[Congressional Record Volume 147, Number 99 (Tuesday, July 17, 2001)]
[Senate]
[Pages S7721-S7735]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




    BANKRUPTCY ABUSE PREVENTION AND CONSUMER PROTECTION ACT OF 2001

  The ACTING PRESIDENT pro tempore. Under the previous order, the 
Senate will now resume consideration of H.R. 333, which the clerk will 
report.
  The legislative clerk read as follows:

       A bill (H.R. 333) to amend title 11, United States Code, 
     and for other purposes.

  Pending:

       Leahy/Hatch/Grassley amendment No. 974, in the nature of a 
     substitute.

  The ACTING PRESIDENT pro tempore. Under the previous order, there 
will now be 3 hours for debate, 2 hours under the control of the 
Senator from Minnesota, Mr. Wellstone, and 1 hour to be equally divided 
between the chairman and ranking member of the Judiciary Committee or 
their designees.

[[Page S7722]]

  The Senator from Iowa.
  Mr. GRASSLEY. Madam President, I yield myself such time as I need 
from the time allotted to Senator Hatch.
  The ACTING PRESIDENT pro tempore. Without objection, it is so 
ordered.
  Mr. GRASSLEY. Madam President, I urge my colleagues to support the 
cloture motion to substitute the language of S. 420 to H.R. 333, the 
House bankruptcy bill.
  As we all know, the substitute amendment to the House bill is the 
text of the bill that passed the Senate on March 15 by an 
overwhelmingly bipartisan vote of 83-15. This bill went through 
hearings and markups in Judiciary, went through an extensive amendment 
process on the floor, so no one can dispute that this is a bipartisan 
bill that has gone through a bipartisan process in the Senate.
  The bill has gone through the regular order and we should proceed to 
conference under the regular order.
  There are a lot of reports out there that have distorted the truth 
about this bill. Many groups have said this bill is very controversial. 
That is not the case. I first started working on bankruptcy reform back 
in the 1990s, when Senator Heflin, now retired, and I set up a 
Bankruptcy Review Commission to study the bankruptcy system. This 
commission was not made up of any Members of the Congress. It was made 
up of experts in the area of bankruptcy to study the issue so that what 
we did in this Chamber, with their recommendations, would be done 
right.
  The debate that set up the Bankruptcy Review Commission was prompted 
by small business and other small proprietors that had problems with 
individuals who were reneging on their debts but then turned out, it 
seemed, to have the ability to pay their bills. The impact on these 
small businesses, obviously, was significant: Prices had to be raised 
for items; maybe some businesses went out of business. When that 
happens, employees are laid off. There is no sense having this economic 
condition, not because we want to deny people a fresh start, because it 
has been a policy of our bankruptcy laws to let people have a fresh 
start when they are in financial straits through no fault of their 
own--natural disaster, high medical bills, et cetera--but when people 
have the ability to repay, then they should not get off scot-free and 
cause employees of businesses that go out of business to lose jobs.
  We want to be fair to everybody. You can't be fair to businesses and 
employees that lose their businesses and jobs when somebody who has the 
ability to pay bills gets off without paying those bills.
  I was interested in what was going on in the bankruptcy system in the 
early 1990s when we set up this commission because of my concern about 
fundamental fairness.
  Why should people get out of repaying their debts if they can pay 
them? The issue is not new. In fact, the issue of bankruptcy and 
personal responsibility has been debated since the 1930s, and Congress 
has made numerous attempts to decrease the moral stigma associated with 
bankruptcy. As in previous versions of the bankruptcy bill, the 
language in the substitute amendment is part of an effort to ensure 
that bankruptcy is reserved for those who truly need it, and that 
persons with the means to repay their debts should assume their 
responsibilities.
  Some say this bill is unfair and unbalanced because it makes it 
harder for normal people to avail themselves of bankruptcy. This is 
just not true either.
  First, the bankruptcy bill applies to everyone, rich and poor, and 
the premise behind the bill--that you should pay your debts if you 
can--does not discriminate against poor people. In fact, there is a 
safe harbor provision for lower income people. The bill specifically 
exempts people who earn less than the median income for their State. 
And for those consumers to which the bill does apply, the means test 
that is set forth in the bill is flexible, as it should be. It takes 
into account the reasonable expenses of a debtor as applicable under 
standards not set by me but issued by the IRS for the area in which the 
debtor resides. The means test permits every person to deduct 100 
percent of medical expenses. The means test permits every person to 
deduct expenses for the support and care of elderly parents, 
grandparents, and disabled children. In addition, the means test would 
permit battered women to deduct domestic violence expenses and protects 
their privacy. Furthermore, the means test allows every consumer to 
show ``special circumstances'' to avoid a repayment plan, just in case 
there is something within this formula that just doesn't fit every 
particular family in America.
  Let me again remind people about the enhanced consumer protections 
and credit card disclosures that are contained in the bill. The 
bankruptcy bill requires credit card companies to provide key 
information about how much a customer owes on his credit card, as well 
as how long it is going to take to pay off the balance by making just a 
minimum payment. We do that by requiring that the credit card companies 
set up a toll-free number for consumers to get information on their 
specific credit card balances.
  The bill prohibits deceptive advertising of low introductory rates. 
The bill provides for penalties on creditors who refuse to renegotiate 
reasonable payment schedules outside of bankruptcy. The bill 
strengthens enforcement against abusive creditors and increases 
penalties for predatory debt collection practices. The bill also 
includes credit counseling programs to help avoid and break the cycle 
of indebtedness.
  Let me remind colleagues about the provisions contained in this bill 
that will help women and children because there has been a dramatic 
change in the direction of this legislation when it was introduced 
three Congresses ago until it now has reached the point where it is 
today. The bill before us makes family support obligations the first 
priority in bankruptcy. The bill makes staying current on child support 
a condition of discharge. The bill gives parents and State child 
support enforcement collection agencies notice when a debtor who owes 
child support or alimony files for bankruptcy. It also requires 
bankruptcy trustees to notify child support creditors of their right to 
use State support child support enforcement agencies to collect 
outstanding amounts due. The bill also permits battered women to deduct 
domestic violence expenses and protects their privacy in bankruptcy.

  I also remind colleagues that we adopted a number of amendments in 
the Judiciary Committee and in this Chamber that make this a bipartisan 
bill. It started out as a bipartisan bill anyway, through the help of 
Senator Torricelli of New Jersey. If I am correct, I believe we adopted 
something on the order of 8 amendments in the Judiciary Committee and 
30 amendments on the floor of the Senate. For example, the Senate 
adopted an amendment that, for the first time, would protect consumer 
privacy when businesses go into bankruptcy. Specifically, the Senate 
agreed that personally identifiable information given by a consumer to 
a business debtor in bankruptcy should have privacy protections. The 
Senate also created a consumer privacy ombudsman in the bankruptcy 
court.
  The Senate agreed to amendments that expand farmer eligibility in 
bankruptcy and facilitate postbankruptcy proceedings for farmers. The 
list goes on. While I did not agree with all of the amendments adopted, 
the Senate went through a lengthy and fair process. That is why it got 
an 83-15 vote. The whole process doesn't need to be repeated now. Some 
of those 15 who voted against it won't give up, and that is their right 
under the Senate rules. But, eventually, an overwhelming majority in 
the Senate wins out. Maybe all the time a majority in the Senate 
doesn't win out, but eventually an overwhelming majority in the Senate 
wins out. And if it doesn't, it should. This is one of those times. So 
we need to go to conference now and iron out the differences with the 
House.
  I am asking my colleagues to join me in supporting this bill. We need 
to send a message that people cannot use bankruptcy as a financial tool 
or an easy way out of paying their debt. The bill promotes responsible 
borrowing and provides financial education to financially troubled 
consumers. It also provides some of the more proconsumer provisions 
relative to credit card companies in years. We have not dealt with 
these issues in years. This bill deals with it and it should. We all 
recognize that the proliferation of advertising for

[[Page S7723]]

credit cards and the junk mail we get is part of the cause that we have 
people in bankruptcy.
  It also creates new protections for patients when hospitals and 
nursing homes declare bankruptcy. The bill makes permanent chapter 12 
bankruptcy for family farmers and lessens the capital gains tax burden 
on financially strapped farmers who declare bankruptcy. This is a bill 
that the Senate passed with this overwhelming margin, which my 
colleagues probably get tired of my mentioning so many times, but it 
was 83-15. So I think it is just common sense. Maybe common sense 
doesn't rule around this institution enough, but it is common sense 
that we move on to the next step. I urge my colleagues to vote in 
support of the cloture and in support of the Leahy-Hatch-Grassley 
substitute amendment.
  I yield the floor, and since there are no other Members present, I 
suggest the absence of a quorum and that it be charged to Senator 
Wellstone. I have been advised by staff that that is the proper thing 
to do.
  The ACTING PRESIDENT pro tempore. Without objection, it is so 
ordered.
  The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. WELLSTONE. Madam President, I ask unanimous consent the order for 
the quorum call be dispensed with.
  The ACTING PRESIDENT pro tempore. Without objection, it is so 
ordered.
  Mr. WELLSTONE. Madam President, my understanding is that there may be 
a number of other Senators who are coming to the floor to speak in 
opposition to the bankruptcy bill. Senator Durbin may try to come down. 
So Senator Durbin and others know, when they come I will simply break 
my remarks and others can speak at their convenience.
  At the beginning of last week, the majority leader moved to proceed 
to the bill and I objected. Then we had a cloture vote on the motion to 
proceed. In the time I had, I implored, called upon, begged the Senate 
to step back from the brink and to decline to go to conference with the 
House on this so-called bankruptcy reform. I believe we would be making 
a grave mistake.
  I am trying to figure out a way not to repeat all the arguments I 
made last week. I will simply say I think this is a measure we are 
going to deeply regret. There are a lot of people--Elizabeth Warren 
comes to mind, law professor at Harvard--who have done some very 
important scholarship at Harvard in this area. I don't know that I can 
think of a single law professor who has argued in favor of this bill. 
Maybe there is someone somewhere. The opinion of the scholars in the 
field, the opinion of people who work in the field, is almost unanimous 
that this is a huge mistake.
  We need to understand that bankruptcy is something most families do 
not think they will ever need. They do not think they will ever need to 
file for bankruptcy. But it is really a safety net, not just for low-
income families but for middle-income families as well.
  Fifty percent of the people who file for bankruptcy in our country 
today do it because of a medical bill. You have a double whammy. It is 
not just the situation where you have the expense of the medical bills 
but also it may be that, because of the illness or injury, you yourself 
are not able to work so you are hit both ways, or it might be your 
child's medical bill, but also you may not be able to bring in the 
income because you are not able to go to work because you need to be at 
home taking care of your child. That is 50 percent of the people. We 
are not talking about deadbeats.

