Very interesting article on the new bankruptcy legislation in The Credit Union Journal. It's unfortunate that the legislation is so lopsided though.
There is definitely a problem with personal bankruptcy these days, but the legislation seems to weigh very heavily in creditors' favor. My question is, what are the new requirements for creditors when it comes to lending money? These days there are many predatory lending practices, from usuarious credit card companies to high-interest mortgage lenders. My favorite is the mailing I regularly get from "First Select" offering me an "unsecured" gold card. of course, I am pre-approved for at least the minimum amount of $200, of which about $195 is instantly charged to the card to pay for the set-up fee, program fees (who knows what they are?), annual fee, etc.
I know firsthand about the deceptive practices of creditors. My freshman year of college at Penn State University, I was constantly bombarded by credit card companies offering me all kinds of "free" goodies-who can pass up a frisbee on a nice spring day? Interestingly enough, the university was receiving money from these companies so they could set up on campus and offer credit cards to unknowing (and unemployed) college kids. In fact, MBNA has the first building in over 20 years to bear the name of a company (the MBNA Career Center), despite university bylaws that forbid the practice.
At the ripe and "mature" age of 18, I had $3,000 in unsecured credit card availability, but no job to pay the bills when they came in. By the time I was 20, I had already ruined my credit. I still have one of those cards. The other I paid off in collections. A $1,000 card turned into a $2,800 collection in one year's time. If that's not usury, I don't know what is.
We have many members at our credit union that buy cars from "finance anyone" dealers. The stipulation? You miss a weekly payment, you lose the car. Six-year financing on a $5,000 car (that will probably last a year) only $34 a week! Total of payments? Almost $11,000. Seems to me like we're going backwards, not forwards. And now there are mortgage lenders willing to do the same! All you need is a pay stub and a utility bill. Bad credit? No problem. Don't pay your bill? Hope you don't mind sleeping on the curb. Sounds a lot like "The Jungle" to me.
Sometimes, bankruptcy is not an option. Creditors, however, DO have the option of extending credit to people who are poor credit risks-in fact, they bank on it. Delinquent accounts are the bread and butter of lenders.
So, with bankruptcy legislation tilted in their favor, what is going to stop creditors from piling the money on to the credit-unworthy?
John T. Kmetz
The Community Credit Union of New Milford, New Milford, Conn.
