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Dear Representative Nadler:
Thank you for your letter of March 4, 1999, to the President regarding bankruptcy reform. He has asked me to respond on his behalf. The President appreciates your kind words about the role that he and the First Lady played during last year’s debate on bankruptcy reform. He also appreciates your continued dedication to this issue.
Web posted and Copyright © March 24,
1999, American Bankruptcy Institute.

EXECUTIVE OFFICE OF THE PRESIDENT

OFFICE OF MANAGEMENT AND BUDGET

WASHINGTON, D.C. 20503

March 23, 1999

The Honorable Jerrold Nadler

Subcommittee on Commercial and Administrative Law

Committee on the Judiciary

U.S. House of Representatives

Washington, DC 20515

Dear Representative Nadler:

Thank you for your letter of March 4, 1999, to the President regarding bankruptcy
reform. He has asked me to respond on his behalf. The President appreciates your kind
words about the role that he and the First Lady played during last year’s debate on
bankruptcy reform. He also appreciates your continued dedication to this issue.

As you know, the President supports responsible bankruptcy reform that is balanced,
would reduce abuses of the bankruptcy system, and would require debtors and creditors
alike to act responsibly. The President was disappointed that the last Congress failed to
produce legislation that he could support. He remains hopeful that bipartisan consultation
and compromise will result in legislation that he can enthusiastically sign this year.

Last year the Administration expressed its strong opposition to the House-passed
version of H.R. 3150. We encouraged passage of the Senate bill "as an important step
toward balanced bankruptcy reform," but noted that the Administration would support
its enactment "only if the essential reforms incorporated by the Senate
managers’ amendment [were] preserved and strengthened and the unbalanced and
arbitrary elements of the current House bill [were] omitted." Although we thought
that the Senate bill could be further improved, we believed that the extraordinary
bipartisan support for the Senate bill was an endorsement of balance and moderation. We
were disappointed that the Conference Report failed to include key provisions of the
Senate bill, thus failing the test of balance. In my letter to Congressional leadership
dated October 9, 1998, I noted that the President’s senior advisors recommended that
the President veto the Conference Report. Our position from last year has not changed.

During this year’s debate, the Administration will continue to encourage Congress
to find an appropriate balance. Among the issues that must be addressed are:

• Access to Chapter 7: Any "means test" imposed should deny access to
  Chapter 7 only to those who genuinely have the capacity to repay a portion of their debts
  successfully under a Chapter 13 repayment plan. Thus, debtors affected by a means test
  must be given a meaningful opportunity to have their specific circumstances considered by
  bankruptcy courts with discretion to determine whether they genuinely have the capacity to
  repay a portion of their debts. In addition, the time periods and thresholds used in any
  means test should be set to ensure that only those debtors with a strong likelihood of
  success are denied access to Chapter 7.
• Nondischargeable Debts: It is generally inappropriate to make
  post-bankruptcy credit card debt a new category of nondischargeable debt. The Bankruptcy
  Code makes debts nondischargeable only where there is an overriding public purpose, as
  with debts for child support and alimony payments, education loans, tax obligations, or
  debts incurred by fraud. We remain skeptical that the current protections against fraud
  and debt run-up prior to bankruptcy are ineffective and that the additional debts made
  nondischargeable by this bill meet the standard of an overriding public purpose. If new
  categories of nondischargeable debt are to be created, however, they should be narrowly
  tailored and limited to situations where the debtor is clearly abusing the system, such as
  when the debtor: (1) incurred the debt to pay nondischargeable debt with an intent to
  avoid the debt in bankruptcy; and/or (2) incurred the debt on the eve of bankruptcy for
  goods and services that are not reasonably acquired to support the debtor's household.
• Coercive Credit Practices: Particularly if we are to provide new
  opportunities for creditors to challenge debtors' use of the bankruptcy system under the
  707(b) abuse test, it is imperative that we adequately limit prevalent abusive creditor
  practices such as coercive reaffirmations and violations of the automatic stay. While the
  Senate bill initially took laudable steps in this direction, the Conference Report rolled
  back existing consumer protections by denying consumers an effective means for remedying
  the harm from such practices and eliminating the current authorization for penalties for
  intentional violation of debtor rights.
• Consumer Information and Protection: The challenge posed by the
  unprecedented level of bankruptcy filings requires us to ask greater responsibility of
  both debtors and creditors. Credit card companies must give consumers more and better
  information so that they can understand and better manage their debts.
• Homestead Exemptions: At the same time that we are creating a system
  that will deny certain moderate-income Americans access to the traditional "fresh
  start," we should also close the loopholes that allow the wealthy to shield hundreds
  of thousands of dollars of wealth from their creditors.

