WASHINGTON — Discussing a hearing that took place last week in a subcommittee of the House Judiciary Committee, CUNA Vice President of Legislative Affairs Dean Sagar said the time is not right yet to measure the effect of the credit union supported Bankruptcy Abuse Prevention and Consumer Protection Act.
"The purpose is to study the impact and operation of the bankruptcy act over the past two years," Sagar explained. He said that CUNA submitted testimony for similar Senate hearing in December. This earlier written testimony was provided as background to the House committee staff.
"Our view is that not enough time has really passed to get a full assessment of the operation of the act," he said. Additionally, he pointed out the rush of bankruptcy filings leading up to the Oct. 17, 2005 effective date exceeded everyone's expectations and skewed any data for comparisons at this point.
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The Financial Services Roundtable President/CEO Steve Bartlett testified at the May 1 hearing. He told members of the subcommittee that the reform law was "still new" but "from the perspective of the American consumer and the economy, the new bankruptcy reform law is working quite well." Filings are down and more Americans than ever are getting credit counseling. Consumer bankruptcy filings have dropped to 573,203 in 2006 from an average annualized rate of 1.5 million over the previous five years. Additionally, those choosing Chapter 13 repayment plans instead of the Chapter 7 clean slate jumped from 27.5% to between 35-40%, according to Bartlett.
However, National Association of Consumer Bankruptcy Attorneys President Henry Sommer painted quite a different picture for the lawmakers. "In answering the fundamental question posed by this hearing, I would say that the 2005 amendments to the Bankruptcy Code are not protecting consumers," he stated. "They were premised upon allegations that there was widespread abuse in the consumer bankruptcy system and that many who filed Chapter 7 bankruptcy cases could afford to pay a significant portion of their debts. The reality is that this was never true, and the experience since the effective date of the amendments has borne that out."
All the while, he said, abusive credit card practices such as climbing late charges have gone up.
"The biggest impact of the new law," Sommer said, "has been the enormous increase in the costs and burdens of filing an individual bankruptcy case." –[email protected]
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