  Frankly, most of the rest of the cases can be explained--it should 
not surprise anybody--by loss of job or divorce. These are the major 
explanatory variables why people file for bankruptcy, file for chapter 
7. The irony of it--and I tried to make this argument last week as 
well--is that for a long time my colleagues were facing a problem that 
did not exist; that is to say, they were talking about all the abuse 
and all the ways in which people were gaming the system in American 
bankruptcy, but they came out with a record that said that is 3 percent 
of the debt. So let's come out with legislation that deals with the 3 
percent, but let's not have legislation where people who find 
themselves in terrible economic circumstances no longer are able to 
rebuild their lives, all because of a small number of people who abuse 
the system.
  Moreover, actually the bankruptcies were going down. So quite to the 
contrary of the claim we had this rash of bankruptcies and people no 
longer felt any stigma or shame and people were no longer responsible, 
none of it really held up very well if you closely examined the 
arguments.
  Now what we have, in case anybody has not noticed, is an economy that 
is leveling off with a turn downward. It is not the boom economy we saw 
while the Presiding Officer's husband, President Clinton, was President 
of the United States of America. It is a different economy now. There 
are going to be more people who will lose their jobs and more people 
who will be faced with these difficult economic circumstances through 
no fault of their own. We are going to make it well nigh impossible for 
them to rebuild their lives.
  Madam President, I argued last week that we are hardly talking about 
deadbeats. This bill assumes people who file for chapter 7 are 
deadbeats and they are not. The means test aside, there are 15 
provisions in the House and Senate-passed bills that will affect all 
debtors, regardless of their income--15 provisions. The means test will 
not protect them. The safe harbor will not protect them. These 
provisions are going to make bankruptcy relief more complicated, more 
expensive, and therefore harder to achieve for debtors--again, 
regardless of income. That means they will also fall the hardest, in 
terms of the people who will be most affected by this legislation, on 
low- and moderate-income debtors.
  The irony is that those who advocate for this bill justify it by 
arguing that we need to go after the wealthy deadbeats. But if the cost 
of filing for bankruptcy doubles, which is exactly what it does in this 
bill, who gets hurt the most? A middle-income family who had to save 
for 6 months, under current law, to pay for an attorney and for filing 
fees, or a multimillionaire like the ones the proponents cite in this 
statement? It just makes no sense.
  There will be no problem for millionaires who are gaming the system. 
They are not the people who get hurt by this legislation. This 
legislation is the most harsh on the most vulnerable.
  I also argued and tried to make the case that this couldn't be a 
worse time to do this in terms of where the economy is headed.
  So while the bill would be terrible for consumers and for regular 
working-class families even in the best of times, its effects will be 
all the more devastating now that we have a weakening economy.
  Colleagues, you are going to regret this.
  It boggles the mind that at a time when Americans are most 
economically vulnerable and when they are most in need for protection 
from financial disaster we would eviscerate the major fiscal safety net 
in our society for the middle class. It is the height of insanity that 
we would be contemplating doing what we are doing right now given what 
is happening to this economy.
  Colleagues, I couldn't support this legislation in the best of times. 
Even in the sunniest of economic circumstances, there are many families 
who are down on their luck and who are sent to the sidelines. 
Bankruptcy relief lets these families rebuild their lives again. It is 
a little bit like ``there but for the grace of God go I.''
  I think Time magazine had a series which was just a blistering attack 
on this bill. They did it in two ways. They did it, first of all, by 
talking about what this legislation means in times--which quite often 
on the floor of the Senate we don't make those connections as we 
should--to a lot of these families and what happened to these families 
because of their economic circumstances. They did not ask that their 
child be stricken by a terrible illness. They did not ask for the 
physical pain. They did not ask for the economic pain. But we are going 
to make it harder for them to rebuild their lives. People do not ask to 
be laid off work. People do not ask that their families be shredded 
because there is a divorce. You wish it would not have to happen. But 
it does happen. Sometimes

[[Page S7724]]

someone is at fault and sometimes no one is at fault, but it happens.
  It is usually the woman who is the one taking care of the children, 
and she doesn't have the income she once had. These are the kinds of 
citizens who file for bankruptcy relief. That is why every labor 
organization, civil rights, women's, and consumer organizations in the 
country and more--religious organizations--oppose this legislation.
  This legislation is a testimony to the absolutely sickening power of 
the financial services industry in Congress. We wouldn't be doing this 
otherwise.
  I did not say this is a one-to-one correlation. Anyone can play the 
game that people vote this way because they are in the pockets of the 
financial services. That is not the argument that I make. Everybody can 
say that about everybody who votes in the Senate on every issue.
  What I am saying is not at the personal level but at the 
institutional level in terms of who has the lobbying coalition, who is 
ever present, who has all the financial resources, and who has the 
political power. This industry has a heck of a lot more power than 
``ordinary consumers and ordinary citizens'' who are the very people we 
ought to be representing.
  I want to make it clear that this is not a debate about winners and 
losers because we all lose if we erode the middle class in this 
country. We all lose if we take away some of the critical underpinnings 
that shore up working families. Sure, in the short run big banks and 
credit card companies may take their profits. But in the long run, it 
is going to be ordinary families and entrepreneurs--all 
businesspeople--who take the risk and who are going to pay the price.

  This isn't a debate about reducing the high number of bankruptcies. 
In no way will this legislation do that. Indeed, I would argue that by 
rewarding reckless lending that got us here in the first place, you are 
going to see more consumers overburdened by debt.
  By the way, there isn't hardly a word in this legislation that calls 
on these credit card companies to be accountable. It is all a one-way 
street.
  This debate is about punishing failure--whether self-inflicted or 
uncontrolled and unexpected. This is a debate about punishing failure. 
If there is one thing that our country has learned, punishing failure 
doesn't work. You need to correct the mistakes. You need to prevent 
abuse. But you also need to lift people up when they stumble and not 
beat them down.
  I thought I made a pretty good case last week. I didn't think it was 
really refuted. The proponents of the bill came down and they did their 
thing, but I don't think they did much damage to my argument.
  What did the proponents of this legislation say? We need to talk 
about this. It might be that it is going to go through. But, darn it, 
there ought to be some discussion before the Senate about what we are 
doing.
  What do the proponents say? My friend from Alabama got up and 
complained that I was taking on or presenting this critique of the big 
banks and credit card companies. He said this is a bankruptcy bill, and 
it only deals with the bankruptcy code and bankruptcy court reform. 
Therefore, holding the lender accountable is not appropriate.
  That was one criticism. It sounded a little bizarre to me, as much 
fondness as I have for him. I think it sounds kind of bizarre to most 
commonsense Americans in Minnesota who reach in their mailboxes every 
day of the week and pull out a handful of credit card solicitations. 
But apparently some of my colleagues see no connection whatsoever 
between the irresponsibility of the lenders and the high number of 
bankruptcies. That is preposterous.
  The reason colleagues do not see any connection between the 
irresponsibility of the lenders and the high number of bankruptcies is 
because they don't want to see any connection because these folks have 
a lot of clout and a lot of power.
  Both the House and the Senate bills basically give a free ride to 
banks and credit card companies that deserve much of the blame for the 
high number of bankruptcy filings because of their lose credit card 
standards. Even the Senate bill, which is better than the House bill, 
does very little to address this problem. There are some minor 
disclosure provisions in the Senate bill. But even those don't go 
nearly as far as they should. Lenders should not be rewarded for 
reckless lending.
  Where is the balance? If you are holding a debtor accountable, why 
are you not holding lenders accountable in this legislation?
  Let me just give you some examples of some of the poor choices that 
can be made. In this particular case I am talking about the lenders--
not the borrowers. Here are some real world examples.
  In June of 1999 the Office of the Comptroller of the Currency reached 
a settlement with Providian Financial Corporation in which Providian 
agreed to pay at least $300 million to its customers to compensate them 
for using deceptive marketing tactics. Among these were baiting 
customers with ``no annual fees'' but then charging an annual fee 
unless the customer accepted the $156 credit protection program--
coverage which was itself deceptively marketed. The company also 
misrepresented the savings their customers would get from transferring 
account balances from another card.
  In 1999, Sears, Roebuck & Co. paid $498 million in settlement damages 
and $60 million in fines for illegally coercing reaffirmations--
agreements with borrowers to repay debt--from its cardholders. But 
apparently this is just the cost of doing business: bankruptcy judges 
in California, Vermont, and New York have claimed that Sears is still 
up to its old strong arm tactics but is now using legal loopholes to 
avoid disclosure. Now, I say to my colleagues, Sears is a creditor in 
one third of all personal bankruptcies. And by the way, this 
legislation contains provisions that would have protected Sears from 
paying back any monies that customers were tricked into paying under 
these plans.
  That is unbelievable. I will tell you something. With the one-
sidedness of this legislation, there is no wonder. Again, I am not 
attacking colleagues at a personal level but at an institutional level. 
No wonder ordinary people think the political process in Washington is 
dominated by powerful folks and that powerful interests are opposed to 
them.
  How else can one explain the complete lack of balance? July 2000, 
North American Capital Corporation, a subsidiary of GE, agreed to pay a 
$250,000 fine to settle charges brought by the Federal Trade Commission 
that the company had violated the Fair Debt Collection Practices Act by 
lying to and harassing customers during collections.
  Another example: October 1998, the Department of Justice brought an 
antitrust suit against Visa and Mastercard, the two largest credit card 
associations, charging them with illegal collusion that reduced 
competition and made credit cards more expensive for borrowers.
  To make the argument that when we look at bankruptcies we only hold 
those who are the lenders accountable and not the creditors makes no 
sense whatsoever.
  The goal of this bill was supposed to be to reduce bankruptcies. That 
is why the big banks and credit card companies have been pushing for 
it. They are the only ones pushing for it. I am hard pressed to find 
one bankruptcy judge in the United States who supports this 
legislation. I am hard pressed to find one bankruptcy expert in the 
United States who supports this legislation. This legislation was 
written by and for the lenders. It is that simple.
  Maybe it is different in Rhode Island; I doubt it. I can't remember a 
conversation in a coffee shop anywhere in Minnesota, be it metro or be 
it in greater Minnesota, out in rural Minnesota, where people have 
rushed up to me and said: What we want you to do is please support that 
bankruptcy bill which will make it more difficult for people who are 
going under because of medical bills or because they have lost their 
job or because of a divorce in their family to rebuild their 
lives. Please, Senator, that is our priority.

  I hear people talking about children and a good education. I hear 
young working people talking about affordable child care. I hear 
elderly people talking about the price of prescription drugs. I hear 
elderly people terrified, along with their children, about what will 
happen to them at the end of their life if they are faced with 
catastrophic medical expenses. I hear people talking

[[Page S7725]]

about all of the health insecurity they feel because they don't believe 
they have good coverage or because it costs much more than they can 
afford.
  I hear veterans who are concerned about veterans health care. This 
Thursday we are going to have a hearing in the veterans committee, 
which Senator Rockefeller chairs, on homeless veterans. I am guessing 
that probably a third of all the homeless males--too many are women and 
children--are veterans, and most of them are Vietnam vets. Many of them 
are struggling with PTSD. Many are struggling with substance abuse. It 
is a scam that these veterans are homeless in America.
  I hear discussion about why can't we do better for veterans. I hear 
concern about the environment. I hear concern about energy costs. I 
hear concern about a fair price in farm country. I hear small 
businesspeople talk to me about how hard it is to have access to 
capital. I don't see the ground swell of support all around the United 
States for this piece of legislation.
  What in the world are we doing debating this piece of legislation in 
the Senate today? Why is this legislation out here? What kind of good 
does this do for the people we represent? It does a lot of good for the 
credit card companies. It does a lot of good for the financial services 
industry. I know that. I would just like somebody to explain to me how 
it does a lot of good for ordinary people, those folks who don't hire 
the lobbyists, the people who don't have the big bucks, the people we 
see every day. I hope we see them every day when we are back home.
  It is ridiculous on its face that we can divorce the behavior of the 
credit card companies from the high number of bankruptcies. Indeed, all 
the evidence points to the fact that the lenders and their poor 
practices are a big part of the problem. It is just outrageous we don't 
take them on.
  I call this going down the path of least political resistance. It is 
easy to pass legislation that has such a cruel and harsh effect on 
people who are being put under because of medical bills or because they 
have lost their jobs. They don't have that much economic clout, and 
they don't have that much political clout. As a matter of fact, I will 
come up with an amendment on our bill sometime when there is an 
appropriate vehicle that will go after the credit card companies and 
the lenders on their lending practices; we will have a vote on it. Then 
it will be more difficult because we have to go against those 
interests, but we ought to at least have some balance.
  In the debate last week, my friend from Alabama stood up and said 
that the core of this bill is the means test. All the means test does 
is force those folks with high incomes to go to chapter 13. What is 
wrong with that? Therefore, the bill doesn't hurt low-income people.
  The means test is only 9 pages of a 200-page bill. If the means test 
were all this bill consisted of, then it would have passed 12 years 
ago. We have been trying to hold this matter up for 2\1/2\ years, 
something such as that.
  The bankruptcy bill purports to target abuses of the bankruptcy code 
by wealthy scofflaws and deadbeats who make up 3 percent of the filers, 
according to the American Bankruptcy Institute. Yet hundreds of 
thousands of Americans file for bankruptcy every year, not to game the 
system but because they are overwhelmed by medical bills or job loss or 
divorce.

