Todd Zywicki over at Volokh Conspiracy argues that the critics of the recent bankruptcy bill are overstating things.
This is a topic I care about but haven't taken time to research thoroughly enough to have an informed opinion on. However, it might not be a coincidence that several of this morning's talking head TV shows discussed how highly leveraged some consumers are. Evidence offered was the rising amounts of home equity loans granted last year.
On the surface that's not automatically a convincing metric to me. Given the rapid rise in housing values (which is probably unsustainable over time as Baby Boomers retire and demand goes down), combined with currently very low interest rates, using home equity loans to pay down credit card debt is an economically rational decision.
Whether the debt itself was wise is a different issue, however - and overdrawing home equity can leave many families exposed in the future. I'll see if I can dig up some stats on all this over the coming week.
In the meanwhile, it sounds as if the bill was timed to deal with an expected increase in bankruptcy filings.
Robin, AFAIK, the bill has been around since before 2000 - Clinton vetoed one much like it in Dec, 2000.
I don't think this is based on any macroeconomic concerns, just the ability to get it passed and signed.
I'll have more in a bit...
A.L.
Hedge Fund Guy also is in the minority defending the bill. Worth reading.
As I understand it, this bill has been around four times. In the last election, huge financing from credit card companies was bestowed on Republican candidates.
Heard on C-Span this a.m. from financial consultant, at least 90% of bankruptcies feature overcharge of credit cards. Trillions of unsolicited credit card offers have been sent out over the past year alone.
Want to draw a picture? The abuse of credit is not just the consumers' irresponsibility.
Needless to add, over 50% of bankruptcies follow health problems.
Ruth, that 50% figure is not, shall we say, entirely accurate.
Well, I'm not sure that bankruptcies are ever the responsibility of the lender -- but neither am I inclined to save them from irresponsible lending habits.
RE: 50% of bankruptcies being due to medical problems, would you care to back that up with some data? If you mean Elizabeth Warren's claims, Jane Galt shows that she badly twists the data to fit her claims - and Jane is anti- this bill.
According to the WSJ, credit cards make up 20% of the debt in a typical bankrupcy. Where does the 90% number come from?
I understand people hate the credit card companies - I sure do - but they don't force people to go out and buy a $5,000 60" flat panel HDTV when they only have $30,000 in income.
The stigma of bankrupcy used to keep people from doing it. Now that it is socially acceptable, I think it should be made legally harder to do.
Robin, Specifically what is the probelm with this bill? I have yet to hear anything other than how bad credit card companies are. I've had experience near that business and I won't be put in the position of defending it. But if we want to adress its abuses we whould do so directly, not via bankruptcy legislation.
I also have a sister and brother in law who wenk through bk. Didn't seem to make any impression or have and effect on their life style at all. I think the law could probably use a lot of tightening up. But I would like to hear what about it is so bad.
The bill, as I understand it, would make it harder for ordinary people to shield assets during bankruptcy and would require repayment of part of the debt in the future. But I haven't researched this in detail - Armed Liberal has strong feelings about it, as do a lot of bloggers across the political spectrum.
My 21 yr old brother, his wife and their baby were travelling to start his new fulltime job with benefits when he collapsed and aggressive cancer was diagnosed. Two and a half months later, his white blood cell count was down to 1 - they'd pushed the chemo and radiation as hard as they could.
Bro and wife ended up in bankruptcy. I helped my retired and ill blue-collar dad cover the school loans he'd cosigned until the bankruptcy kicked in. Two oncologists donated their services to him, for which we're grateful.
Bro and wife eventually repaid all the debt, bought cars and a townhouse. So I've seen that side of bankruptcy too.
OTOH I've been appalled at the casual intent I've heard by some people to declare if their credit-card subsidized fun life collapsed. That's just irresponsible -- as is the decision of lenders to extend them that much unsecured credit.
Without looking at the bill's language and relevant stats, I can't form any opinion on this particular bill, but I can link to the various arguments. Jane Galt had some good arguments against the bill - that's probably a good place to start if you want to follow this issue.
I've seen Jane's arguments and lots more on the web. But they always boil down, and rather quickly, to how bad the credit card companies are and how people shouldn't have to pay them back if they go bk. Ask for specifics beyond "credit cards bad debtors good". They are few and far between.
