[Congressional Record (Bound Edition), Volume 147 (2001), Part 10]
[Extensions of Remarks]
[Page 14185]
[From the U.S. Government Publishing Office, www.gpo.gov]



                        LENDERS SHARE THE BLAME

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                           HON. DOUG BEREUTER

                              of nebraska

                    in the house of representatives

                         Monday, July 23, 2001

  Mr. BEREUTER. Mr. Speaker, this Member encourages his colleagues to 
read the following editorial, from the June 27, 2001, edition of the 
Omaha World Herald. This editorial takes the position that both debtors 
and lenders of credit are responsible for the record rates of 
bankruptcy filings in Nebraska and Iowa.

                        Lenders Share the Blame

       Nebraskans and Iowans are filing for personal bankruptcy at 
     a higher rate than ever before, a fact that has roots not 
     only in unwise personal spending but also in the explosion of 
     easy credit available in recent years.
       Nationally, personal debt is at an all-time high. Americans 
     put a trillion dollars on their credit cards last year. The 
     Federal Reserve reported that the amount owed on credit 
     cards, auto loans and similar consumer-type loans rose to 
     $1.58 trillion in April. Americans spend 14 percent of their 
     take-home pay paying off these debts.
       In Nebraska, 33 percent more bankruptcies were filed during 
     the first five months of the year compared with 2000. The 
     rate in Iowa increased significantly, too. Many factors may 
     play into the rise--a weaker economy, higher unemployment, 
     the threat of a stronger and less-friendly bankruptcy law 
     being considered in Congress.
       People should, of course, take responsibility for their own 
     spending. No one forces them to apply for the credit that is 
     offered. No one forces them to use that credit, running up 
     debts to a crippling level until one small change in 
     circumstances--an illness, perhaps, or a lay-off--causes 
     their financial downfall.
       However, the other component of the problem, the credit 
     industry, bears a portion of the responsibility for the 
     situation and has not received enough attention.
       The Consumer Federation of America and other organizations 
     have accused big banks of overly aggressive credit card 
     marketing and excessive credit extension, leading to growing 
     numbers of bankruptcies and credit problems. Mailings 
     offering bank cards--particularly to low- and moderate-income 
     households--have increased substantially. In 1998, an 
     estimated 3.2 billion mailings went out, compared with 2.4 
     billion in 1996.
       Up to 85 percent of college students have one or more 
     credit cards in their own name, and a significant number are 
     in credit trouble. Many of them got the cards by signing up 
     at tables set up on campus, applying for the card to get a 
     free gift--a T-shirt, candy, long-distance minutes.
       Aggressive promotion of credit, particularly to people with 
     a poor record of repayment, can be blamed for a lot of 
     financial troubles. It's not hard to see why the companies 
     are doing it: money. They slap on what two Maryland consumer 
     organizations recently called ``deceptive conditions'' that 
     bolster their profits at the expense of people who can't pay 
     their bills. Interest as high as 30 percent, covering the 
     entire balance and lasting until it is paid off, can be 
     imposed on people who are late or miss a payment. High late 
     fees, a shorter period in which to pay the bill and brief or 
     no grace periods contribute to people's difficulties. Thus, 
     people with poor credit histories and poor performance are 
     penalized further with the extra fees.
       There are far too many gullible souls in this country who, 
     for whatever reason, don't have enough financial sense or 
     self-discipline to use credit cards wisely. They fall into 
     the traps set by the banks that issue credit cards. The 
     temptation for instant gratification overwhelms some people. 
     Their difficulties are, ultimately, their own fault.
       Nevertheless, lenders shouldn't be exploiting the 
     vulnerable unless they accept the risk involved. When they 
     bombard people of modest means with offers of credit--
     thousands of dollars worth of easy credit, at a low! low! 
     low! (introductory) interest rate; when they target college 
     students who often don't have jobs or the means to pay back 
     credit card debt; when they work hard to entice people who 
     have just gone through a bankruptcy to re-enter the credit 
     whirlwind, they need to recognize that many of these people 
     will not be able to handle the debt they have been enticed to 
     assume. They will default.
       People should have the common sense to handle their credit 
     cards cautiously and manage their finances wisely. But too 
     many do not. When the credit card industry takes advantage of 
     their weaknesses to increase its bottom line, it should not 
     be surprised when problems occur.

     

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