One of the more questionable aspects of the bankruptcy bill is the requirement, if a debt-laden individual doesn't meet an income means test, that the individual (or married couple) pay for "credit counseling" prior to filing for either Chapter 7 or Chapter 13 bankruptcy. Now let's think about this for a moment - if a person is in such dire financial straits that they have to take the last ditch step of filing for bankruptcy, the bill is going to force them to pay hundreds of dollars for "counseling". That's on top of the hundreds (or thousands) of dollars that an attorney will charge the consumer to file. But I'll come back to the economics of filing at a later date.
I want to focus on the credit counseling aspect of the bill. One thing that's quite clear is that in the past 10 years, the cottage industry of credit counseling has literally exploded. And like any such growth industry, it's rife with corruption and charlatans. In the past 30 days alone, the Federal Trade Commission has either fined or put out of business at least four such companies for thoroughly ripping off consumers. The entire concept of a company negotiating your debts, and taking in a lump sum payment each month to pay your debts, plus skimming a percentage off the top for their own "expenses" is simply fertile soil for a rouge's gallery of grifters and con men:
Three credit counseling firms settle fraud charges with FTC:
WASHINGTON - The Federal Trade Commission announced Wednesday that three consumer debt-service companies have settled charges that they cheated financially strapped customers out of more than $100 million.
National Consumer Council of California; Debt Management Foundation Services of Florida, and Better Budget Financial Services of Massachusetts agreed to pay more than $6 million to consumers for falsely promising easy debt relief that left many deeper in debt and some forced to file bankruptcy.
'All three lied about who they were, what they could do for consumers and what they charged,' said Lydia Parnes, acting director of the FTC's consumer-protection division.
... Last week the FTC settled a lawsuit against AmeriDebt, a Maryland-based credit counseling firm that it alleged collected nearly $200 million in hidden fees from consumers.
I covered the entire topic of bankruptcy in some depth earlier; now it's time for some action.
First off, take a look at the bill summary (H.R. 685), and in particular, pay attention to the sponsor and co-sponsors. There's a lot of Democrats on the list. I'm targeting one in particular myself - Rep. Rob Andrews (D-NJ) - because his office is right down the road from my house. There is NO WAY THAT ANY DEMOCRAT SHOULD BE SUPPORTING THIS DRACONIAN BILL, especially by lending sponsorship to the legislation.
If one of your representatives is listed as a cosponsor, whether D or R, contact them via email, and preferably with a phone call. I actually posted a nice little script in this post. But for now, rather than eating the whole elephant, so to speak, I'd like to focus on one aspect of the bill to engender an initial positive response - the credit counseling provision. Ask your representative to demand this portion of the bill be eliminated because of the rampant fraud and lack of accountability of credit counseling companies.
As this bill proceeds through the House, I'll be blogging more about it. I hold no false illusions that the bill will fail - but again, it's important to make a stand and let our voices be heard that H.R. 685, a completely anti-family, pro-corporate crime bill, needs to be defeated by whatever means necessary.