Tuesday, January 17, 2006
Bush Administration, Credit Card Lobby Push Bankruptcy Gag Rule
WASHINGTON -- The Bush Administration has endorsed the banking industry's latest attempt to scale back bankruptcy protection for debtors by trying to eliminate use of the "B- word" -- bankruptcy -- in financial counseling sessions.
Patterned after the abortion "gag rule," which denies U.S. funding to overseas family planning clinics that advise clients about abortion, the bankruptcy gag rule would impose stiff monetary penalties on credit and financial counselors who advise debtor clients about the option of filing for personal bankruptcy.
"People should pay back what they owe," said Ronald Stillborn, a banking industry spokesman. "But letting people know about bankruptcy procedure sends a wrong message that we condone bankruptcy filings."
Bankruptcy laws were formerly viewed as a humanitarian "last resort" to enable individuals to get a fresh start rather than trying to survive under crushing debt. But the banking industry, whose profits have skyrocketed due to the explosion of credit card debt in the U.S., have succeeded in making it harder for individuals to file for bankruptcy.
Under a recent bankruptcy restriction that went into effect last October, debtors were required to obtain "credit counseling" before they would be permitted to file for personal bankruptcy. But early experience under the rule showed that credit counseling was not having its intended effect of deterring bankruptcy filings and steering debtors into voluntary debt-management plans.
"With the gag rule, our hope is that debtors will eschew bankruptcy because they don't know about it," says Stillborn. Banking industry leaders see the gag rule as a viable stop-gap measure until they can convince Congress to re-establish workhouses and debtors' prison.
Cap doff: Tom Bozzo
Patterned after the abortion "gag rule," which denies U.S. funding to overseas family planning clinics that advise clients about abortion, the bankruptcy gag rule would impose stiff monetary penalties on credit and financial counselors who advise debtor clients about the option of filing for personal bankruptcy.
"People should pay back what they owe," said Ronald Stillborn, a banking industry spokesman. "But letting people know about bankruptcy procedure sends a wrong message that we condone bankruptcy filings."
Bankruptcy laws were formerly viewed as a humanitarian "last resort" to enable individuals to get a fresh start rather than trying to survive under crushing debt. But the banking industry, whose profits have skyrocketed due to the explosion of credit card debt in the U.S., have succeeded in making it harder for individuals to file for bankruptcy.
Under a recent bankruptcy restriction that went into effect last October, debtors were required to obtain "credit counseling" before they would be permitted to file for personal bankruptcy. But early experience under the rule showed that credit counseling was not having its intended effect of deterring bankruptcy filings and steering debtors into voluntary debt-management plans.
"With the gag rule, our hope is that debtors will eschew bankruptcy because they don't know about it," says Stillborn. Banking industry leaders see the gag rule as a viable stop-gap measure until they can convince Congress to re-establish workhouses and debtors' prison.
Cap doff: Tom Bozzo
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That's horrific. So, how is someone supposed to find out about current bankruptcy rules? Oh, I know. Start a company and go in to "financial counseling" as a CEO. (Corporations are exempt from all these new restrictions, aren't they?)
(and if you think that debtor's prison doesn't exist, it's only because you haven't been arrested for child support arrears. The government WILL throw your butt in jail for owing money. But "it's for the children" so that makes it OK. Sounds like debtor's prison to me.)
(and if you think that debtor's prison doesn't exist, it's only because you haven't been arrested for child support arrears. The government WILL throw your butt in jail for owing money. But "it's for the children" so that makes it OK. Sounds like debtor's prison to me.)
# posted by 
: 5:24 AM, January 18, 2006
: 5:24 AM, January 18, 2006 
Perhaps better financial counseling could be provided in basic high school economics courses. Better yet, what about a financial counseling session before one is first granted a credit card?
I agree that credit card companies should bear responsibility for taking bad risks. But there are upper- and middle-class people living beyond their means who should have to take responsibility too. Same thing for parents owing back child support. At some point, you have to stop seeing victims and discouraging self discipline and self reliance.
A good start would be elimininating our societal association between material things (cars, clothes, vacations, eating out, etc) and respectability. That is, as a society, don't look down on people who live lesser lives materially, but within their means.
I agree that credit card companies should bear responsibility for taking bad risks. But there are upper- and middle-class people living beyond their means who should have to take responsibility too. Same thing for parents owing back child support. At some point, you have to stop seeing victims and discouraging self discipline and self reliance.
A good start would be elimininating our societal association between material things (cars, clothes, vacations, eating out, etc) and respectability. That is, as a society, don't look down on people who live lesser lives materially, but within their means.
# posted by : 6:42 AM, January 18, 2006
: 6:42 AM, January 18, 2006
Anonymous: I couldn't agree more with your last paragraph--but that's not encouraged in a capitalistic society, is it? In fact, according to "prosperity theology" having things is a sign of god's blessing. How f$cked up is that? B
# posted by : 7:46 AM, January 18, 2006
: 7:46 AM, January 18, 2006
Sigh. Well, maybe if you came up with a ludicrous acronym for the new ruling, I may have got it. The thing about your satire is that it's too close to what actually may happen (I seem to recall you making a joke only to have it passed into legislation a couple years later? Or was that some fevered dream I had?).
The thing of it is, I can see this happening.
Anon: I agree with you.
B: If we stopped consuming the global economy would collapse.
The thing of it is, I can see this happening.
Anon: I agree with you.
B: If we stopped consuming the global economy would collapse.
# posted by : 8:47 AM, January 18, 2006
: 8:47 AM, January 18, 2006
Anonymous commenters: please see my new comment policy! You're welcome here, but come up with a pseudonym!
Self discipline is great, but what about corporate self discipline? Why not stop at a "reasonable" 8-10% annual profit? Why not have self-discriplined, rather than astronomical, executive compensation?
People are subjected to an incredible bombardment of advertizing -- including even by the credit card companies themselves -- to spend beyond their means. Credit card companies make their money off people who spend beyond their means and wind up paying 20% interest on their floating debt. What shouldn't the companies be blamed? It's like putting all the blame on the junkie and none on the dealer.
Self discipline is great, but what about corporate self discipline? Why not stop at a "reasonable" 8-10% annual profit? Why not have self-discriplined, rather than astronomical, executive compensation?
People are subjected to an incredible bombardment of advertizing -- including even by the credit card companies themselves -- to spend beyond their means. Credit card companies make their money off people who spend beyond their means and wind up paying 20% interest on their floating debt. What shouldn't the companies be blamed? It's like putting all the blame on the junkie and none on the dealer.
Damn! I was going to go shopping this afternoon and now you've gone and made me feel bad about my spendthrift ways.
Tonya, the juxtaposition of "shopping" and "spendthrift" in your post initially looked like you said: Damn! I was going to go shoplifting this afternoon...
I parsed it correctly on the doubletake.
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I parsed it correctly on the doubletake.
# posted by : 12:27 PM, January 18, 2006
: 12:27 PM, January 18, 2006 Subscribe to Post Comments [Atom]
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