WASHINGTON — Senators heard testimony about alleged credit card abuses Tuesday at a hearing to explore whether changes to the bankruptcy code are needed to give borrowers more leverage in negotiations with their creditors.

The hearing comes as Democratic lawmakers are pushing to tighten consumer protections on an array of financial products, including payday loans, overdraft protection and mortgages. Many have introduced tougher versions of bills from the last Congress, as public opinion has soured on big financial firms that have received government aid.

A Rhode Island salesman, Douglas J. Corey, was the star witness at Tuesday's hearing before a subcommittee of the Senate Judiciary Committee. After failing to pay the full amount of his minimum monthly credit card payment, Corey claimed to be treated poorly by his credit card company, Bank of America Corp., which has received billions in federal financial rescue funds.

"Bank of America has come before you asking for help, understanding, and, with both hands open, for financial support," Corey said. "Yet when we the consumers go to these institutions looking for the same help, understanding and financial support, we get roughed up and receive no compassion."

Credit card companies, already facing heat from Democrats in Congress, have come under more intense scrutiny in recent months as the economy has worsened. During the hearing, Democrats floated the idea of setting caps on interest rates.

"I think people have had it up to here with financial firms," Sen. Bernie Sanders, I-Vt, said at the hearing. He added that, "One way that we can go forward is putting a cap on interest rates."

In a separate hearing Tuesday, the Federal Trade Commission asked Congress to expand substantially its power to crack down on unfair and deceptive practices in the financial services industry.

The agency wants authority to seek civil penalties from financial services firms that commit abuses in federal court, FTC Chairman Jon Leibowitz testified before the House Energy and Commerce subcommittee on commerce, trade and consumer protection. The FTC also wants to be considered as Congress mulls an overall of financial regulation, Leibowitz said.

In his opening remarks at the Senate hearing, Sen. Sheldon Whitehouse, D-R.I., the chairman of the subcommittee, compared the credit card business model to a "sweat box" in which one missed payment leads to a piling on of penalties and higher interest rates.

"You can't escape, and they sweat you," Whitehouse said. "Under this business model, the lender focuses on squeezing out as much revenue as possible in penalty rates and fees, pushing the customer closer and closer to bankruptcy."

Whitehouse introduced legislation this year to require judges to throw out lender claims relating to credit agreements carrying an interest rate above a certain threshold. The bill is a tougher version of one he introduced in the last Congress, which would have required such high-interest debt to be subordinated to all other claims in bankruptcy. House and Senate Democrats also are pushing a measure to crack down on a broad array of credit card practices.

The Federal Reserve late last year overhauled regulations governing the credit card industry, with the new rules set to take effect in mid-2010. Democrats argue that is not soon enough, and are pushing for legislative changes that would take effect this year.

Whitehouse argues his legislation will give borrowers more leverage when they seek relief from high interest rates. However, Pepperdine University Professor Mark S. Scarberry contended the bill wouldn't achieve that goal because unsecured debts, such as credit card debts, typically get discharged in consumer bankruptcy.

"They will not lose much by charging high interest rates that trigger disallowance of their claims," he argued.

Corey told the panel how Bank of America more than doubled the interest rate on his credit card to 28.99% after he misread his statement and accidentally failed to pay the full minimum monthly payment. Corey described how the bank gave him very little relief on his interest payments, but continued to offer to increase his credit line.

Corey said he was told that he would have to make six consecutive payments before the rate could be lowered again. Shortly thereafter, Corey lost his job and missed one mortgage payment. He said he still managed to make the six consecutive minimum credit card payments, however. The bank then offered to lower the rate only to 24.99%, he said.

A spokeswoman from Bank of America, Betty Reiss, said the company can't comment on an individual customer's account for privacy reasons.

"Our practices are fair and balance the safety and soundness of our business with serving customer needs and providing credit to creditworthy customers," she wrote in an email.

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