  Unfortunately, there are at least 15 provisions in both bills that 
make it harder to get a fresh start regardless of whether the debtor is 
a scofflaw and/or a person who must file because they are made 
insolvent by their medical debt. These include, but are in addition to, 
the means test.
  Neither the means tests nor the safe harbor in this bill applies to 
the vast majority of the new burdens placed on debtors under both 
bills. Debtors will face these hurdles to filing regardless of their 
circumstance.
  The final point made by proponents last week was actually made by 
several Senators. I think in some ways it is the most insidious. The 
argument advanced is that the bill is good for women and children 
because it places child support as the first priority debt to be paid 
in bankruptcy.
  First, it is the case that this is a useful change in the law as far 
as it goes. Unfortunately, it doesn't go very far. Child support is 
already nondischargeable in bankruptcy. In theory under this bill, a 
woman who is owed child support is more likely to receive that support 
from her deadbeat husband while he is going through bankruptcy. But 
once he emerges from bankruptcy, the other provisions of these bills 
will make it less likely that his ex-wife or kids will get anything.
  Under current law, an ex-spouse postbankruptcy often has few other 
debts; they have all been discharged. The child support is 
nondischargeable. After his other debts are gone, the ex-spouse can 
devote more of their income to their support obligations. In this way, 
the current law actually helps women and children because they don't 
have to compete with other more sophisticated creditors postbankruptcy. 
But under this bill, the ex-spouse will emerge with much more debt than 
under current law. Less credit card debt is dischargeable. Creditors 
will have more leeway to force reaffirmations, agreements where debtors 
reaffirm their intention to pay back debt, and so the debt is not wiped 
out in bankruptcy.
  The net effect is that women and children whose spouses file for 
bankruptcy under this bill will have to compete more than ever with 
auto dealers, with big retailers such as Sears, and with credit card 
companies for the paycheck of their ex-husband. Do we think they are 
going to do well?
  The Senate giveth with one hand and taketh away with the other. That 
is part of the reason that 31 groups that are devoted to women's and 
children's issues oppose this bill.
  I can't think of one women's or children's organization that supports 
this legislation.
  May I make one other point. There is another reason. That is, one 
group of citizens--in fact, it is the fastest growing number of 
citizens who file for bankruptcy--are women. Since 1981, the number of 
women filing increased 700 percent. Divorced women are the ones who end 
up supporting the children. Income drops.
  Are single women with children deadbeats? This bill assumes they are. 
The new nondischargeability of credit card debt will hit hard those 
women who use the cards to tide them over after a divorce until their 
income stabilizes. The ``safe harbor'' in the House bill, which 
proponents argue will shield low- and moderate-income debtors from the 
means test, will not benefit many single mothers who need help the most 
because it is based on the combined income of the debtor and the 
debtor's spouse--are you ready for this--even if they are separated, 
the spouse is not filing for bankruptcy, and the spouse is providing no 
debt for the debtor and her children. That is figured in as the 
mother's income.
  I will tell you something. This is one harsh, mean-spirited piece of 
legislation, and I am stunned that so many Senators are supporting it.
  Now, while I am waiting for Senator Durbin to come to the floor, let 
me talk about the pending amendment to this bill, which is actually the 
text of the bill that the Senate passed earlier this year. Here is 
where I will give the Senate some credit. We started this year with a 
truly terrible, completely one-sided bill. It was basically identical 
to the House version. The committee marked it up over the chairman's 
objections and made improvements. Once it was considered by the Senate, 
additional improvements were made. The Senate bill is still a very bad 
piece of legislation. Unfortunately, most of what we have accomplished 
has been nibbling around the edges. But it is better than the House 
bill; that is clear.
  The Senate bill has better credit card disclosure provisions. They 
are inadequate, but the House is completely silent on that. The Senate 
bill allows more credit to be discharged, thanks to an amendment by 
Senator Boxer. The Leahy amendment fixed the ``separated spouse 
problem'' with the safe harbor. Why there was even a fight on that is 
beyond me. The House bill has no such fix.
  The Senate bill is less harsh when it comes to filing chapter 13 
cases. We also limited some but not all of the hurdles this bill 
creates in the successful filing of chapter 13 cases.
  A Feingold amendment adopted in committee protects, to some degree, 
renters from eviction if they pay the overdue rent when they file for 
bankruptcy.

[[Page S7726]]

  Very significant is the Kohl amendment on the homestead exemption. 
With its adoption, the Senate takes on wealthy debtors who file 
frivolous claims and shield their assets in multimillion-dollar 
mansions. This is a real abuse of the current system and it ought to be 
corrected. Five States, under current law, allow a debtor to shield 
from creditors an unlimited amount of equity in their home. In fact, 
the Florida Supreme Court, in a case last month, established that even 
if a debtor uses Florida's unlimited homestead exemption for nakedly 
fraudulent purposes, there is nothing the courts can do. You would 
think that with all the bluster of the proponents of the bill about 
curbing abuse of the deadbeats they would rush to close this loophole. 
Not so. Senator Kohl had to drag the Senate kicking and screaming to 
plug this obvious gap.

  Unfortunately, the House and the President have drawn a line in the 
sand over this issue. While the House of Representatives--or at least 
the majority party in the House--and the President of the United States 
of America support harsh, punitive hurdles to a fresh start for low- 
and moderate-income folks who virtually nobody claims are abusing the 
system, they are unprepared to go to the mat for folks who want to 
protect their mansions and who are openly flouting their obligation.
  May I repeat this again. The Republicans in the House of 
Representatives and the President of the United States support a very 
harsh and punitive piece of legislation making it very difficult for 
people to rebuild their lives--people who have been put under because 
of medical bills, for example. On the other hand, they have no problem 
with folks who want to protect their property and protect their income 
by buying these multimillion-dollar mansions in States in the country 
and shielding themselves from any obligation.
  It doesn't get any weirder than that--actually, it does. It does if 
the Senate conferees--and I don't have any illusion; this bill will go 
to conference--knuckle under to the House on any of these issues. I 
think the Senate conferees should be trying to improve this bill 
further in conference. I think that is Senator Leahy's intention, and I 
salute him for it. But I certainly hope you can get the backing of the 
Senate conferees.
  I have to worry about what is going to happen in the conference 
committee. Look at the past. Look at the evidence from the past. Since 
1998, the House has passed terrible bills. The Senate has passed better 
bills. Every time it emerges from conference, it is a nightmare. I hope 
that doesn't happen again, and I certainly hope all of the Senate 
conferees will stick with the Senate position on the Kohl amendment, 
the Schumer amendment, and other efforts which have made the bill at 
least slightly better.
  This time, I am sorry to say, this legislation is much more likely to 
become law. With this President, this ridiculous giveaway to the big 
banks and credit card companies is going to make it. To the everlasting 
credit of President Clinton, he vetoed this legislation. Look, I was 
certainly one of his critics in the Senate. I have to admit that 
sometimes as I look at the values and policy preferences of this 
administration, I certainly miss the Clinton administration. I 
certainly do. But to give credit where it is due, President Clinton 
vetoed this legislation.
  The White House has all but said they will sign the bill, as long as 
it protects wealthy deadbeats and their mansions. That is the position 
of the White House: We will sign this piece of legislation as long as 
you guarantee us that you will protect the wealthy deadbeats and their 
mansions--as in Texas.
  I am afraid, given what wealth and power get you in this town, given 
the kind of backing this bill has, and given that some of the biggest 
investors of both parties are involved, it is going to be far too easy 
for the majority of the conferees to go along with this proposition. I 
am sorry, I am going to repeat this again. People in Minnesota--I do no 
damage to the truth--and I think people in Rhode Island do not know 
about this legislation or any of the details. I promise you, they will 
be deeply offended with this proposition, that a whole lot of people--
because a few people game the system. True, a small percentage. Every 
independent study says that regarding bankruptcy. If we pass this piece 
of legislation that basically makes it impossible for a lot of good 
people, middle-class people, low- and moderate-income people, who, 
through no fault of their own--there but for the grace of God go I--
through the loss of job, medical bills, you name it, find themselves in 
brutal circumstances, this legislation is going to make it difficult to 
rebuild their lives.
  At the same time, this piece of legislation, because of the 
insistence of the President and the Republicans in the House of 
Representatives, is going to protect wealthy deadbeats and their 
mansions and enable people to shield their assets--not the people I am 
talking about but the wealthy people. Does that make any sense 
whatsoever? That offends me as a Senator from Minnesota.
  I hope I am wrong. I hope the Democratic conferees in the Senate will 
support Senator Leahy, the chairman. He has done good work on this bill 
under very difficult circumstances. He did good work with an equally 
divided Senate. I don't agree on the final product, but I am not going 
to ignore some of the improvements. I just hope the Democrats in the 
Senate do not let him down.

  Mr. President, I will conclude on this note. Last week, the Senate 
voted to move forward to conference. The Senate voted overwhelmingly. I 
think it is fair to say that. The die is cast. It is going to happen. I 
can block the Senate, I suppose, for a week, but the result will be no 
different. I know that.
  I came to the Chamber last week. I have come to the Chamber today. I 
will have another amendment probably postcloture, but I do not know how 
to stop this any longer. I do not know of any way to stop it.
  Let me say this: I will have an amendment that is going to call for a 
GAO study of this bill over the next 2 years, and I say to Senators, 
there should be 100 votes for it. I will wait to use my hour after the 
vote to talk about it, but there should be 100 votes for it.
  I am going to go over each of the arguments and ask GAO to look at 
them, and we will see who is right or wrong. I am not saying that in 
some macho way. I am saying at a minimum we ought to be willing to have 
an evaluation of this legislation and what it is going to do to people.
  I do not regret holding up this legislation. Maybe it comes with 
being 5 foot 6 inches. I am almost defiantly proud, along with the help 
of other Senators, in stopping this, in blocking it, in fighting it. I 
do not regret it at all. This bill should not be moving forward. I do 
not think it should be a priority. I am in disagreement with the Senate 
majority leader on this question. I think it is too harsh and too one-
sided. Unfortunately, it is a perfect reflection of who all too often 
has the power in the Nation's Capital. With the economy heading in the 
wrong direction right now and slowing up and people losing jobs and 
people being underemployed--that is to say, they are not counted among 
the ranks of the official unemployed, but they are not working at the 
kinds of jobs they would be working at with a better economy, and 
people under more economic pressure and more economic strain--this is 
the worst time to pass this legislation.
  In fact, I do not know--maybe this is a stretch. I read an article 
the other day in the New York Times that a number of economists were 
expressing their concern that it has been the consumer spending which 
has kept the economy going because a lot of business investment is way 
down now. They are saying they do not know how much longer consumers 
will continue to spend. There is a fair amount of debt.
  I imagine this legislation may, in fact, add to our economic 
troubles. People may be even more skiddish about consuming; they may be 
even more reluctant to be buyers, especially if they are going to wind 
up in the poorhouse for the rest of their life.
  This legislation does not make sense on economic grounds. It does not 
make sense in terms of what people in our States are asking us to do 
and what our priorities should be. This legislation should not be 
before the Senate. I am in disagreement with my majority leader on this 
question. This legislation violates the basic standard of elementary 
justice. It is going to pass, but it should not.
  I yield the floor, and I suggest the absence of a quorum.