Likewise this bill has been rumbling around congress for 7 years. In that time, the financial institutions have probably bought off every congresscritter twice. Now they've called and the legislature will have to produce. So there's a bad odor all 'round. But it's like that in bk.
Still, no one has made a specific argument of why this bill is bad, not Galt not Zywicki, not Instapundit.
It’s actually probably will be the other way around. There probably will be an increase in personal bankruptcy filings in order to file before the law changes. IIRC the same thing happened in 1997(?) when it looked like we were going to reform the laws then and more people filed for bankruptcy then because they thought that it would be more difficult later.
Richard Heddleson wrote:
You’ve pretty much nailed the anti-reformer’s argument which centers on (a) hatred for credit card companies and (b) complaints that the bill doesn’t go “far enough” in dealing with wealthier debtors, neither of which are really persuasive arguments against the actual contents of the legislation in question.
One thing I’m particularly supportive of is that the bill changes the homestead exemption which IIRC used to be decided by the States as to how much is shielded from bankruptcy (some States like FL may have allowed an unlimited exemption) while allowed some wealthier debtors to plow their money into an expensive new home and basically shield it from their creditors. The bill puts a cap of $125,000 on the exemption in cases where:
a) The debtor has not actually lived in the place for 40 months before filing bankruptcy or
b) The debtor has a debt because they violated federal securities law or committed fraud e.g. Ken Lay) or
c) The debtor has a debt because they committed an intentional tort that caused a serious injury or death within 5 years before filing.
Definitely a step in the right direction.
Elizabeth Warren is the source of the 50% figure, and the reason I have heard (during hearings in committee) for arguing with the figure is that it includes mental health issues as well as alcoholism. I join with Warren in including those as health issues. Sorry I didn't take notes on who was being cited on the 90% figure, also during committee hearings.
I'm not sure that constant advertizing that 'no credit is good enough' in car sales appeals isn't as irresponsible as consumer overspending. And I, too, have seen people take advantage of bankruptcy. They are far from the majority, however, and yes, there will be a rash of filings to beat the rush if the bill goes through.
Bankruptcy Debate
The analysis everyone is clamoring about Illness And Injury As Contributors To Bankruptcy By David U. Himmelstein, Elizabeth Warren, Deborah Thorne, and Steffie Woolhandler
As reported by the NYT Bankruptcy, the American Morality Tale
A lot to think about here and still not enough on the bill or a link that provides the text of the bill in detail.
I've had friends and relatives who were forced into bankruptcy due to circumstances that were beyond their control. Unemployment, undremployment, trying to support a family when the job market collapsed under them...
None of them were living the high life on credit -- they were doing scandalously crazy stuff like buying thirty bucks worth of groceries for a family of four, and trying to keep the gas turned on in winter. While ther are certainly people out there abusing bakruptcy (just as there are people out there abusing charitable deductions to get off tax-free), credit card companies are not suffering.
The bill has been sold on the idea that Credit card companies (and by extension, America) have been crushed under the weight of bankruptcies by libertine spendthritfts. Strangely enough, in this period of horrible financial trouble, the past decade has seen their profitability triple. In many cases, credit cards that are wiped out in bankruptcy have already made the credit card companies a profit due via interest rates, late fees, and so on. Coincidentally, their profits have tripled since Congress changed regulations to allow them to charge much, much higher interest rates. These rates were increased with the justification that riskier loans merited higher rates because of the threat of bankrupcty. We'll see if they drop interest rates industry-wide when this legislation passes.
The Credit industry's profit model is built on extending credit to people who can't really affored it, and will keep large balances riding for long periods of time. These people are the ones who are very, very profitable. The ones who pay off their balances are known as "deadbeats." While this is not inherently bad (at least, to some), it's risky. And to keep profits growing, they will have to get riskier -- extending more credit to people less able to repay. To protect this business model, they've been lobbying to make bankruptcy more and more difficult for years. Everyone says that no one is forcing people to use credit -- but no one is forcing credit card companies to extend unsecured credit to people in dire financial straits, with low incomes. It's like playing roulette, but lobbying Congress to ensure you can't lose.
