensation packages. And their “friends” in Congress really haven’t turned out to be very good friends at all: indeed by passing this bill, the sycophants supporters of MBNA, Bank of America, Capital One et al, actually hastened and increased their losses.
After 9:00 AM, I am going to place a call to Senator Tom Carper, who co-sponsored the Bankruptcy Bill (Joe Biden, who DID vote for the bill, has caught a lot of shit that should have been thrown at Carper). I will make fun of him. Then I will call Senator Arlen Specter, and make fun of him too. And then I will call my local Blue Dog, Allyson Schwartz, and make fun of her too.
Finally, I will call Capital One. Soon after the Bankruptcy Bill passed in 2005 my interest rates, like everyone else’s, skyrocketed. I closed the account (shoulda transferred it) and told Capital One to fuck off. They continued to charge interest. Now I have a golden opportunity to pay them off with a lump sum that’s a lot smaller than what I currently owe.
All of this could have been avoided if the credit card industry, its lobbyists, and its finger puppets in DC hadn’t gotten so damn greedy.
October 31st, 2008 at 2:35 pm
[...] Read more: Bankruptcy Bill Now Screwing Credit Cards as Well As Consumers [...]
October 31st, 2008 at 3:13 pm
[...] Read the rest of this great post here [...]
December 15th, 2008 at 1:06 pm
[...] And because average mortgage debt is typical hundreds of times more than the average credit card debt, the predictable result is an impact on the economy on an order of hundreds of times what the unpaid credit card debt could have. And that’s not getting paid either, by the way. [...]