[[Page S7727]]

  The PRESIDING OFFICER (Mr. Reed). The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. WELLSTONE. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. WELLSTONE. Mr. President, I ask unanimous consent that the quorum 
call be charged to both sides.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. WELLSTONE. My understanding, Mr. President, is Senator Hutchison 
of Texas and Senator Brownback want to speak, and if they do, I 
allocate to each one of them 10 minutes. My understanding is Senator 
Durbin also wants to speak. I allocate to the Senator the rest of my 
time.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. WELLSTONE. I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. DURBIN. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Under the previous order, the Senator from Illinois is recognized.
  Mr. DURBIN. Mr. President, I rise today, as I did earlier this year, 
in opposition to the Senate-passed bankruptcy bill, Senate bill 420. It 
is likely this week we will appoint conferees and start the debate 
about this bankruptcy bill.
  Let me say at the outset, I support bankruptcy reform. A few years 
ago, as a member of the Judiciary Committee, I was the ranking Democrat 
on the subcommittee that produced a bankruptcy bill. At the time, we 
saw a rather dramatic increase of public bankruptcy filings across 
America, and there also appeared to be, and I believe there are, 
serious abuses where people are going to bankruptcy court to be 
discharged from debts when, in fact, they could pay many of those 
debts. When a person is able to pay their debts and does not, for 
whatever reason, the economy absorbs it and all of us as consumers are 
taxed or end up paying the cost of those unpaid debts. It is passed 
along in one version or another.
  So bankruptcy reform in and of itself is warranted and should be part 
of our agenda. I was happy to be part of the creation of a bill a few 
years ago which dealt with changing our bankruptcy code.
  Bankruptcy law is one of the most arcane laws in America. Although it 
affects probably more Americans than we imagine, it is an area of the 
law to which very few people pay attention. Almost by accident, I took 
a course in bankruptcy law in law school at Georgetown. As a practicing 
attorney in Springfield, IL, I was appointed as a trustee in bankruptcy 
for a local truckstop that was going bankrupt. Those were my two 
brushes in the law with bankruptcy. Other than that, I didn't include 
it in my practice, and I paid little attention to it. When the time 
came to debate it in the Senate Judiciary Committee, it turned out I 
had more experience in bankruptcy law than any other Senator. It is a 
rather obscure area of the law that, unless it is focused on, is 
difficult to understand, and more difficult to suggest meaningful 
reforms that make a difference.
  What I tried to do in the earlier debate on the bankruptcy law was to 
suggest that if there are abuses, there should be reforms so people do 
not abuse the bankruptcy process. But we should also look to the other 
side of the ledger. There are abuses on the credit side, on the 
financing of debt side, which also should be addressed as part of 
bankruptcy reform. I believe this balanced approach, saying don't go in 
and abuse the bankruptcy courts, is a good one as long as we couple it 
with an admonition, warning, a prohibition in the law, if necessary, 
against those who abuse the credit side.
  I still remember and I have repeated it often, those who came to see 
me first about bankruptcy reform--these are people from banks and 
financial industry and credit card companies--said it used to be filing 
bankruptcy was something of which people were ashamed. They didn't want 
to do it, they didn't want to admit they had done it. They were 
embarrassed by the experience. Now, in the words of those who came to 
see me, bankruptcy has lost its moral stigma.
  I am not sure if that is altogether true. In fact, I question whether 
it is true except in isolated cases. I said back to them: Do you 
believe there is a moral stigma attached to credit practices, as well?
  The fact is, when I went to a college football game in Illinois and 
went up the ramp, and as I started to go into the stadium in Champaign-
Urbana there stood someone offering me a free T-shirt for signing up 
for a University of Illinois credit card sponsored by one of the major 
credit card companies. Let me make it clear, they were not looking for 
me at the top of the stairs. They were looking for students to try to 
get them to sign up for credit cards and get deeper into debt. Where is 
the moral stigma there? Who is asking the hard question whether that 
student can pay off a debt?

  At the University of Indiana a few years ago, the dean of students 
said the No. 1 reason kids were dropping out of school and taking some 
time away from school was to pay off credit card debts. So I say to the 
credit industry, when we are talking about moral stigma, do you think 
twice about offering credit cards?
  I suggest to anybody listening to this debate, go home tonight and 
open your mail. How many new solicitations will you receive for a new 
credit card? Literally hundreds of millions of them descend on America. 
Are hard questions asked whether a person is creditworthy? Perhaps. But 
in many cases, no.
  You see people getting deeper and deeper into debt, finally being 
pushed over the edge into bankruptcy court. I suggest as part of this 
bankruptcy debate, let's ask the question on both sides: Who is abusing 
the bankruptcy court? But also, who is abusing when it comes to 
offering credit in the United States?
  I think, to address bankruptcy reform in that context is an honest 
approach. It is one that I think is sensible and balanced. The bill I 
supported that passed this Senate a few years ago with 97 votes was a 
balanced bill. This bill we have before us is not. This bill, which has 
been pushed through by the credit industry, by the financial 
institutions, sadly, does not have the balance that I think is 
absolutely essential.
  I had hoped we would be able to come up with such a bill. That has 
not happened. We had a conference committee after we passed this bill a 
few years ago. It was a conference committee in name only because what 
it boiled down to was the Republican members of the conference 
committee did not invite the Democrats to attend. They sat down with 
the financial industry and wrote a bill and said take it or leave it, 
and we left it, as we should have.
  Fast forward a couple of years: Same experience, credit industry 
comes forward with a bill, they refuse to include in there protections 
for consumers when it comes to credit, and that bill died as well.
  Now we are in the third chapter of this long saga and we are 
considering this bankruptcy bill, which is S. 420. The question is 
whether or not we will report out a bill from conference that addresses 
some of the issues I have raised.
  I think this bill has some serious defects and weaknesses. I am 
disappointed the Senate failed to take the opportunity to achieve 
meaningful reform on credit card disclosure and marketing practices.
  There was a recent study by the Federal Reserve Bank in Boston. It 
concludes that the rise in personal bankruptcy in America roughly 
mirrors the increase in credit card loans outstanding--a direct 
relationship. So we see people getting deeper and deeper into credit 
card debt until a moment comes that pushes them over the edge. What is 
that moment? Perhaps it is when the debt becomes intolerably high, or 
the loss of a job, or a serious illness, or a divorce. These sorts of 
things push people over the edge and into bankruptcy court. But the 
reason they reach these terrible situations has a lot to do with credit 
card debt in America that continues to grow.
  I was back in Illinois over the weekend and ran into a couple who 
started

[[Page S7728]]

talking about some of the outrageous things happening to them. They 
told me a story about some of the things of which I was not aware. The 
fellow said:

       Our family, like a lot of families, has several credit 
     cards.

  This is on a Friday night at the Navy Pier in Chicago. He pulled me 
over, and we weren't even talking about bankruptcy. He said:

       I wanted to ask you about credit card companies. Did you 
     know if you fail to make a timely payment on one of your 
     credit cards that information is shared among the credit card 
     companies? What happened is that I missed a payment on one of 
     my furniture loans. As a result, my monthly interest rate on 
     all my credit cards went from 12 to 20 percent. I called them 
     and said I made timely payments on all these credit cards. 
     They said, ``But you missed your furniture loan over here.''

  He said:

       Is that right? Is that fair?

  I said:

       The sad reality is, that is probably part of your contract.

  I am a lawyer. When I flip over that monthly statement from the 
credit card companies--I have reached the point where I need pretty 
good glasses to read something, but I could not even make sense of the 
fine print on the back of my monthly credit card statement. I imagine 
most Americans, when they sign up for a credit card or see the monthly 
statement, don't say, Dear, we are not going to be able to go out to 
the movie because I need to take the next half-hour and read the back 
of my monthly credit card statement. People don't do that. But there 
are things going on with those credit cards that can severely 
disadvantage you.
  We had an opportunity to do something about it in this bill and we 
did not do it. We did not do it. One of the things I pushed for I think 
is so basic, I cannot believe the credit card industry opposed it. Let 
me tell you what it was. On each monthly statement they say: Here is 
the minimum monthly payment. This is all we really want to receive from 
you.
  I suggested as part of that monthly statement they say: This is the 
minimum monthly payment which you can make on your credit card balance. 
If you make that minimum monthly payment, here are the number of months 
you will have to pay to eliminate the balance completely. Here is how 
much you will have paid in principal and how much in interest. So 
people would be knowledgeable when they made a minimum monthly payment 
that in fact they were really signing up for paying off that balance 
over a period of years--and it is literally years--if they made the 
minimum monthly payment. Because what credit card companies do is keep 
charging interest so you just never catch up with yourself.
  I suggested the credit card companies at least give us that 
information so consumers across America will be knowledgeable: OK, I 
have a $2,000 balance. If the minimum monthly payment is $25--or 
whatever it happens to be--how long is it going to take me to pay off 
that balance? Guess what. It is about 5 or 6 years or more. So, will I 
just pay $25? If I could, I would pay more. Let's get rid of that 
balance because the interest is going to accumulate.
  I went to the credit card industry and said: Include that information 
in the monthly statement. That cannot be something you would oppose. Do 
you know what they said? We just can't figure that out. We can't 
calculate that. We cannot produce that information for every borrower, 
it is just too complicated.
  Baloney. With computers today and all the information we have 
available, that would be an easy calculation. But the credit card 
industry doesn't want you to know it. They want you to dig that hole 
deeper and deeper because they make money in the process.