Families with very low incomes and no financial reserves will face more hurdles when filing for bankruptcy (including the 'means test,' which all observers predict will increase the flat cost of filing for bankruptcy) and many will be forced to enter Chapter 13 rather than Chapter 7.
Most telling is the long list of ammentments that were rejected by the bill's sponsors. Go bankrupt due to huge medical expenses? Sorry, no special provisions. Military reservist whose family's been living on a shoestring while you fought for freedom? Nope, no special provisions. Wealthy individual with money sunk into trust funds and expensive property? No-- er. Well, actually, there are special provisions for you...
Both conservatives and liberals, republicans and democrats, have voted for the bill. It's not a party-line issue, just one that past experiences and those of loved ones have made me very very passionate about. The founding fathers saw fit to explicitly protect bankruptcy as a US institution. The fact thta it interferes with a particular industry's predatory profit model should not be our sole reason for whittling away at it.
Anything for a Marine. I believe this is the latest version of the legislation. Given that legislative staffers seem to be paid by the word and all legislation is written in spaghetti code, I will leave it for others to decipher.
Richard
Thanks for the link.
Ruth
Would you be adverse to credit card companies querying consumer's and their health records for potential deadbeats? IE Gambling, alcoholism, drug abuse certainly puts the lender in a high risk position. If not would you be adverse to credit card companies following up on these queries on say a quarterly / semi-annual / annual basis?
I'm not arguing the point that you or Elizabeth make concerning health issues and whether or not certain activities are classified as such. I'll argue the point on whether the credit card companies should be able to determine your risk factor and the data they should have access to though.
My policy for this bill is the same as for the Patriot Act, to wit: I don't take any criticism (or praise) seriously unless it explains 1) the law as it exists, 2) the changes the bill would make, and 3) the likely effect of those changes.
So far I mostly see discussion of 3), which it seems to me rather assumes a knowledge of 1) and 2) that no one has bothered to display in detail.
Also, I simply refuse to credit any argument that does not refer to specific sections of the bill. READ THE BILL AND CITE THE ALLEGED ATROCITIES BY SECTION!
Everyone seems to be depending on pundits and reporters for summaries, who are either 1) partisian or 2) relying in turn on summaries provided by unknown sources who are likely partisan.
Perhaps we can agree to dispense with one of the myths here. Filing bankruptcy on credit card debt does not result in the debt being passed on to other consumers. I (and probably many people reading this post) have never paid a credit card company a dime for the convenience of using a credit card. OK, maybe I had a late fee once, but that was offset by reward programs and frequent flyer miles.
When a credit card company pushes a debtor into a 30% annual interest rate, what has happened is the debtor has been placed in a pool with other bad risks. Once such a high interest rate has been assigned (and once other financing options have closed), the inability to pay the debt is pretty much a mathematical certainty.
Patrick
PD Shaw, you are not correct. The interest paid by the debtor is only a part, and I believe the minor one though I am not current on industry statistics, of the revenue the credit card company makes. The major source is merchants' discount. When you buy something from a merchant for a price of $100 with a credit card, you pay the credit card company $100. But the credit card company pays the merchant only $95 to $99. The credit card company keeps the difference. That is why some merchants offer discounts for cash, they have marked up the price for everybody to cover the cost the credit card company charges them for every transaction.
You don't think the credit card companies could survive floating "deadbeats" like me my monthly credit card bill for 20 days, do you?
Rob Lyman wrote:
Actually I’ve given my specific reasons for why I favor some of the specific changes that the legislation makes but if you’d like more details including the text of the legislation, I’d recommend this site:
http://www.bankruptcyfinder.com/bankruptcyreformnews.html#Anchorflash
It’s actually from a site that opposes the bill but they actually do a decent job in providing a factual overview of the legislation (something sorely missing from most of its detractors).
My own view:
I support cracking down on the abuse of the homestead exemption by limiting the exemption to $125,000 for people who either (a) haven’t lived in their homestead for 40 months before filing, (b) have debts they incurred because they broke securities laws or committed fraud, and/or © owe someone money because they committed an intentional tort that resulted in serious injury or death.
