Card firms ought pay for role in debt mess

April 05, 2001|By Jim Sollisch

CLEVELAND -- The week the Senate voted 85-13 in favor of tightening the bankruptcy laws, I received nine solicitations in the mail offering me credit lines totaling more than I make in a year. Several were pre-approved.

The bill is being pushed hard by banks and credit card companies, including MBNA, the largest donor to the Republican Party this past election year.

Credit card companies believe consumers should take more personal responsibility for their debts. A noble aim. And a perfect time to pose the question: Why not make banks and credit card companies take more responsibility for their lending practices?

Let's make the bill a responsibility in lending and borrowing bill. Because there's certainly enough irresponsibility to go around. In 1999, more than 1.3 million Americans filed for bankruptcy. That's up from 650,000 in 1990. Last year, lending institutions mailed out more than 33 billion solicitations. Coincidence? Only in the same way tobacco companies tried to tell us that smoking and cancer were coincidental.

We've spent the past eight years making the tobacco companies take responsibility for their misleading practices. Why are we so eager to give credit card companies a free ride? These are the friendly folks who interrupt your dinner five nights a week to offer you a zero interest credit card for six months if you transfer all 14 of your other balances. And did we mention, you're pre-approved?

These are the good people who send you that fake check three times a week for $58,017 -- the amount of equity they figure you have in your home. These are the decent corporate citizens who target college students, suggesting that a credit card is a smart way to pay for college expenses. Yeah, smart for the company that you repay at 18 percent when you could be repaying a college loan at 8 percent. These are the nice guys who still charge up to 24 percent in the states that will let them.

Of course, lending institutions want us to be more responsible for our debt. But without more regulation of lending practices, lenient bankruptcy law is a much-needed check and balance. If these companies want fewer people to go belly-up on them, maybe they should tighten their lending requirements.

If I invest in a risky stock -- and who hasn't lately? -- I'm not entitled to get my money back. And that's what consumers are to credit card companies -- investments. They're banking on our ability to repay them. So if they want safeguards, they should be willing to give up something in return.

How about a solicitation tax? For every solicitation by phone or mail, the institution must pay a tax. The money could be used to educate consumers about the dangers of over-extending their credit. I'm sure the two chambers, which are about to reconcile their versions of the bill, can come up with additional ideas, some I hope even more distasteful to the credit card lobby than a solicitation tax.

Jim Sollisch is a free-lance writer who lives in Cleveland.

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