Credit Card Penalties, Fees Bury Debtors
Senate Nears Action On Bankruptcy Curbs
By Kathleen Day and Caroline E. Mayer
Washington Post Staff Writers
Sunday, March 6, 2005; Page A01
For more than two years, special-education teacher Fatemeh Hosseini worked a second job to keep up with the $2,000 in monthly payments she collectively sent to five banks to try to pay $25,000 in credit card debt.
Even though she had not used the cards to buy anything more, her debt had nearly doubled to $49,574 by the time the Sunnyvale, Calif., resident filed for bankruptcy last June. That is because Hosseini's payments sometimes were tardy, triggering late fees ranging from $25 to $50 and doubling interest rates to nearly 30 percent. When the additional costs pushed her balance over her credit limit, the credit card companies added more penalties.
"I was really trying hard to make minimum payments," said Hosseini, whose financial problems began in the late 1990s when her husband left her and their three children. "All of my salary was going to the credit card companies, but there was no change in the balances because of that interest and those penalties."
Punitive charges -- penalty fees and sharply higher interest rates after a payment is late -- compound the problems of many financially strapped consumers, sometimes making it impossible for them to dig their way out of debt and pushing them into bankruptcy. <snip>
http://www.washingtonpost.com/wp-dyn/articles/A10361-2005Mar5.htmlDumping on debtors
Republicans in Congress are pushing a bankruptcy bill that would hurt consumers while helping to enrich the credit card industry.
A Times Editorial
Published March 5, 2005
Prodded by the banking and credit industries, Republicans in Congress have been trying for years to make it more difficult for people to wipe away credit card debt by filing for personal bankruptcy. Their latest attempt would hurt consumers and impose no responsibility on a credit card industry that spreads easy credit around like free money.
In essence, the Senate bill would make it more difficult for people with modest resources to wipe out their debts completely by filing for bankruptcy. Now, consumers who file for Chapter 7 bankruptcy are given a new start and may go forward debt-free. Under Chapter 13, debts are reorganized and a payment plan is established.
The bill would limit Chapter 7 filings to those debtors who earn less than the median income in their state. That covers about 80 percent of bankruptcy filers. With some exceptions, nearly everyone else would have to file under Chapter 13.
The credit card industry wants the change because it says too many consumers are gaming the system - spending heavily on luxury items and then walking away from the bills. In 2003, one out of 73 households declared bankruptcy. But while there are irresponsible spenders who think nothing of racking up charges they know they can't pay, a significant proportion of debtors seeking relief have been financially crippled by medical expenses, unemployment or divorce. More than half of those over 65 who apply for bankruptcy are driven to it by medical bills. <snip>
http://www.sptimes.com/2005/03/05/Opinion/Dumping_on_debtors.shtmlKeep chance for fresh start
The Senate should add compassion to its bankruptcy bill
Friday, March 04, 2005
<snip> The Bankruptcy Abuse Prevention and Consumer Protection Act would make it harder for the roughly 1.5 million people who file for bankruptcy annually to wipe away their debts entirely in bankruptcy court. We favor the idea of a means test that would require bankruptcy filers with the ability to repay a portion of their debts to do so -- especially if the evidence shows they have been gaming the system.
This legislation, though, sets the means test level low, treats all families alike -- as if they are guilty of profligate spending -- and is too rigid about letting judges look at contributing factors. Only those earning less than the median income, about $43,000, could discharge their debts through bankruptcy.
Bankruptcy judges would not be free to gauge individual circumstances and react to true, blameless hardship. So the bill would stack the law in credit card lenders' favor and against average citizens. The lenders would be freed from many results of their reckless issuing of credit cards and their risk-measurement failure to estimate the creditworthiness of their customers.
The result would sentence hundreds of thousands of families to be lenders' indentured servants, unable to escape crushing debts from not irresponsibility but huge medical bills, loss of employment or company pension failures. <snip>
http://www.oregonlive.com/editorials/oregonian/index.ssf?/base/editorial/1109941450323821.xml