I favor means-testing so that people who can afford to pay more of the bills they voluntarily incurred have to at least make an attempt to do so via Chapter 13 rather than trying to go right to Chapter 7 and provides stricter monitoring of what are allowable expenses. The fact that the proposed change are only for those people who are above the median income in their State and who can also afford to pay $6000 on their debts after meeting their necessities hardly makes this a bill that “targets the poor.”
I also like that the US Trustee’s Office will now be providing a list of approved Credit Counseling Agencies which should help to weed out the scam artists. Having worked in collections in college, I’ve seen a number of people who made a good faith attempt to pay their bills through a CCA and got taken by someone who was either dishonest or too incompetent to notify their client’s creditors. Hopefully this added oversight will improve the effectiveness of this otherwise useful alternative for people to get back on their feet while meeting their obligations.
Bottom line: I support the bill and wish it or something similar had been passed years ago. Moreover, I’ve found that when a lot of people actually take the time to read the legislation or learn about some of the specifics like I just mentioned their reaction is usually “what, you mean this wasn’t the law already?”
I'll repeat my specific, albeit boring procedural, problem with the bankruptcy bill.
This bill introduces, for the first time, means-testing and a number of procedural hurdles intended to encourage a "workout" of the debt as opposed to liquidation. I'm not that troubled by the means test in and of itself. Everyone can avoid the means test. How? Make your situation worse: quit your job (for at least six months), and/or borrow more and pay less.
No, my problem is that to guide the debtor through this new system, they will need a lot of legal assistance, which they cannot afford. Moreover, the new bill makes the debtor's attorney responsible to investigate the debtor's claim, a role traditionally played by the debtor's adversaries (the creditors) through the taxpayer-funded role of trustee. If the lawyer fails to "reasonably investigate" the debtor's claims, the lawyer will be liable for costs, attorneys' fees and penalties.
I understand that if the debtor initiates a bankruptcy, it is fair to impose certain costs on the debtor. But since the attorney gets paid first, these costs are essentially passed on to the creditors anyway. Given that legal ethics are seeped in the adversarial system, attorneys are not necessarily good client investigators. Fewer attorneys will agree to take cases in which they are uniquely, personally liable, which will further increase the costs of filing bankruptcy.
I think this legislation promotes a Catch-22 in which the poor will not be able to afford to file bankruptcy.
Patrick
Patrick's comment hits the nail on the head. "Means Testing" isn't something I object to on principle. Rather, it's the additional financial burden it will put on those who are less able to afford the legal fees associated with rigorous means testing. This is not disputed -- increased legal burden will lead to increased legal cost, which puts those who should be "protected" by the means test under an even greater financial burden.
The bill has been posed as a solution to a problem that does not exist (a rise in 'bankruptcy fraud'). It puts new restrictions on a constitutional protection set in place by the founding fathers. I just want to know why the credit industry, in a time of record profits, is seen as the victim requiring protection. They take unecessary risks in a game of financial chance to make higher profits, and sometimes they lose. As they play riskier and riskier games, they lose more often. Why do existing systems need to be changed to help protect the growth of their profits?
There’s no “constitutional protection” to get out of having to pay your bills. The Constitution merely empowers the federal government to set uniform standards for bankruptcy which could include abolishing it entirely if we so chose.
PD Shaw
From what I've read of the bill so far people needed legal assistance before this bill was introduced / passed. It seems to me this is a moot point regardless of the legislations past / proposed changes and history.
So making lawyers responsible for the cases they handle is a bad thing? Seems to me "reasonably investigate" is also open to interpretation. I could also read this as lawyers now must validate a case before you take my money. Somehow this makes sense to me unless a lawyer is simply looking for a fee regardless of outcome. This might even cut down on a lot of bankruptcy ads that air on radio and TV. Is that a bad thing?
On another note I've never fully understood why I should be liable to throw good money after bad to collect on debt owed to me. In that matter none of my choices are favorable. I either spend money to get my money back (a negative) or I write the debt off (again a negative). The lawyer on the other hand always gets a positive?
First, let me say this is the best discussion I have seen of the topic, though I have yet to visit the bankruptcy finder site, my next stop. So thqank you.
No, my problem is that to guide the debtor through this new system, they will need a lot of legal assistance, which they cannot afford.