  People who genuinely need credit, who may in a bad month only be able 
to make that minimum monthly payment--that is a situation that families 
can face. But shouldn't consumers be informed in America? When we talk 
about a bankruptcy reform bill, is it unreasonable to suggest that kind 
of credit card disclosure be part of that bill? The credit card 
industry said flat no, and it is not included.
  Let me tell you another area that really rankles me. This is an 
amendment I offered on the bill, the bankruptcy bill here on the floor. 
It relates to a situation called predatory lenders. You read about them 
occasionally and see them on television. We see stories on some of the 
news reports. Here is what it is. You have people who prey on those who 
are elderly and not well informed and have them sign up for new debt on 
their homes, particularly for home improvements or vinyl siding or a 
new furnace or whatever it happens to be. They put provisions in those 
predatory loans that give them an opportunity to make extraordinarily 
high interest profits off those predatory loans, and they include other 
provisions called balloon payments and the like.
  How many times have you read in the newspaper or watched on TV the 
story of a retired widow--and it has happened in the city of Chicago 
where I represent a lot of people--a retired widow who was safely in 
her little home for which she saved up for her life, and some smooth 
talker came by and had her sign up for what turned out to be a new 
mortgage on her home with really bad conditions and terms. So as time 
went on--usually the work turns out to be shoddy and the debt turns out 
to be intolerable, and it reaches a breaking point. When it reaches 
that breaking point, sometimes this person, in retirement, in their 
safe little family home, stands the risk of losing their home because 
of these predatory lending situations.
  These are the most deceptive loans in America. They cost borrowers an 
estimated $11 billion each year in lost equity, back-end penalties, and 
excess interest paid.
  The American Association of Retired Persons, the largest group of 
seniors in America, did a survey. Eight out of ten Americans over the 
age of 65 own their home free of any mortgage. That is good. It shows 
people have planned ahead. When they reach retirement, they want to 
have that home and not have to worry about a monthly mortgage payment. 
We want seniors to be in that position.
  However, the unscrupulous lenders out there know those seniors have 
an asset and if they can get their hands on it, get their hooks into 
that senior, they set out to do that, and foreclosure is often the 
result when the senior fails to make these outrageous loan payments. 
The elderly person, the senior living alone or a person from a low-
income neighborhood, can get a cold call from a telemarketer or a visit 
from somebody knocking on the door, telling them how they can get a new 
roof or windows: We can give you insulated windows with a little cheap 
loan; just sign up. It usually puts the unsuspecting victim in danger 
of losing their home. Almost before the victims know what hit them, 
they are whacked with outrageous fees, $8,000 or more, slapped with 
skyrocketing interest rates and battered into a financial hole they 
never get out of.
  This is what happened to Janie and Gilbert Coleman from Bellwood. The 
Colemans had purchased their home with a court settlement and had no 
mortgage payment at all. But this elderly couple with a 9th grade 
education had Social Security disability income and predators mortgage 
lenders moved in for the kill.

  Although the Colemans were first able to meet the $200 monthly 
payments on a $12,000 loan, 8 years and 5 refinancings later they found 
themselves $130,000 buried in debt.
  They borrowed $12,000. Over a period of 8 years, with all of the 
refinancing and all of the interest payments on this little home, the 
debt grew to $130,000. That is what I am talking about.
  Six loans were made to the Colemans. Four of these loans were made by 
a national lender, Associates, including two loans made just seven 
weeks apart.
  Associates repeatedly sold the Colemans insurance that they did not 
want or need. And twice they were charged more for fees and insurance 
than they received.
  Associates, a lending arm of Citigroup, is now the target of a 
multimillion dollar lawsuit filed by the Federal Trade Commission.
  Associates earned over $1 billion in premiums last year but paid only 
$668 million in benefits.
  This is a situation that is also going to illustrate what I am 
talking about.
  People like 72-year-old Bessy Alexander from the South Side who 
believed that she was getting a fixed rate

[[Page S7729]]

but really received a mortgage with an interest rate adjusting upward 
every 6 months--from an initial rate 10.75 percent to as high as 17.25 
percent.
  People like Nancy and Harry Swank of Roanoke, IL, who took a small 
loan from Associates to pay for a new stove and ended up with two 
loans, one at nearly 19 percent interest, totaling over $76,000, well 
above the $60,000 value of their home.
  They started off buying a stove for their $60,000 home. When it was 
all over, they owed $76,000 more than the value of their home.
  People like 70-year-old Mrs. Genie McNab and other victims of 
predatory lending practices testified in 1998 before the Special 
Committee on Aging in a hearing chaired by Senator Grassley.
  If my colleagues have not done so already, I would encourage them to 
read the committee report from this hearing for a human face on this 
issue.
  You ask yourself, what does this have to do with the bankruptcy bill 
that is before us? I will tell you what it does. I said in my amendment 
that if you have been guilty of violating fair credit practices, if you 
have taken advantage of people such as those I have described, if you 
are in a position as a company where you have used the law improperly 
and now have a foreclosure against someone who is going into bankruptcy 
court, we will not allow you to walk in and claim you have clean hands 
in bankruptcy court and take the home. Predatory lenders would have 
been put on notice that when it was all said and done after they 
battered these elderly people to the point where they can no longer 
make payments and force them into bankruptcy that our bankruptcy code 
will not protect these vultures.
  My amendment lost on the floor of the Senate by one vote. You think 
to yourself, if you are going to have a balanced bill that says people 
shouldn't file for bankruptcy who have used the process, shouldn't the 
balance in the law also extend to creditors who walk into bankruptcy 
court and want the protection of our legal system to collect from these 
poor people who have been swindled out of their life savings? That 
seems fairly obvious to me. Doesn't it really suggest a balance in the 
law that we should have?
  My amendment was defeated. Who defeated it? The financial 
institutions that don't want to be held accountable for their lending 
practices. That to me is one of the sad realities of the law that faces 
us.
  We know who these predatory lenders are. When we had this testimony 
before our committees, we asked them: How do you pick out the homes of 
the people who you are going after? Well, they said, we look for 
primarily elderly people--primarily elderly widows, those who appear to 
be able to make a decision and sign the document but don't have a lot 
of advice from lawyers, or relatives, or anyone on whom they can rely.
  They catch them in the most vulnerable situation. They take advantage 
of them. They take their money. They take their homes away, and they 
take it away in our court system. This bankruptcy law which we are now 
considering should be protecting those people instead of preying on 
them as it does.
  There is a study I would like to share with you entitled ``Unequal 
Burden: Income and Racial Disparities in Subprime Lending in America'' 
by the U.S. Department of Housing and Urban Development. They found 
that: subprime loans are five times more likely in black neighborhoods 
than in white neighborhoods. In addition, homeowners in high-income 
black areas are twice as likely as homeowners in low-income white areas 
to have subprime loans.

  Unsuspecting minority and low- to moderate-income consumers--often 
equity rich and cash poor--are targeted by predatory lenders that 
extend credit to high-risk borrowers ineligible for conventional loans. 
Of course, predatory lenders do not commit outright fraud. Many of 
these borrowers lack not only sufficient funds but also financial 
literacy. And they take advantage of them.

  Let me tell you what one of these predatory lenders said when he was 
assured that he would be testifying behind the screen so that the 
television cameras couldn't see his face. He was so embarrassed and 
afraid that he didn't want to say this in public.
  My perfect customer would be an uneducated woman who is living on a 
fixed income, hopefully from her deceased husband's pension and Social 
Security, who has her house paid off, is living off of credit cards, 
but having a difficult time keeping up with payments, and who must make 
a car payment in addition to her credit card payments.
  There you have it. When you are out there looking for your prey as a 
predatory lender, that is what you are looking for. Your hope is that 
you push them so deeply into debt that they make all the payments they 
can until they reach the breaking point and then they go into 
bankruptcy court and you take the home.
  Oh, what a happy day it must be that these predatory lending offices 
just picked up another home from another widow in bankruptcy court.
  When I put the amendment on the floor, I basically wanted to spoil 
this party that these predatory lenders have at the expense of senior 
citizens across America. My amendment failed by one vote. This bill 
does not address that problem. To think we can call this bankruptcy 
reform and not offer that kind of balance, as far as I am concerned, is 
disgraceful.
  We have seen the percentage of these predatory loans in precincts 
across the United States. It seems over and over again that these 
situations are where elderly people have become victims. Predatory 
lending is an epidemic.
  Seven years ago, mortgages to people with below average credit was a 
$35 billion business. Today, it is a $140 billion business.
  Who are we talking about? We are talking about somebody's parents, or 
grandparents, who are caught unsuspecting by one of these predatory 
lenders who are ultimately going to run the risk of losing the home 
they saved for their entire lives. AARP--with 34 million members--has 
launched a campaign to fight this problem.
  I know Senator Sarbanes of Maryland, the Senate Banking Committee 
chairman, is going to have hearings this month on lenders that take 
advantage of vulnerable borrowers. I commend him for his leadership on 
this important issue.
  Why wasn't this included in the bankruptcy bill? We have Senators 
standing up and saying: We need to protect these predator lenders. That 
is exactly what happened. I lost by one vote.
  Let me talk to you for a moment about credit card disclosure and 
whether or not there is more information that we can ask for so we can 
have some balance when it comes to credit card predators across the 
United States.
  There are 78 million creditworthy households in America. Remember 
that number--78 million. Each year there are 3.5 billion credit card 
solicitations. As I said, go home tonight and look through your mail. 
You are going to find them. If it is not there tonight, it will be 
there tomorrow night asking you to sign up for a new credit card. They 
are coming at you in every direction--not just through the mail, but in 
magazines, television; wherever you turn, they want us to sign up for 
more credit cards. Frankly, I think you understand what they are 
looking for.
  One of the things they like to do is go after college students. There 
is a brand loyalty here. Major credit card companies think that when 
they set up a college student for a credit card, the college student 
will stick with their credit card for the rest of their lives. They do 
not ask hard questions as to whether the student will pay off the debt.
  One of the things that I suggested about the minimum monthly payments 
was rejected by the credit card industry. I don't think it is a 
difficult thing to calculate. If you were to pay a 2-percent monthly 
minimum on a balance of about $1,300, it would take you 93 months to 
pay it off. We are talking about over 7 years with your minimum monthly 
payment.
  I am not for credit rationing. I believe credit cards have done quite 
a bit of good for a number of people. The credit card industry knows 
the fact that 10 or 20 years ago it might have been impossible for 
someone such as a waitress to get a credit card. Today they can in 
America. That is a good thing. There are times when credit cards are 
invaluable for individuals and

[[Page S7730]]

their families. But we see that the credit card industry is not just 
offering credit to people who otherwise might not have a chance to get 
it; we see them overwhelmingly offering credit way beyond the means of 
people to pay it off. I think the monthly statement should be a lot 
more informative.
  Let me also go to one other issue before I give the floor to my 
colleague from Kansas. One of the issues which is part of this is the 
so-called homestead exemption. The homestead exemption is this: If you 
go into bankruptcy court and you say you have more debts than you can 
possibly pay off, you list all of your debts and all of your assets. 
And many States have said one of the things that you are able to retain 
is your homestead or your home. The value that you are able to keep 
depends on the State in which you live. So each State kind of defines 
what a home can be worth to be exempt from bankruptcy.
  On its face it doesn't sound unreasonable that people would be 
allowed to keep their home even if they are bankrupt. You wouldn't want 
them to be homeless or out on the street. But there is such a gross 
disparity in the exemptions States offer for this homestead that we 
have seen some terrible and outrageous abuses.
  There was a fellow who was the commissioner of baseball, Bowie Kuhn, 
who many years ago decided to file for bankruptcy. Before he filed, he 
moved to Florida. Why did he move to Florida? He bought himself a 
mansion worth hundreds of thousands of dollars. Then he filed for 
bankruptcy in Florida, and he was able to keep all of the money that he 
put in that mansion set aside and not opened to the creditors because 
Florida had a very generous homestead exemption.
  The same thing is true in many other States. One of the famous 
actors, Burt Reynolds, did the same thing; he bought himself a big 
ranch worth over $2 million and then filed for bankruptcy realizing 
that he had protected his assets. That is allowed; that is part of 
State law.
  The PRESIDING OFFICER (Ms. Landrieu). The time of the Senator has 
expired.
  Mr. DURBIN. I ask unanimous consent for an additional 3 minutes.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. DURBIN. If we are going to have real bankruptcy reform, then 
shouldn't we have some consistency? The poor person I mentioned earlier 
who goes into court suffering from a predatory lender and is about to 
lose her home, for which she saved for a lifetime, is not going to have 
the same advantages that this actor and this commissioner of baseball 
had when it comes to a homestead exemption.
  If it is real bankruptcy reform, it should address all levels of 
income in this country. It should be fair to every one. This bill is 
not.
  O.J. Simpson filed for bankruptcy after being ordered by the court to 
pay a $33.5 million judgment. He got to keep his $650,000 Los Angeles 
home. These poor people I talked about in Chicago who are about to lose 
their little home over predatory lenders don't have the advantage O.J. 
Simpson had in California. That isn't fair.
  Actor Burt Reynolds' home was worth $2.5 million. He got to keep 
that. Onetime corporate raider Paul A. Bilzerian kept his extravagant 
11-bedroom, 36,000 square foot estate, the largest in the Tampa Bay 
area. It had a basketball court, movie theater, nine-car garage, 
elevator, and it was worth $5 million. Because Florida law is very 
generous to wealthy people filing for bankruptcy, he was able to keep 
his home. The person I talked about in the city of Chicago didn't have 
that benefit.
  Elmer Hill, Tennessee coal broker, 3 days before being ordered to pay 
$15 million to a company he defrauded, shielded his assets by 
purchasing a $650,000 waterfront home in Florida and paying $75,000 to 
furnish it. Then he declared bankruptcy. The Florida Supreme Court 
recently ruled he was permitted to keep his home. The court said that 
``a debtor with specific intent to hinder, delay or defraud creditors'' 
is presently able to shield his or her assets in their home.

