Cleaver's Response

On Sunday, I expressed my disappointment in Congressman Cleaver for assisting the Republicans in passing an odious bankruptcy reform bill that will protects credit card companies at the expense of the unfortunate. I also wrote to him to express my disappointment, and he responded today:

Thank you for contacting my office with regard to S. 256, the Bankruptcy Abuse Prevention and Consumer Protection Act. I appreciate your taking the time to reach out to me on what I believe is a very difficult issue.

As you may be aware, S. 256 comprises reform of many areas of bankruptcy practice including consumer filings, small business bankruptcy, tax bankruptcy, ancillary and cross border cases, financial contract provisions, amendments to Chapter 12 governing family farmer reorganization, and healthcare and employee benefits. But by far, the most controversial provisions in S. 256 relate to individual consumer filings.

This controversy results from the fact that this legislation is far from perfect. I would have preferred a bill that allowed judges to more readily distinguish between legitimate bankruptcy filers and those whose main goal is to "game the system." I supported proposed amendments that would carve out exemptions for those filers whose debt was a direct result of medical expenses or incurred after a job loss. Unfortunately, the Republican majority forced through a restrictive rule that denied the full House of Representatives the opportunity to consider amendments. As such, I was left with only two alternatives, the option of doing nothing or the imperfect bill. While they have not been well reported, the costs of inaction are real, and in my opinion very hurtful to consumers.

Like you, I would prefer an even more fact intensive inquiry into a debtor's circumstances, but the hard reality is that the new "means test" will afford extra protection for low and median income debtors in Missouri and elsewhere. The new bankruptcy bill will permit Chapter 7's retirement of debt for those at or below a state's median income. The bill has other positive features including prioritizing child support obligations. Under current law, commercial debtors are routinely elevated over spouses seeking support for their children. When this bill was on the House floor two years ago, Democratic members pushed for a child support provision, and its inclusion in the 2005 version marks real improvement over the original product. The bill would also for the first time provide credit counseling for debtors and require credit card companies to disclose how long it would take to pay off debts if one makes only minimum payments.

Despite the imperfections of this bill, I believe that we have an obligation to do something about the problems with our bankruptcy system. Without reform, thousands of low and median income debtors in Missouri will keep getting thrust into Chapter 13 when they can't afford it; working mothers will face the ongoing threat of deadbeat husbands evading child support because current bankruptcy laws are dismissive of obligations to children. And all of us will be forced to reimburse lenders for those irresponsible filers who seek the shelter of Chapter 7 bankruptcy although they have the ability to repay their consumer debts.

With that said, I strongly believe that Congress must also examine the effect that the credit card industry has had on consumers. As a whole, the credit card industry has begun extending credit to a wider segment of our population. My youngest son will be graduating from college this year. He does not have a job waiting for him, yet the credit card companies have seen him fit enough to send solicitations almost daily in an effort to suck him into debt. However, many consumers, some of them recent graduates, like my son may lack sufficient information about the pitfalls of credit. To combat this problem, I believe that we must work to better educate people about credit and how to use it responsibly. In addition, I believe we must take steps to curb abusive industry practices that include extending credit with unconscionably high interest rates to minors, the disabled, those who have no ability to repay the debt. The credit card industry should also be required to accurately and in plain English disclose the terms of credit card agreements. As a Member of the House Committee on Financial Services, rest assured that I plan on closely monitoring the credit card industry.

Again, thank you for sharing your views with me on this important issue. Please do not hesitate to do so in the future.

Sincerely

Emanuel Cleaver, II
Member of Congress

I remain disappointed in Congressman Cleaver's decision, but I appreciate his response. That said, I think he made a terrible mistake. His analysis that it is better to do vote for an imperfect bill rather than doing nothing is wrong in this instance, because the imperfections are so large that they far outweigh the benefits of having acted.

I don't believe that this is a minor issue involving the relative merits of credit card companies and deadbeat spendthrifts. I know that good people sometimes have circumstances in their lives force them into a deep hole of debt, and I know that hopelessness and depression can set in. I hope somebody is keeping track of the number of debt-related suicides - I am confident that we will be seeing an increase in deaths as a result of this bankruptcy reform. Weren't the credit card companies profitable enough before the reform?