How many people file bk without an attorney today? Will the rates really rise that much? Some how they manage to pay the lawyers today and they will in the future, of that I am sure. The lawyers are the only ones sure to be paid; that is the iron law of bankruptcy. Nothing will change that.
Given that legal ethics are seeped in the adversarial system, attorneys are not necessarily good client investigators. Fewer attorneys will agree to take cases in which they are uniquely, personally liable, which will further increase the costs of filing bankruptcy.
It may increase the cost to the specific debtor, but if it reduces the amount of fraud, it will decrease the cost for the rest of us. I don't mind seeing the unfortuante legitimate bankrupts pay a premium to reduce fraud.
I think this legislation promotes a Catch-22 in which the poor will not be able to afford to file bankruptcy.
If there's means testing, to which you do not object, then it won't be the poor who suffer, it will be those whose means are just above the cutoff. And how much can the incremental cost of the means test be if the person is truly poor?
It puts new restrictions on a constitutional protection set in place by the founding fathers.
Get serious. The protection was placed in the Constitution (NOT the Bill of Rights) to protect Creditors from the States that were implementing bankruptcy laws and practices that screwed out of state creditors.
USMC wrote:
You’d better brace yourself. When we get around to tort reform, part of it will probably be a proposal to make attorneys more accountable for the suits they file as well as their discovery requests in order to cut down on frivolous filings and abusive/unreasonable discovery requests. Expect to see the Plaintiff’s bar trot out the same argument about how attorneys really shouldn’t be accountable for this either.
The interest paid by the debtor is only a part, and I believe the minor one though I am not current on industry statistics, of the revenue the credit card company makes. The major source is merchants' discount.
Good point. My business currently pays a 1.62% for each transaction. I don't really see this as a lot from my end, although I can see how that would add up. Any business that does not require cash at, or before, the time of purchase, has always had a cost associated with the risk of not being paid. Some encourage pre-payment with discounts of 5% or more. Others discourage non-payment with high interest rates at the back-end, which have to be enforced with legal costs. From my perspective 1.62% is not a large fee given the complete security of payment that comes with it and given that we are fast approaching a cashless society. I suspect that my 1.62% fee would not decrease dramatically if bankruptcy filings were cut in half.
Patrick
From what I've read of the bill so far people needed legal assistance before this bill was introduced / passed.
True, but its no different than taxes -- the more complex the system, the more the costs. We need to keep in mind that a debtor thinking about bankruptcy is probably in a number of legal proceedings in which his income and assets are being liened and seized. The ability to put aside the money to pay a bankruptcy attorney may be legally impossible, unless the money is paid by an outside source. I would not be surprised if legal costs double as a result of this bill.
So making lawyers responsible for the cases they handle is a bad thing?
Currently, lawyers are liable in two situations: (1) when their legal points are not based upon the law, and (2) when their factual points are not well grounded in fact after reasonable inquiry. In other words, the lawyer must ask his client if the facts are true. The bill imposes a new obligation of investigation, which moves away from the English common law adversarial system and towards a system in which the lawyer is responsible to the State, i.e. the French civil code.
If there's means testing, to which you do not object, then it won't be the poor who suffer, it will be those whose means are just above the cutoff.
I don't object to means-testing in principle; I just think it is very difficult to create a fair means test. Or maybe, I don't think the perfect means test would be worth the additional expense.
Patrick
Are you saying lawyers are not and should not be subject to fair market value. If I decide your services aren't a fair value I'll not use them. Seems to you are arguing in favor of the paycheck for lawyers not in favor of the consumer.
Don't get me wrong I'm not saying lawyers shouldn't make money. They have a right to make as much money as they want as anyone else. What I am saying is no lawyer is forced to take a bankruptcy case today. Not that I am aware of at any rate. If your plate becomes less appealing due to the amount you want versus the amount available so sorry. I still don't see this as a valid argument concerning bankruptcy law changes.
And if the client says yes it's true the lawyer takes it on full faith? I doubt that very seriously. No doubt there are lawyers that are naive and will believe anything a client tells them. I doubt however this is entirely the case.
On another note I've never fully understood why I should be liable to throw good money after bad to collect on debt owed to me. In that matter none of my choices are favorable. I either spend money to get my money back (a negative) or I write the debt off (again a negative). The lawyer on the other hand always gets a positive?
