Visa and The Anti-Child Support Act

[Robert Weissman <rob@essential.org>]

Call it the Anti-Child Support Act.

It is the product of a full-throttled campaign by the credit card
companies and financial services industry to rewrite U.S. bankruptcy laws. 

Their goal: to make it harder to declare bankruptcy and to impose heavy
burdens on debtors who do fall into bankruptcy.

More than one million Americans declare bankruptcy each year. This should
not be a surprise: the credit industry sends out 2.5 billion solicitations
each year; credit card advertisements urge consumers, simply, to spend;
and the consumer culture encourages extravagant purchases and constantly
upgrades the measure of what is an "essential" versus a "convenience." All
the while, real wages have stagnated or dropped over the last 25 years for
80 percent of the population.

When a person declares bankruptcy, they are required to undertake
court-supervised repayment plans. During a period of three to five years,
with some money set aside for essential needs like food and rent, they
allocate their income to pay off their debts as best they can. At the end
of the repayment period, their debts are wiped clean.

For the credit industry, of course, personal bankruptcies mean unpaid
accounts. That's why the industry wants to make it harder to declare
bankruptcy and more onerous to live through it.

The industry-supported "Responsible Borrower Protection Act" would force
debtors to litigate their right to be in bankruptcy, and impose expensive
new filing and other bureaucratic requirements -- just to get into
bankruptcy. Once in bankruptcy, debtors would be forced to stay in
repayment plans for five to seven years. The legislation would place
payment obligations for credit card debt on a par with secured debt on
critically important items like a home mortgage or a car loan.

It even would place credit card debt on equal footing with child support
payment obligations, says Gary Klein of the National Consumer Law Center.

In other words, debtor repayment plans could not prioritize paying off
mortgages -- enabling people to keep their homes -- or paying back child
support over payments on overdue Visa or Mastercard accounts.

The industry spin on this draconian legislation is that it would crack
down on "bankruptcies of convenience." The American Financial Services
Association argues that debtors routinely file for bankruptcy to escape
debts when they have the means to make payments. Bankruptcy is becoming a
"financial planning tool," the Association contends.

These claims ignore some inconvenient facts: Bankruptcy debtors have an
income 40 percent below the national average, for example. And the
existing bankruptcy system imposes tough oversight provision on debtors,
with strong civil and criminal penalties for fraud and dismissal of claims
by people who can afford to pay their debts.

But the credit industry doesn't intend for facts to get in its way. It has
launched a massive PR and lobbying blitz to generate public support for
the Anti-Child Support Act.

Financial interests have banded together to form the National Consumer
Bankruptcy Coalition. Members of the coalition poured more than $700,000
into federal candidate campaign coffers in the first half of 1997 alone.

The American Financial Services Association has hired a Dream Team of
lobbyists and consultants to push the Anti-Child Support Act. Among its
hires: Verner Liipfert, a law firm that is the current home of Bob Dole
and Lloyd Bentsen, former Treasury Secretary; Timmons & Co., run by
William Timmons, a top White House aide in the Nixon and Ford
administrations; and former Republican National Committee Chair Haley
Barbour's law firm.

The industry's big bucks and lobbyist Dream Team are all working to
sabotage an institution that provides a modicum of fairness in the
American economy. There is no debtor's prison in the United States; when
people fall on hard times and into financial troubles from which there is
no escape, we make them pay what they can -- and then offer them a fresh
start.

There is, of course, one serious issue of bankruptcy abuse -- big
corporations declaring bankruptcy to avoid liability payments for
dangerous products they sold. But somehow that problem hasn't drawn the
attention of the self-proclaimed advocates of "bankruptcy reform."

Russell Mokhiber is editor of the Washington, D.C.-based Corporate Crime
Reporter. Robert Weissman is editor of the Washington, D.C.-based
Multinational Monitor.

(c) Russell Mokhiber and Robert Weissman

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