The credit card merry-go-round nightmare from hell: Brought to you by your friends in the GOP

Posted by Morbo

People who are too lazy to follow political matters often assert that it’s useless anyway because Republicans and Democrats are alike.

Actually, the differences between the two parties have never been sharper. On social issues, there is chasm between the two. The same can be said for economic matters. One quick example: The Republicans want to destroy Social Security. The Democrats want to save it.

But what if you’re a young person who doesn’t care much about Social Security yet? Perhaps you need another example, one that hits closer to home right now.

Fair enough. Now open your wallet and look at your credit cards — and be afraid, very afraid.

If you are an American who buys things, chances are big changes in credit and bankruptcy laws will affect you. Lately you have probably received notices from credit card companies printed up in about six-point type and written in language so dense a Byzantine-era scribe would throw up his hands.

Those notices were telling you about new fees and penalties the banks that offer credit cards have tacked on to your account. If you’re even a day late with a payment, they zing you with a $30 fee. If you exceed your credit limit, they hit you another — perhaps $50.

And then they jack up your interest rate to say, oh, 30 percent.

Rates like that were once known as “usury” and were illegal. To your friends in the Republican Party, there is no such thing as usury. Attempts to ban outrageous interest are just liberal schemes to steal from the pockets of the fine business leaders in the credit card industry, whose profits last year amounted to only a paltry $30 billion.

Some people get in over their heads with credit cards. It’s unfortunate, but it does happen. I will also readily concede there is too much consumer debt in America, and some folks are just reckless when it comes to spending. Others, however, fall into debt because of unexpected circumstances, tragedy and just plain bad luck. The new bankruptcy law fails to differentiate between the two.

Declaring bankruptcy is a radical step but sometimes necessary. It might give a person a chance to restructure and start again. In the event of an unexpected, life-changing event, such as job loss, divorce or medical emergency, it might be the only option available.

Not any more.

Aside from allowing credit card companies to rob you blind, your friends in the GOP have also passed legislation making it harder for most people (i.e., low- and middle-income Americans) to declare personal bankruptcy. It’s a one-two punch: First, your GOP friends in the Senate rejected amendments to that bill that would have curbed excessive fees by credit card companies. Then they stuck it to you with the bankruptcy bill.

Your friends in the GOP aren’t your friends at all. But the bankers love them.

A March 6 Washington Post article profiled several people caught in the nightmarish hamster wheel of credit card fee hell. Fatemeh Hosseini, a teacher of special education students, ran into financial problems when her husband took off, leaving her with three children. She racked up $25,000 in credit-card debt.

Late fees, penalties for exceeding limits and jacked-up interest pushed that debt up to $49,574. Hosseini wasn’t even using the cards any more, yet the debt kept piling up.

This next example is even scarier: Josephine McCarthy of Manassas, Va., used a Visa card to make $218.16 worth of purchases. She ended up making monthly payments totaling $3,058. Nearly all of this was in the form of fees and interest, which had escalated to 29.99 percent.

The bankruptcy measure now being debated in Congress has been sought for nearly eight years by the credit card industry. Twice in that time, versions of it have passed both the House and Senate. Once, President Bill Clinton refused to sign it, saying it was unfair, and once the House reversed its vote after Democrats attached an amendment that would prevent individuals such as anti-abortion protesters from using bankruptcy as a shield against court-imposed fines.

Credit card companies and most congressional Republicans say current law needs to be changed to prevent abuse and make more people repay at least part of their debt. Consumer-advocacy groups and many Democrats say people who seek bankruptcy protection do so mostly because they have fallen on hard times through illness, divorce or job loss. They also argue that current law has strong provisions that judges can use to weed out those who abuse the system.

Let me bring it down a few notches: Republicans side with evil, greedy, usurious credit card companies. Most Democrats side with the average wage earner. Get it?

New York Times columnist Paul Krugman explained it much better than I can:

A vast majority of personal bankruptcies in the United States are the result of severe misfortune. One recent study found that more than half of bankruptcies are the result of medical emergencies. The rest are overwhelmingly the result either of job loss or of divorce.

To the extent that there is significant abuse of the system, it’s concentrated among the wealthy — including corporate executives found guilty of misleading investors — who can exploit loopholes in the law to protect their wealth, no matter how ill-gotten.

During Senate debate, Sen. Charles Schumer offered an amendment to close one of those loopholes. Surprise! What’s good for the poor and middle class is not good for the rich. The Republicans voted it down.

Just to be clear: I understand that a credit card is a loan. I know that loans must be repaid, and that the lender is entitled to collect a reasonable amount of interest. (I have a mortgage, after all!) I also understand that people who spend recklessly must accept the consequences of their actions. Reasonable penalties and fines are acceptable.

But thanks to the GOP, what has happened to many people is simply cruel and unjust. A municipal judge in Cleveland summed it up well last year after ruling on a case against Discover Card. The cardholder, Ruth M. Owens, tried for six years to pay a $1,900 debt, only to see the balance balloon to $5,564.28 — $1,158 of which was due to fees.

Judge Robert J. Triozzi noted that Owens had long since stopped using the card, yet the debt piled up. “How is it,” he asked, “that the person who wants to do right ends up so worse off?”

Good question. He might want to ask the leadership of the GOP.