Creditors have two signigant risks with debt. One is that the debt will not be paid (it will either be discharged in bankruptcy or the debtor will die). The other is that the creditor will incur more costs collecting a debt than it receives. The bankruptcy reform appears to limit the first risk, but increases the second.
Its in this second forum, that smaller creditors are in direct competition with larger creditors over finate funds. I see the 30% interest balloon as more of a lateral strategy to "push" the debtor into bankruptcy and maximize that creditor's position vis a vis other creditors. I really think you could find a lot of small businesses that would like to see reform of credit practices.
Patrick
On point one limiting the first risk is bad? Why? Bankruptcy is a possibility for all regardless of stature or status is it not? Death is inevitable is it not? Each in and of itself is a risk and as a lender would I not find it prudent to limit the risk? As a lender I'm limited as to the information I can garner to assess that risk, am I not?
As to the second case we are talking potential usury rates. Unless I miss my guess we have laws in place for this situation as well.
Are you saying lawyers are not and should not be subject to fair market value. If I decide your services aren't a fair value I'll not use them.
I think the bill clearly requires new and additional legal services that will increase legal costs. But I gotta admit, if the debtors don't have the money there will be downward pressure on the price. I guess the question is will there be fewer, and somehow more efficient bankruptcy lawyers, or will the price restraints attract a less attractive group of attorneys. Or will more debtors represent themselves? Or will more creditors be forced to file involuntary bankruptcy for a debtor?
Frankly, I wouldn't mind some sort of bankruptcy reform that eliminates the need for attorneys at all. But the Code may simply be too complex.
And if the client says yes it's true the lawyer takes it on full faith?
The client says he made $24,500 last year. Should the lawyer simply believe him? Or should he "investigate" his client to determine his actual income from independent sources. A lawyer charged with undertaking a "reasonable inquiry" treats his client as a truthteller unless circumstances suggest otherwise. This is the lawyer's duty in all other areas of law. A lawyer charged with undertaking a "reasonable investigation" assumes his client is a lier as to facts within the client's knowledge.
On point one limiting the first risk [of bankruptcy] is bad?
No. I don't oppose limiting a debtor's recourse to bankruptcy in principle. I just don't think this is a very effective way of going about it.
As to the second case we are talking potential usury rates.
Well, I think in my state I couldn't charge an interest rate of more than 9% per annum, so obviously there are some loopholes here, but I would be darned to know where they are. I also favor more transparent disclosure for consumer credit. I also instinctively feel that not all creditor practices are deserving of the same degree of protection (just as I feel that way about debtor practices).
Patrick
As a lawyer it seems prudent to ask for validation. Income tax returns, current bills etc.. does it not? I don't assume you didn't commit the robbery I ask where were you and validate your claim do I not? In this case I fail to see the difference concerning "reasonable inquiry". Does it mean more work than a lawyer would do now. Possibly. However the argument of more work on a lawyers behalf makes it seem as though bankruptcy is a walk in the park and an easy mark for them. IE What it sounds like is the current situation was I walk into a lawyers office say I want to file for bankruptcy the lawyer says fine I'll draw up the papers tomorrow you pay me $$$ now. All this without regard for the bankruptcy law and whether or not an individual qualifies.
I agree whole heartedly. Personally I'd like to see every credit card bill that comes in the mail say something like. Your minimum payment is $$$, accrued interest on the balance prior to payment is $$$, total interest paid to date is $$$, minimum payment rate will total $$$ at time of payoff if no other charges are incurred.
USMC:
No objection at all to testing for alcohol, drug, mental health issues. Would definitely be preferable to extending credit - then going into collection procedures - without a basis for extending credit.
by the way, there are credit counselling services also making rather large profits, and a growth industry in itself, latching onto people who are getting into debt.
