Editorial: Let's alter credit card legislation

The U.S. House passed legislation last week that is intended to make it harder for people to get rid of their debts through bankruptcy laws. For a variety of reasons Nevadans have a stake in this bill. In 1997 Nevada ranked fourth among states in the number of personal bankruptcies, with 7.7 of every 1,000 residents filing for protection against creditors. The gaming industry also had an interest, because last year an effort was made -- unsuccessfully -- to amend a bankruptcy bill that would have banned ATMs from casinos and forgiven debts owed to casinos.

The House's version last week did not include any provisions that would impact the gaming industry, but there are other aspects of the bill that are worrisome. One such provision is the creation of an unalterable "means test" that would determine whether the debtor could erase the debts completely through Bankruptcy Court protection or be allowed to pay them back over time. Under the bill, a judge would not have any discretion in determining the reasonable living expenses for a debtor in bankruptcy.

Even a staunch conservative such as Rep. Henry Hyde, R-Ill, opposed the lack of flexibility. Unfortunately other members of the House haven't yet learned any lessons from years of passing tough-on-crime legislation that doesn't give judges any discretion when sentencing. Setting minimum terms for some offenses has tied the hands of judges and led to unnecessarily harsh penalties. The same probably will happen with bankruptcy if the legislation in its existing form becomes law.

It also shouldn't go unmentioned that it is the credit card industry leading the charge on this bill. Many consumer activists correctly point out the hypocrisy of these companies trying to prevent some of their customers from seeking bankruptcy protection. These companies, after all, are the ones flooding high-risk customers with mail offers promising low rates. The reality is often hidden in the fine print which, if a consumer squints hard enough, reveals that the rate offered lasts just a few months. After that introductory period these interest rates skyrocket.

In response to these concerns the House did pass some amendments that would mandate that credit card companies clearly disclose when "teaser rates" expire and the higher interest rate then kicks in. Another provision would require credit card companies to disclose up front their late-payment fees.

Bankruptcy is a problem in this nation and all too often it is sought as a way to escape paying one's debts. Americans filed a record 1.4 million personal bankruptcies in 1998, so there is a need to get this problem under control.

But now that the legislation is in the hands of the Senate, the upper chamber should correct the House's mistake and remove the provision that prevents judges from taking into account extraordinary expenses debtors may face, such as health care costs and assisting elderly parents, that the legislation doesn't include. This will make it better legislation that ensures that debts are collected, yet allows a judge the flexibility to make a rational decision based on all the facts.

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