  Senator Kohl of Wisconsin offered an amendment to reform this. I 
supported it. The amendment passed. But, the interests that support 
wealthy people here want this provision stripped in conference.
  When we consider bankruptcy reform, should we not have basic 
fairness? Shouldn't all families across America, regardless of their 
wealth and income, be treated fairly? Sadly, this bill does not.
  I will not be supporting this bankruptcy bill in its current form.
  I ask unanimous consent that Senator Torricelli be allocated 10 
minutes of the time controlled by the proponents of the substitute 
amendment.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Pursuant to the previous order, the Senator from Kansas is 
recognized.
  Mr. BROWNBACK. Mr. President, I appreciate the comments of my 
colleague from Illinois who I have some agreement with on the 
bankruptcy bill, although not on the homestead provision. I want to 
articulate why I have a different viewpoint.
  Overall, I believe the House version of this legislation, the 
bankruptcy legislation, is a good piece of legislation with which we 
can work. I have worked hard on it. We have worked hard for a number of 
years on getting bankruptcy reform. The last conference report on 
bankruptcy passed with over 70 votes, which is a substantial vote and 
the agreement of a number of people.
  One of the key provisions that was worked out on this overall 
bankruptcy legislation was the homestead provision. That is key to me. 
It is key to my State because of the nature of the homestead provision 
throughout bankruptcy and the bankruptcy code's history, how we have 
left that to the States. In previous bankruptcy bills, we have 
constantly left the homestead provision to the States, which is where 
it should be. The States should determine this.
  In seven States in this country, including my own of Kansas, there is 
a homestead provision that is in our State's constitution. The founders 
of my State saw as so important the protection of the homestead that 
they provided in the constitution of our State a protection for the 
homestead of 160 acres, 160 contiguous acres to be in a farm, or one 
acre in town of contiguous acreage in protecting that home. They said 
this is something that is central to us. I will talk about why that is 
central.
  It is central because farming, agriculture has been so much a part of 
our State's past. A number of farmers would borrow to protect, not 
against the homestead; they would borrow against other areas for the 
farm and leave the homestead out of it because if they would lose the 
farm, they could at least protect their home and 160 contiguous acres.

  I used to be a lawyer in private practice prior to getting involved 
in public office. As such, I would examine a number of abstracts. 
Abstracts are titles to the land. They are histories of the land--who 
used to own it, who had a mortgage against the land, who had a lien 
against the property. You would examine that to see if there was clear 
title to the land or not.
  You could track a piece of property and see the farm cycles in it. If 
the years were going well, there wouldn't be a mortgage against the 
property. If it was going poorly, there would be a mortgage against the 
property. But almost always they would leave clear and free, if they 
possibly could, that homestead because just as sure as you would get 
one bad year, you might get 2, and then you might get 3, and then you 
would lose the farm.
  The history would follow the farm cycle. Just as farm prices and farm 
production would go down, mortgages would mount up. And then you would 
have a loss of the farm.
  They would set aside and protect this homestead. They wouldn't put a 
mortgage against it, if at all possible, because our State's 
constitution said they could keep that homestead to start farming 
again. If they got on the bottom of the trough, lost the rest of the 
farm, lost livestock, they could still have that home and 160 acres to 
be able to start farming again and build back up in a cycle.
  We built this into our State's constitution. Seven other States did. 
It was an important part of maintaining that farming tradition and of 
keeping people on the farm. That is what it did.
  In the last cycle we went through, which was the early 1980s, I was 
still practicing law at that time. We continued to have at that time 
the homestead

[[Page S7731]]

provision for family farmers, where you would leave within that a home 
and 160 acres. There are a number of people in Kansas who are still 
farming today because they didn't mortgage the homestead. They lost 
much of the rest of the farm in the downturn of the farm cycle, but 
they were able to rebuild around that home and 160 acres and start and 
move forward again.
  It was used then. It will be used again in the next farm cycle, if we 
don't take that right away in the Bankruptcy Reform Act of 2001.
  What has taken place is that this has been a long, hard-fought battle 
over the past several years--the bankruptcy reform that we have put 
forward. We worked out a compromise in the House that protects the 
sanctity of those State laws on homestead provisions and allows 
accumulation of a certain amount of property. It doesn't allow fraud. 
If you are trying to move money into the homestead within 5 years of 
bankruptcy, that can get pulled back out in bankruptcy proceedings. It 
doesn't allow you to fraudulently say: I am going to cash out this 
asset and put that into my homestead as a way of building up equity on 
the homestead. That can all be set aside by the court. This was a 
carefully compromised package that came from the House bill.
  The problem is in the Senate bill where it takes away the States 
rights to establish a homestead. There was an exemption provision 
carved out for the family farm by Senator Kohl, for which I am 
grateful; but it wasn't within the home in town. So now you have the 
Federal Government, for the first time in 120 years, telling the States 
what is the homestead. They have not done that for 120 years. We should 
not do that now. This is the wrong time for us to start; it is the 
wrong thing for us to do to take that away.
  As I understand it, we are going to vote on inserting the Senate 
package, which takes away this homestead right from the States. That is 
in the Senate package on which we will soon be voting. I am opposed to 
doing that, and I will vote against that bill if it continues to 
maintain that type of homestead provision which takes away the 
homestead rights from the States and puts it into Federal bankruptcy 
law. That is against our State's constitution and against the 
constitution in seven other States in this country. We should not be 
doing that. It is a bad precedent to start.
  I have no doubt that if we start it in this bankruptcy reform, in the 
next bankruptcy reform we do we will go after the family farm homestead 
provision because there will be some allegation of, OK, there was 
somebody who shielded assets here and they were able to protect too 
much, going through a family farm type of setting, and then we will set 
it aside. There will undoubtedly be an example or two, but we find in 
most of the lawsuits--the vast majority--that there are not abuses 
taking place to the homestead provisions. It would be wrong for us to 
say we have a couple of examples, and because of the abuse in a couple 
of cases we want to take this right completely away from the States for 
thousands of people, hundreds of thousands of people who have depended 
upon this for the past 120, 130 years.
  I think particularly if we start down this road of Federalizing the 
homestead provision, while we may not hit the family farmers now, we 
will the next time around, and that would be a wrong way for us to go.
  I want to make it clear on this point again that if there is fraud 
involved, if somebody is taking assets from another area and putting 
them in the homestead to hide from a creditor, that is covered by the 
law. You cannot do that today. You cannot do that under the provision 
that is in the House bill, and we should not allow people to do that. 
So we are not talking about fraudulent transactions. Many examples 
cited by my colleagues on the homestead provision actually involve 
fraudulent transactions. They are against the law and they should be. 
We should not allow people to fraudulently hide assets. But we should 
not, as well, take away this homestead provision from States on homes 
and family farms because of allegations of examples that don't even 
apply in the situation. This is not fraud--what I am talking about. 
This is about a basic home, a home on 160 acres in the country, if you 
are a family farmer.
  The Kohl amendment in the Senate version is one that I vigorously 
oppose because it jeopardizes the compromise that was worked out last 
year in the bankruptcy bill, and I believe it jeopardizes the fate of 
the entire bill, as well, because of what it does to the homestead 
provision. That is what this amendment is about.
  I urge my colleagues to vote against inserting the text of the Senate 
bill into H.R. 333 and to support, instead, the House version, which 
contains the compromise language with which I am comfortable, and with 
which I believe Senator Hutchison of Texas is comfortable as well. It 
maintains the homestead provision and authority in the States, with 
some limitation on it, which is a concession on our part.
  The Senate bankruptcy bill, if it is inserted in the House version 
with the Kohl amendment included, radically alters the homestead 
provision from what was crafted last year. It is in this carefully 
balanced legislation we have before us. If the Senate language is put 
in with the Kohl amendment that takes away the homestead rights from 
the States, I will be vigorously opposing this legislation, as will a 
number of other colleagues who have similar homestead problems, given 
the constitutions within their States. I urge my colleagues to vote 
against doing that.
  I yield the floor and I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. TORRICELLI. Madam President, I ask unanimous consent that the 
order for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Under the previous order, the Senator from New Jersey is recognized 
for up 10 minutes.
  Mr. TORRICELLI. I thank the Chair.
  Madam President, for more than 4 years, the Senate has been 
considering various proposals to address the bankruptcy system in the 
United States. Everyone on all sides of this debate seems to have 
agreed the bankruptcy system is in need of serious repair.
  There have, however, been many questions about how to address the 
problem. In both the 105th and 106th Congresses, efforts to pass 
bankruptcy reform came very close. In the final days of each session, 
we could not make the mark.
  At the start of the 106th Congress when I assumed the role of the 
ranking Democratic member on the Judiciary subcommittee of 
jurisdiction, I felt some optimism that we could succeed. In the 
previous Congress, Senator Durbin had come very close, and we began 
with an outline of his legislation.
  During the 106th Congress, literally hundreds of hours were spent 
with Senators Grassley, Biden, Hatch, Sessions, and Leahy over many of 
these very difficult issues.
  The bill before the Senate today is a culmination of all of those 
hours, months, indeed, years of work. It represents the suggestions of 
many Members of this Senate now included in provisions of this bill.
  It is a fair bill. It genuinely represents the sentiments of the 
Senate and both political parties. It improves the bankruptcy system, 
eliminating many of its abuses without doing injury to vulnerable 
Americans and continuing the protection that Americans need to 
reorganize their lives. It may be tougher than current law, but it is 
also fair.
  The best indication, I believe, of our success in this effort is the 
bipartisan vote in the Senate itself earlier this year when the bill 
passed by an 83-15 vote.
  For the Senate to speak in such a loud, consistent, and bipartisan 
voice is probably a reflection of the understanding of the depth of the 
problem. In 1998, during the largest economic expansion in American 
history, 1.4 million Americans sought bankruptcy protection. That is a 
staggering 350-percent increase since 1980.
  In 1999, filings were reduced by 100,000 but still remained at the 
1.3 million filing level. It is estimated that 70 percent of these 
filings were made in chapter 7, allowing a debtor to obtain relief from 
most of their unsecured debts. Conversely, only 30 percent of filings 
were in chapter 13 which requires a repayment plan.

