Why the Bankruptcy Bill Was a Betrayal of Consumers and The Senate's Deliberative Process
Diane Feinstein voted the bill out of committee and had believed she would vote for it after it had the worst aspects modified by thoughtful amendments. When it was apparent that no changes would be allowed, she decided that she could not support this bill because it was terribly unfair and left in place some "gross injustices."
Senator Dayton moved an amendment which would limit interest rates on credit cards to 30 percent. The amendment was summarily defeated. The fact of the matter is that with penalties, with other charges, with high interest rates and many companies have interest rates well -- believe it or not -- in excess of 30 percent, a minimum payer cannot ever repay the full debt because the interest on the debt, if combined with certain penalties and/or fixed payments, becomes such that it overwhelms the principal. Now, many people don't know that.
The fact is that 40 percent of credit card holders pay off their debt every month, 40 percent make only the minimum payment, and 20 percent are kind of 50/50 in that category. But for those 60 percent who are generally people who are not as informed, not as able to pay back their bill, who may have one, two, three, four, five, six different credit cards, who live -- because this is a credit economy -- on their credit card, credit card companies have been able, with very little interest to the payer of the debt, to solicit huge fees, penalties, and interest rates. And I think this is just plain wrong. And I really believe that if we're unable to correct it, which I had hoped would be corrected by these amendments that have been presented, I just can't vote for this bill as long as these inequities -- and I think gross injustices -- remain.
Let's just for a moment look at the 30 percent interest rate. It's very high. Inflation is about 2 percent. The interest rate on three-month Treasury bills is 2.75 percent. The national average lending rate on a 30-year mortgage is 5.59 percent. And yet an amendment to limit interest rates on credit cards to 30 percent went down dramatically.
I mentioned there are companies that are charging high annual interest rates. Some charge 384 percent, 535percent. Amazingly, one Delaware-based company has charged 1,095 percent. And that's according to the Minnesota Chapter of the National Association of Consumer Bankruptcy Attorneys.
She also complained that the process followed to pass this legislation was harming the deliberative process that has always been the hallmark of the Senate. Indeed, this bill showed how the tactics of the House are being picked up by the Senate, thus entrenching one party rule where the one party cares nothing about how effective or just the legislation they pass is. The Republicans seem bound and determined to prove "Government is the problem" as their icon stated over 20 years ago now. And the Democrats that voted for this bill show they are clueless in understanding the difference in fixing a problem and going along to get along. They need to hear about why their vote was wrong and the damage they did to their credibility by making that vote.