Right Side of the Rainbow

The loan sharks who issued your credit cards -- I first wrote about them here -- are screwing Americans from sea to shining sea. Here's what they did to a California woman who fell on hard times when her husband left her and their three children:

For more than two years, special-education teacher Fatemeh Hosseini worked a second job to keep up with the $2,000 in monthly payments she collectively sent to five banks to try to pay $25,000 in credit card debt.

Even though she had not used the cards to buy anything more, her debt had nearly doubled to $49,574 by the time the Sunnyvale, Calif., resident filed for bankruptcy last June. That is because Hosseini's payments sometimes were tardy, triggering late fees ranging from $25 to $50 and doubling interest rates to nearly 30 percent. When the additional costs pushed her balance over her credit limit, the credit card companies added more penalties.

Ms. Hosseini isn't alone:

Punitive charges -- penalty fees and sharply higher interest rates after a payment is late -- compound the problems of many financially strapped consumers, sometimes making it impossible for them to dig their way out of debt and pushing them into bankruptcy.

Perhaps as early as this week, the Senate will vote on S. 256, sponsored by Sen. Chuck Grassley (R-Bank of America), that would make it harder for consumers to erase their debt through bankruptcy. Fair enough. People should pay their debt. But what is the debt?

Bankruptcy experts say that too often, by the time an individual has filed for bankruptcy or is hauled into court by creditors, he or she has repaid an amount equal to their original credit card debt plus double-digit interest, but still owes hundreds or thousands of dollars because of penalties.

Meanwhile, the orwellian Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, sought for years by an industry that's out of control and wants to stay that way, " ... ignores loopholes that would allow rich debtors to shield millions of dollars during bankruptcy through expensive homes and complex trusts, while ignoring the need for more disclosure to cardholders about rates and fees and curbs on what [opponents] say is irresponsible behavior by the credit card industry."

But that's not all:

The Republican majority, along with a few Democrats, has voted down dozens of proposed amendments to the bill, including one that would make it easier for the elderly to protect their homes in bankruptcy and another that would require credit card companies to tell customers how much extra interest they would pay over time by making only minimum payments.

Another amendment would have limited credit card interest to not more than 30%; it too was rejected.

If this bill passes, it will be only because most Americans don't know about it. But it's not too late. We still have a few days before the Senate votes and even longer until the House votes. Please call or write your senators and tell them to vote no on S. 256; tell your representative to vote no on H.R. 685, the House version of the bill. If you have a blog, please post about this and urge your readers to stop these financial rapists from changing the law without changing any of their own greedy behavior.

(You'll find here more on what's wrong with the bill itself.)

UPDATED: Instapundit has more:

I'm deeply skeptical of the bankruptcy bill in front of Congress now, and this report on credit-card industry practices goes a long way toward explaining why. Credit extended to people who can't handle it, absurd hidden fees, high interest rates, etc.: There's a lot of scamming here. The argument, of course, is that people who sign up for credit card accounts ought to know what they're getting into. But shouldn't the companies that extend credit to people who obviously can't handle it be held to the same standard?