[[Page S7732]]

  The Department of Justice has estimated that 182,000 people per year, 
people currently filing under chapter 7 to avoid their debts, properly 
belong in chapter 13 where they will repay part of their debts. The 
difference is not insignificant. If those 182,000 people were moved 
into chapter 13 and were paying those debts which were affordable, $4 
billion would be returned to creditors.
  Critics of the bill argue that $4 billion would only enrich large 
financial institutions, transferring money from people who live 
marginal economic lives to wealthy institutions. That claim ignores the 
fact that much of the debt burden that is avoided by chapter 7 filings 
also goes to local contractors--the mechanic on the corner, the small 
retailer, the family business which provides services or goods, only to 
face someone entering into bankruptcy and avoiding paying their debts. 
This creates a situation where one debtor passes a debt on to a family 
business and causes that business to fail and then another family 
business. It is not fair, and it is not right.

  Critics have also argued that bankruptcy reform will deny poor people 
the protection of the bankruptcy system, recognizing the bankruptcy 
system has always been an important part of American life, giving 
people a second chance, ensuring that because someone has made a 
mistake or, more likely, through a problem of health in the family or 
divorce, illness, they are not denied a chance of fulfilling a 
prosperous life.
  This claim simply is not true. No American is being denied access to 
bankruptcy. Indeed, the bill contains several provisions to ensure that 
no one genuinely in need of debt cancellation is prevented from 
receiving a fresh start under chapter 7. It is done in several ways.
  First, the bill gives the judge discretion to consider the debtor's 
special circumstances under which they are unable to meet a payment 
plan, an escape clause where a judge can always ensure that a person 
with no means is given chapter 7 protection.
  Second, it contains a safe harbor to ensure that all debtors earning 
less than the State median income will have access to chapter 7 without 
qualification. If one is under the median income, one is in chapter 7, 
period.
  Third, the bill adds a floor to the means test to guarantee that 
debtors unable to pay more than $6,000 of their outstanding debt will 
not be moved into chapter 13: Again, protection for people of modest 
means.
  All this gives people of lower income a chance to sweep away their 
debts and to start again an American life. It has always been our way.
  Finally, probably the most unfair criticism and the one to which I am 
most sensitive is the issue of whether this adds a new burden to women 
and children. The bill contains language that Senator Hatch and I 
offered in an amendment to protect exactly this element of our society: 
single parents and children in need of protection.
  Under current law, when it comes to prioritizing which debts must be 
paid off first, child support is seventh in bankruptcy court. It ranks 
after rent, storage garages, accountant fees, tax claims, or other 
claims by government, and that is wrong.
  Not only does this new bill not make it worse, we make it better. 
Under the bill, child support is moved to where it belongs: First, 
ahead of government, other businesses, or financial institutions. The 
obligations of a father or mother to their child will never be put 
behind another debt.
  Finally, this compromise deals with one other area of the law that is 
equally important. We were not going to reform bankruptcy laws without 
doing something about the overreaching efforts by the credit card 
industry itself.
  The credit card industry yearly has more than 3.5 billion 
solicitations of Americans, encouraging them to incur debt. That is 41 
mailings for every American household, 14 for every man, woman, and 
child in the Nation. Not surprisingly, with this level of solicitation, 
Americans with incomes below the poverty line have doubled their credit 
usage in the last decade. The result is not surprising. This doubling 
of credit usage has involved 27 percent of families earning less than 
$10,000 a year, having consumer debt that is 40 percent or more of 
their income.

  If we are going to do something about the abuse of bankruptcy laws, 
it is only right and fair we do something about the credit industry 
encouraging Americans to incur debts they cannot afford and in which 
they should not have become involved.
  We deal with these abuses of the credit industry in several ways. 
First, we require that lenders prominently disclose the following 
aspects of their debt solicitations: The effects of making only the 
minimum payment every month; second, when late fees will be imposed; 
third, the date on which introductory or teaser rates will expire, as 
well as what the permanent rate will be after that time.
  This is balanced legislation protecting the most vulnerable Americans 
who have marginal economic lives; ensuring that single parents and 
children are protected; ensuring that the credit industry itself has 
new obligations but also ensuring that bankruptcy laws are not misused 
and do not become an opportunity for Americans to escape the financial 
obligations they have willfully encountered and passing that burden on 
to other small businesses or institutions that cannot afford them.
  Madam President, $4 billion of unpaid bills, unfairly passed on to 
others, is more than American businesses, industries, family firms, and 
farms should have to incur.
  At long last we have reached reform of our bankruptcy laws. It is a 
good moment for the Senate and for the Judiciary Committee for these 
years of struggle with this legislation. I commend again Senator Leahy, 
Senator Hatch, and all who joined in the process through the years.
  I yield the floor and suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. HATCH. Madam President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. HATCH. Madam President, I am pleased to rise today to support the 
motion to invoke cloture on the substitute amendment to H.R. 333. The 
substitute language is the text of S. 420, the Bankruptcy Reform Act, 
which passed this Chamber with a bipartisan vote of 83 to 15 on March 
15. As you may recall, the conference report to last year's bill, H.R. 
833, passed the Senate by a similarly wide margin just last December, 
but was pocket-vetoed by President Clinton at the end of the 
legislative session.
  Today, we are another step closer to getting this bill to conference 
and heading down the home stretch of this legislative marathon. It is 
time to wrap up this debate and appoint conferees who will present a 
good bill to the President for his signature so American consumers can 
reap the benefits.
  As my colleagues well know, we have cooperated and compromised at 
every step along the way in order to produce a fair piece of 
legislation that provides new consumer protections, helps children in 
need of child support, and makes other necessary reforms to a system 
that is open to abuse.
  Contrary to the views of the bill's opponents, this legislation does 
not make it more difficult for people to file for bankruptcy, but it 
does eliminate some of the opportunities for abuse that exist under the 
current system. Right now, certain debtors with the demonstrated 
ability to pay continue to abuse the system at the expense of everyone 
else. Current law perpetuates a system in which people with high 
incomes can run up massive debts, and then use bankruptcy to get out of 
honoring them. In the end, all of us pay the price for those who abuse 
the system in the form of higher interest rates and rising consumer 
prices.
  I am optimistic that this much needed bankruptcy reform legislation 
will be signed into law this year once the procedural roadblocks put 
down by the narrow opposition have been removed. It is beyond time to 
appoint conferees and to enact meaningful bankruptcy reform. As I have 
said many times here on the floor, and just as lately as last week, the 
American people have waited long enough.
  I also oppose amendments that may be offered at this stage after we 
invoke cloture.
  I take very seriously the role of the Senate as a deliberative body, 
but with

[[Page S7733]]

respect to this reform bill, I am beginning to feel like the passenger 
on the Titanic who said, ``I asked for ice, but this is ridiculous.'' 
The offering of any additional amendments on this bill at this stage 
will set a dangerous precedent for reopening bills that have already 
been fully considered here on the Senate floor. I urge any and all of 
the 83 Senators who voted for this bill in March to vote to defeat 
these amendments to send a clear message that ``final passage'' means 
just that. Resolving remaining issues is the job of a conference 
committee. It is simply fortunate, and, in my opinion bad faith, to 
reopen issues after holding a hearing and mark-up in committee followed 
by a prolonged debate on the floor, with almost one hundred amendments 
considered at that time.
  No one can say that the Senate has not already adequately considered 
bankruptcy reform. The Senate has literally been engaged in the process 
of deliberating on this issue for years, with numerous hearings, 
markups, and votes. Back in 1997, a comprehensive bankruptcy reform 
bill was developed by Senators Grassley and Durbin which we marked up 
and reported out of committee in May of 1998. In September of that 
year, the Senate passed bankruptcy reform by a vote of 97 to 1. This 
overwhelming Senate vote in favor of bankruptcy reform was followed by 
the appointment of conferees, negotiations with the House, and in 
October of 1998, an overwhelming House vote in favor of the conference 
report.
  Although the motion to proceed to consideration of the conference 
report was agreed to in the Senate by a strong vote of 94 to 2, the 
Senate ran out of time for a vote on final passage before the end of 
the Congress.
  In February of 1999, Representative George Gekas introduced 
bankruptcy reform again, which passed out of the House in May of 1999 
by another overwhelming vote of 313 to 108. Then, the Senate Judiciary 
Committee once again marked up Senator Grassley's bill and in May of 
1999, we reported it out of committee.
  Then, in February of last year, the reform legislation passed the 
Senate by another impressive margin of 83 to 14. The Senate requested a 
conference, but the objection of a single member from the other side of 
the aisle blocked the appointment of conferees. As a result, we had to 
turn to an informal conference process with the House. With a great 
deal of effort by members on both sides of the aisle, we reached a 
compromise agreement on over 400 pages of legislation, and on all but 
one issue.
  In October of 2000, the House passed the bankruptcy reform conference 
report, and in December, the Senate passed it by yet another vote of 70 
to 28. And, as my colleagues know, later that month, the President 
pocket-vetoed the legislation.
  The issue of bankruptcy reform is not a new one. We have studied it, 
held hearings on it, compromised on it, and come to resolution on it 
with veto-proof margins, in both houses time and again. An elaborate 
record that sets out the issues, documents the debate and makes the 
compelling case for reform is available to anyone who cares to give it 
their attention. At some point, the process of deliberation needs to 
come to a close, and the will of the Congress needs to be exercised
  Only those who want to use delay to kill bankruptcy reform altogether 
could possibly argue for more process. Now is our opportunity to enact 
into law the legislation that the Congress supports and that the 
American people want. Let's get on with the Nation's business.
  I would hope that we defeat any obstructionist amendments at this 
stage, or we may never see the end to any legislation already passed by 
this body ever again.
  I yield the floor:
  The PRESIDING OFFICER (Mr. Edwards). The Senator from Wisconsin.
  Mr. FEINGOLD. Mr. President, I ask unanimous consent to speak on this 
motion for up to 15 minutes, and at the conclusion of my remarks that 
the vote on the motion commence.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. FEINGOLD. Mr. President, I commend the Senator from Minnesota for 
his efforts to educate our colleagues and the American people about the 
unfairness of this bankruptcy bill. It has been a lonely struggle for 
him, but the Senator from Minnesota has never avoided a struggle 
because it is lonely. He has succeeded in framing the issues for the 
conference quite well. Are we passing this reform for the credit card 
companies or for consumers? Who is the Senate working on behalf of 
here? Are we going to pass a bill that passes muster with bankruptcy 
law experts in the law schools and the courts or with the big banks?
  I spoke back when we considered this bill in March about the problems 
with this legislation and why I believe it should not be passed. Even 
with the addition of a number of important amendments during the Senate 
debate--and I hope that the bill that emerges from conference is more 
like that bill than the House bill--I still believe that the bill will 
do terrible damage to the bankruptcy system in this country, and even 
more importantly, to many hard-working American families who will bear 
the brunt of the unfair so-called ``reforms'' that are included in this 
bill. It is unfortunate to have to say it, but this is a harsh and 
unfair measure pushed by the most powerful and wealthy lobbying forces 
in this country, and it will harm the most vulnerable of our citizens. 
I voted against the bill when it came up for final passage in March, 
and I voted against proceeding to it last week. I continue to support 
bankruptcy reform, but not this version.
  One of the major problems with the bill that came to the Senate floor 
was fixed by an amendment offered by the senior Senator from my State, 
Mr. Kohl. Senator Kohl has been crusading for years against the 
millionaire's loophole in the bankruptcy law--abuse of the unlimited 
homestead exemption. By a lopsided vote of 60-39, the Senate voted not 
to table his amendment to set a national ceiling on the use of that 
exemption. It is clear to everyone that the fate of Senator Kohl's 
homestead exemption will be the most fiercely contested issue in a 
House-Senate conference.
  Let me put it as simply and clearly as I can: A bankruptcy reform 
bill that does not contain limits on abuse of the homestead exemption 
is a fraud on the American people. We cannot claim to be acting in an 
even handed fashion if we leave this major loophole untouched, while at 
the same time imposing harsh new limitations on average hard working 
people forced by circumstances to seek the protection of the bankruptcy 
laws.
  There are a number of other problems with the bill that I hope the 
conference committee will try to work out. I will take my remaining 
time this morning to highlight one. It has to do with the new 
definition of ``household goods'' in section 313 of the substitute 
amendment.
  As written, this bill very quietly undermines an extremely important 
protection that current bankruptcy law offers to debtors. Section 313 
is a gift to finance companies who have what I consider to be a 
questionable practice of taking liens on the personal property of the 
people to whom they lend money.

