NACBA: SENATE BANKRUPTCY “HEARING” IS LAST-DITCH
EFFORT BY CREDIT CARD INDUSTRY TO “SLAP SOME
LIPSTICK ON THE PIG” OF FAILED LAW CHANGES
Republican Witnesses Either Blindly Support Failed
Bankruptcy Law Changes or Are Industry Shills; Senate Hearing is Typical of
Industry-Dominated Process that Led to Anti-Consumer Law.
WASHINGTON,
D.C.//December 6, 2006///The radical fringe element of global warming science deniers
had their last shot at a friendly Senate hearing Tuesday. Today, the equally untenable arguments of
credit-card industry proponents of failed bankruptcy law changes “get their last
gasp at one more unbalanced hearing out of Congress before Democrats assume
control,” according to the National Association of Consumer Bankruptcy
Attorneys (NACBA). The Republicans
currently in charge of Senate Judiciary Subcommittee on Administrative
Oversight and the Courts are holding the hearing today to create a phony record
of the “success” of what, in fact, are widely viewed as decidedly ineffective
and counterproductive bankruptcy law changes.
NACBA
President Henry Sommer said: “This Republican
witness line-up is the financial world equivalent of the Flat Earth Society. Responsible banking industry people are just
like the vast majority of scientists when it comes to global warming; they
aren’t going to try to con you into thinking that that the verdict is still out
and that black is white and up is down.
We know from judicial opinions and surveys of credit counseling firms
and bankruptcy attorneys that the bankruptcy law changes are not working.”
Sommer
added: “No credible person in the field
seriously disputes the fact that the bankruptcy law changes have been a
spectacular flop. The law is not
squeezing out the supposed legions of abusive filers because they were never
there in the first place. All these ill-considered
law changes are doing is erecting pointless additional hurdles and costs in the
way of desperate families who legitimately need the fresh start of bankruptcy.”
Sommer
said the witnesses invited by the Republicans who have been charged with
slapping some lipstick on the pig of the 2005 bankruptcy reform law changes,
include the following:
*
Steve Bartlett, president, Financial Services Roundtable, which represents
banks and credit card companies. The financial
services industry repeatedly told members of Congress that the high rate of
bankruptcy cases cost each American family $400 or more per year. In
fact, Bartlett
was quoted in a November
25, 2006 article saying that the new bankruptcy law has been good
for consumers, creditors and the national economy. One of Bartlett’s colleagues said
that “If the new rules encourage more people to pay their debts, it will reduce
the cost of doing business for all consumers.” But the promised savings
have not materialized and do not appear to be likely to do so in the
future. If Bartlett is right, why hasn’t the credit card
industry started to slash the steadily increasing interest rates they charge
consumers in response to the supposed “success” of the law?
* Clifford White, III, acting director,
Executive Office for United States Trustee.
Although the U.S. Trustee program operates in theory as a neutral in the
bankruptcy process, the reality is that the office has concentrated its efforts
on serving the interests of the credit industry. Like other parts of the Bush Administration,
the United States Trustee Program seems more interested in protecting big
corporations from consumers than in protecting consumers from creditor abuses.
White has also
gone so far as to make a kind of “if-you-criticize-the-bankruptcy-law-changes-the-terrorists-win”
argument. In an October 16, 2006 speech,
White admonished bankruptcy professionals against criticizing the new law, stating:
‘I believe we can make faster progress
in the future . . . if the tenor of the debate can be elevated and if
bankruptcy professionals make a greater effort to breed respect for the rule of
law.”
*
Professor Todd Zywicki, George
Mason University
School of Law. Even as 104 law professors from around the U.S. wrote
to the Senate Judiciary Committee last year saying that the proposed bankruptcy
law changes were “deeply flawed, and will harm small businesses, the elderly,
and families with children,” Zywicki stood virtually alone among law professors
in support of the legislation. In a
lengthy exchange during a February 2005 Senate Judiciary Committee hearing, Mr.
Zywicki basically said he would not change one word of the proposed law. It was, he suggested, perfectly drafted!
In
reality, there is ample evidence that the bankruptcy legislation is not working
as intended:
*
On February 22, 2006,
NACBA released the first analysis of tens of thousands of consumers seeking
protection since a new federal bankruptcy law went into effect in October
2005. The data showed that of 61,355 of
the earliest consumers seen by credit counseling firms – the required first
stop under the new bankruptcy law – nearly all (97 percent) were unable to
repay any debts and that an overwhelming majority were forced into dire
financial straits by circumstances beyond their control, such as the loss of a
job, catastrophic medical expenses or the death of a spouse.
*
On October 4, 2006,
as the controversial federal bankruptcy overhaul approached its first
anniversary, a survey of 700 NACBA members provided clear proof that the
ill-conceived law is failing on an across-the-board basis. More than three-quarters of bankruptcy
attorneys said that the time involved in preparing a bankruptcy filing had gone
up by 50 percent or more. A full 76
percent of respondents reported that the work involved in filing a bankruptcy
case had increased over 50 percent; with 92.8 percent of respondents saying
that increased paperwork hassles was the primary effect of the new law. Full survey findings are available online at
http://www.thehastingsgroup.com/NACBASurvey/Summary.html.
*
On September 7, 2006,
NACBA reported that the United States Bankruptcy Court for the Northern
District of New York had reluctantly interpreted the controversial U.S.
bankruptcy reform law to mean that those going through bankruptcy may not tithe
to their church or make other charitable donations … until after they have paid
off credit card companies and other creditors. Before the new law went into
effect, bankruptcy court judges were required to permit debtors to tithe a
portion of their income on a regular basis.
On September 29, 2006,
the U.S. Senate acted to clarify that the concern raised by NACBA was not
intended to be a change made under the poorly crafted 2005 amendments. However,
it does not appear that that bill will be enacted in this Congress.
ABOUT NACBA
The
National Association of Consumer Bankruptcy Attorneys (http://www.nacba.org) is
the only national organization dedicated to serving the needs of consumer
bankruptcy attorneys and protecting the rights of consumer debtors in
bankruptcy. Formed in 1992, NACBA now has more than 2500 members
located in all 50 states and Puerto Rico.
CONTACT: Patrick Mitchell, (703) 276-3266 or pmitchell@hastingsgroup.com.
NACBA Press Release Slams Senate Bankruptcy Hearing
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