We don't need to be reminded of the factors that lead to desperate straights, and that those factors are on the increase in present conditions. We have increasing productivity, static wages - meaning the individual workers are putting in more time, more effort, and getting no more than they were before. Employment is increasing in health care, service industries, waste management and administration, construction and real estate, restaurants (see Danielle DiMartino, ddimartino@dallasnews.com), tech is going offshore. It doesn't take a lot of vision to see the direction that economic life is going, and it is not helping the American consumer picture. It seems cynical then to tighten up the possibilities for those consumers to ameliorate their condition - while on the international scene we are allowing the third world to write off its unconscionable debt. Kindness to lenders is not altogether the solution to financial problems, IMHO.
Ruth
The scam artists have also been addressed in the bill. I don't know about other states but government programs are offered here in Virginia concerning financial management.
On this point I do have an issue. If such a policy were to be put in place where would it stop? Only on the factors you mentioned? Should we check for obesity, diabetes, respiratory ailments, smoking, do you own a gun, do you have a trampoline or pool in your backyard? I see such an arrangement doing more harm than possible good. I'd be hard pressed to go down this path.
USMC:
Your defense of Virginia brings a smile, as I enjoy watching the state legislature there do away with camera supervision of traffic while banning consensual gay sex. For which the solution is having gay sex in cars, wouldn't you say?
But on the subject of responsible lending:
Maybe you would be interested in the washpost.com article "House Panel to Address Subprime Lending" addressing one legislative proposal relating to irresponsible/unethical lending practices.
From said article:
"The bill seeks to create a national framework governing what is known as subprime lending, typically mortgage loans with high interest rates, fees or other high-cost features designed to compensate lenders for dealing with higher-risk borrowers. In the past decade, to address abuses by some lenders that have locked borrowers into usurious rates, high fees or avoidable foreclosures, many states and more than a dozen cities have passed laws to guard against such abuses. But the industry, and some consumer advocates, have argued that a federal standard is required to reduce undue compliance burdens on lenders and to protect borrowers in states that have not passed their own laws."
A major provision of the law is arbitration to settle disputes of collection.
You have a point, that personal attributes for indications in advance that may indicate a disinclination to repay debt are highly variable. And use of personal data is an area that frightens most people. But you were the one who brought up consideration of health data before making loans, and I am not adverse to that. I am inclined to think that saving up for purchases rather than going into debt is a sound practice that would generally benefit the consumer as well as our whole economy. Do we all have the 'right' to loans? I don't think so.
Ruth
Yes I did bring it up. I did not, however; indicate that I would be proponent of such a practice. The question was posed as one that should be examined prior to claiming foul concerning lender's rights.
I can see potential areas of discrimination based on such data. The discrimination I speak of would not be based on facts concerning an individual as much as it would be based trends.
For another perspective on the bankruptcy bill, here's an interesting article
That was an interesting article. Thank you, Richard.
I particularly agree with the first part of the article in which bankruptcy fraud is equated with tax fraud -- something that needs to be audited by the government. In fact, I would be interested in knowing if, and how, we treat tax cheats and bankruptcy cheats differently. I know we don't impose a duty on tax lawyers and tax accountants to investigate their clients.
The Prof. says some lawyers are advising their clients to falsify their filings. This would not only have subjected the lawyer to liablity under the old law, its grounds for disbarment. If its not grounds for criminal indictment, it should be.
He also says lawyers tend to encourage bankruptcy instead of credit counseling. Some of that is inevitable given that lawyer's aren't credit counselors, but for someone who voluntarily wants to file Chapter 13, they are dissuaded by the fact that their legal costs will be much greater to file Chapter 13 (its more legal work). I'm not a big fan of price floors or price ceilings on the market, but the price differential could be reduced if the government agreed to waive filing fees (about $200) for Chapter 13 cases.
Patrick
IAMAL. Tax accountants have no attorney client privilege and are subject to prosecution by the IRS if it concludes they might have been aware of a fraud. They are, for all intents and purposes, regulated by the SEC. I would never make my accountant aware of something gray, whereas I would discuss it freely with an attorney.
I was also going to make an observation about the ethics I have observed on all sides of the bankruptcy bar. But as I am posting under my real name and am currently a defendant and a creditor in a (corporate) bankruptcy, I shall refrain.
To be fair to Zywicki, the author of the article, I think what he was saying about bk attorneys was not as denigrating as PD has described it, false filings, or as you might infer from my non-statement; more along the lines of when the only tool you've got is a hammer everything looks like a nail.