  To understand how unfair the bill is here, my colleagues must be 
aware that the practice of taking a non-purchase money security 
interest in certain household goods has been illegal for many years. 
Under 16 C.F.R. Sec.  444.2, a regulation first promulgated by the 
Federal Trade Commission during the Reagan Administration, it is an 
unfair credit practice under section 5 of the Federal Trade Commission 
Act for a lender to ``take or receive from a consumer an obligation 
that constitutes or contains a non-possessory security interest in 
household goods other than a purchase money security interest.''
  Let me take a step back and remind my colleagues of the difference 
between a purchase money security interest and a non-purchase money 
security interest. A purchase money security interest is a lien that is 
taken on the property that is being purchased with the proceeds of a 
loan. For example, an auto manufacturer or a bank takes a purchase 
money security interest in your car when you get a loan to pay for it. 
That security means the lender can repossess the car to satisfy the 
loan if you don't make your payments. Major department stores might 
take a purchase money security interest in a home entertainment center 
or a computer or a major appliance that you buy on credit. It makes 
perfect sense

[[Page S7734]]

for these lenders to be secured creditors and to protect their interest 
in getting their loans repaid. No one has a problem with that.
  But when a finance company takes an interest in property already in 
the home to secure a loan, property that is already purchased and paid 
for, that is a non-purchase money security interest. And as I said, the 
FTC determined long ago that such an interest on household goods is 
illegal. The FTC's definition of household goods, however, is limited. 
On this chart, you can see the definition of household goods in the FTC 
regulation--clothing, furniture, appliances, one radio and one 
television, linens, crockery, kitchenware, and personal effects, 
including wedding rings.
  So this definition of household goods is relatively narrow. It 
includes only a single TV, for example, and it doesn't cover things 
such as CD players that hadn't even been invented in 1984, or personal 
computers that were not nearly as common in family homes as they are 
today. Nonetheless, the FTC rule prohibits finance companies from 
taking non-purchase money liens on items covered by this definition.
  But finance companies that like having these liens as a bargaining 
chip with their borrowers have hardly been deterred. They want to turn 
what is essentially an unsecured loan into a secured loan. So they take 
liens in everything in the house they can get their hands on that is 
not on the FTC's list of household goods.

  This chart shows a typical form that the finance companies use to get 
borrowers to list their personal property when they apply for a loan. 
They take a lien on everything that a borrower identifies--things like 
garden tools, jewelry, rugs, cameras, exercise equipment. Make no 
mistake, these companies have no intention of repossessing these 
items--most of them are probably worthless--they just use them as a 
threat to try to get their loans repaid. This chart shows a typical 
loan application with a list of household goods that these lenders try 
to take an interest in. They try to cover it all: bicycles, tennis 
rackets, hedge trimmers, leaf blowers, mirrors, model airplanes, 
sleeping bags, the list goes on and on and on.
  Under section 522(f) of the Bankruptcy Code, a debtor can apply to 
the bankruptcy court to avoid these non-purchase money liens in 
household goods. And the courts have generally interpreted household 
goods broadly to include all items kept in or around the home to 
facilitate the day-to-day living of the debtor. The courts have 
specifically rejected the narrow list of household goods contained in 
the FTC's regulation as too narrow.
  Remember, in bankruptcy, liens can't be avoided on extremely 
expensive items. The power of lien avoidance under section 522(f) only 
applies to property that falls under an exemption from the bankruptcy 
estate, and there are strict limits on the value of property that is 
exempt from liquidation in bankruptcy under State and Federal law. But 
the power of lien avoidance serves the purpose of treating creditors 
equally and fairly, particularly in Chapter 13, and it protects debtors 
from being pressured into reaffirming debts that they would otherwise 
be able to discharge in bankruptcy because they fear they will lose 
their family heirlooms or their child's model airplanes.
  Section 313 of the bill is a new and very restrictive definition of 
household goods for purposes of the lien avoidance power. It 
essentially codifies the FTC's list of household goods and makes it the 
exclusive list of household goods on which liens can be avoided in 
bankruptcy.
  This chart shows how section 313 compares to the FTC's definition. 
The bill would turn the law on its head. In effect, it says that 
virtually the only liens that can be avoided are those that the FTC's 
regulation already prohibits. As you can see here, liens can be avoided 
on clothing, furniture, appliances, one radio and one television, 
linens, crockery, kitchenware, and personal effects, including wedding 
rings--all items that are on the FTC's list already.

  Thus, under this definition, section 522(f) lien avoidance, which is 
intended to protect the exemptions for personal property that states 
and federal law provide, is almost completely gutted.
  All of the things I mentioned before that finance companies commonly 
take liens in are not included in the definition--garden tools, 
jewelry, rugs, cameras, exercise equipment, bicycles, tennis rackets, 
hedge trimmers, leaf blowers, mirrors, model airplanes, and sleeping 
bags. Finance companies can take liens in these items and enforce them 
in a bankruptcy case.
  The real problem here is that no list can be exhaustive. And there is 
really no reason to have an exhaustive list anyway. The courts are 
fully capable of determining in a bankruptcy case what kinds of things 
are standard household items. The list in the bill is far too narrow, 
and there is absolutely no evidence that there are abuses taking place 
that need to be addressed.
  The reason that this provision is in the bill is simple--the finance 
companies that support the bill want more power to take these 
borderline unethical liens. They want more power to coerce people into 
reaffirming debts because they don't want their home stripped bare by a 
company that holds an interest in everything in it. This provision is 
part of the ``deal'' between all the creditors that support this bill. 
All of them are getting their special protections in this bill, and 
consumers are left with nothing.
  Mr. President, I was prepared to offer an amendment to strike section 
313 back in March, but time ran out before I could offer it. I filed it 
so that it could be offered once cloture is invoked. I will not offer 
it today, but I believe we should remove this offensive provision in 
conference. That would move this bill just a little closer to one that 
actually treats American families fairly.
  I thank my colleague from Minnesota for all he has done to fight for 
American families on this issue. I yield back the balance of my time.


                             Cloture Motion

  The PRESIDING OFFICER. Under the previous order, the clerk will 
report the motion to invoke cloture.
  The senior assistant bill clerk read as follows:

                             Cloture Motion

       We, the undersigned Senators, in accordance with the 
     provisions of rule XXII of the Standing Rules of the Senate, 
     hereby move to bring to a close debate on the substitute 
     amendment No. 974, the text of S. 420, as passed by the 
     Senate, for H.R. 333, the bankruptcy reform bill:
         John Breaux, Harry Reid, Byron Dorgan, E. Benjamin Nelson 
           of Nebraska, Kent Conrad, Thomas Carper, Chuck 
           Grassley, Daniel Inouye, Joe Biden, Robert Torricelli, 
           Joseph Lieberman, Blanche Lincoln, Max Baucus, Zell 
           Miller, James Jeffords, Tim Johnson, and Patrick Leahy.

  The PRESIDING OFFICER. By unanimous consent, the mandatory quorum 
call has been waived. The question is, Is it the sense of the Senate 
that debate on amendment No. 974 to H.R. 333, an act to amend title 11, 
United States Code, and for other purposes, shall be brought to a 
close?
  The yeas and nays are required under the rule.
  The clerk will call the roll.
  The senior assistant bill clerk called the roll.
  Mr. FITZGERALD (when his name was called). Present.
  The PRESIDING OFFICER. Are there any other Senators in the Chamber 
desiring to vote?
  Mr. NICKLES. I announce that the Senator from New Hampshire (Mr. 
Smith) is necessarily absent.
  I further announce that if present and voting, the Senator from New 
Hampshire (Mr. Smith) would vote ``yea.''
  The yeas and nays resulted--yeas 88, nays 10, as follows:

                      [Rollcall Vote No. 234 Leg.]

                                YEAS--88

     Akaka
     Allard
     Allen
     Baucus
     Bayh
     Bennett
     Biden
     Bingaman
     Bond
     Breaux
     Bunning
     Burns
     Byrd
     Campbell
     Cantwell
     Carnahan
     Carper
     Chafee
     Cleland
     Clinton
     Cochran
     Collins
     Conrad
     Craig
     Crapo
     Daschle
     DeWine
     Domenici
     Dorgan
     Edwards
     Ensign
     Enzi
     Feinstein
     Frist
     Graham
     Gramm
     Grassley
     Gregg
     Hagel
     Hatch
     Helms
     Hollings
     Hutchinson
     Inhofe
     Inouye
     Jeffords
     Johnson
     Kennedy
     Kerry
     Kohl
     Kyl
     Landrieu
     Leahy
     Levin
     Lieberman
     Lincoln
     Lott
     Lugar
     McCain
     McConnell
     Mikulski
     Miller
     Murkowski

[[Page S7735]]


     Murray
     Nelson (FL)
     Nelson (NE)
     Nickles
     Reed
     Reid
     Roberts
     Rockefeller
     Santorum
     Sarbanes
     Schumer
     Sessions
     Shelby
     Smith (OR)
     Snowe
     Specter
     Stabenow
     Stevens
     Thomas
     Thompson
     Thurmond
     Torricelli
     Voinovich
     Warner
     Wyden

                                NAYS--10

     Boxer
     Brownback
     Corzine
     Dayton
     Dodd
     Durbin
     Feingold
     Harkin
     Hutchison
     Wellstone

                        ANSWERED ``PRESENT''--1

       
     Fitzgerald
       

                            NOT VOTING --- 1

       
     Smith (NH)
       
  The PRESIDING OFFICER. On this question, the yeas are 88, the nays 
are 10, with 1 Senator responding ``present.'' Three-fifths of the 
Senators duly chosen and sworn having voted in the affirmative, the 
motion is agreed to.
  Mr. REID. Mr. President, I know the hour for recess is here, but at 
2:15 I will renew a unanimous consent agreement that Senator Domenici 
and I have offered on at least two or three separate occasions on 
previous days to have a cutoff time for the filing of amendments to the 
energy and water appropriations bill. I hope both the Democrats and 
Republicans during their noon conferences take up this issue. It is an 
important bill. Until there is a filing of amendments, staff cannot 
work on these to see if we can accept some of them. It would be helpful 
in moving this bill and having a fair, responsible piece of legislation 
so we wouldn't have to work on these at the last minute.
  I will renew my request at 2:15.
  The PRESIDING OFFICER. The Senator from Connecticut.
  Mr. DODD. Mr. President, I ask what is the pending matter before the 
Senate?
  The PRESIDING OFFICER. Under the previous order, the Senate is to 
stand in recess until 2:15.
  Mr. DODD. Mr. President, I ask unanimous consent I may be allowed to 
address the Senate as in morning business for the next 5 minutes.
  The PRESIDING OFFICER. Is there objection? Without objection, the 
Senator is recognized.

                          ____________________