We look forward to working with you and your colleagues on both sides of the aisle to
address these and other important concerns and to produce responsible, balanced bankruptcy
reform.

Sincerely,

Jacob J. Lew

Director

Identical Letter Sent to the Honorable John Conyers, Jr.

To revise the banking and bankruptcy insolvency laws with respect to the termination and netting of financial contracts, and for other purposes.

To revise the banking and bankruptcy insolvency laws with respect to the termination and netting of financial contracts, and for other purposes.

To revise the banking and bankruptcy insolvency laws with respect to the termination and netting of financial contracts, and for other purposes.

To increase the availability and choice of quality health care.

To amend the Truth in Lending Act to enhance consumer disclosures regarding credit card terms and charges, to restrict issuance of credit cards to students, to expand protections in connection with unsolicited credit cards and third-party checks and to protect consumers from unreasonable practices that result in unnecessary credit costs or loss of credit, and for other purposes.

H.R. 900--Consumer Credit Card Protection Amendments of 1999
March 2, 1999
Section-by-section summary
Sponsor: Rep. John LaFalce
H.R. 900--Consumer Credit Card Protection Amendments of 1999
March 2, 1999

[-------------------------------]

Section-by-section summary


Sponsor: Rep. John LaFalce

Sec. 1. Short Title/References: "Consumer Credit Card Protection Amendments of 1999"

Sec. 2. Disclosures Regarding Minimum Monthly Payments: Requires new consumer disclosures regarding required minimum monthly payments-

In card agreements-how minimum payments are to be calculated;

In card solicitations--the charges or penalties to be imposed for failure to pay a minimum payment;

In billing statements-estimates of the months required and the total cost to the consumer of repaying card balance in full if payment is made only at level of the required minimum monthly payment.

Sec. 3. Disclosure of Late Payment Fees: Requires card issuers that impose a penalty on card holders that fail to make a monthly payment by a required payment due date to state the date that payment is due in bold print in a prominent place on the monthly billing statement, together with the amount of the fee or charge that will be assessed if payment is received after that date.

Sec. 4. Worldwide Web-Based Credit Card Solicitations: Requires that all disclosures regarding the terms and costs of credit card accounts that are required for direct mail solicitations also be included in solicitations on internet sites or web pages. These disclosures must be clear and conspicuous, readily accessible to consumers and updated regularly to reflect all current credit card terms and costs.

Sec. 5. Disclosures Relating to "Teaser" Rates: Require more clear and conspicuous disclosure regarding special or introductory interest rates used to entice consumers to open credit card accounts, including--

the date that the introductory "teaser" rate will expire;

the permanent rate or rates that will be applied to the account after the introductory "teaser" rate expires;

any conditions under which the "teaser" rate may be revoked or otherwise conditioned on actions by the card holder (e.g., failure to make the minimum payment or to make payment on time) and the interest rate to be applied to the account as a result of such action.

Sec. 6. Limit on Inactivity Fees: Prohibits card issuers from imposing an "inactivity" fee for any monthly billing period where a card holder has an outstanding balance that is subject to finance charges.

Sec. 7. Issuance of Credit Cards to Underage Consumers: Prohibits issuance of a credit card account to persons who have not reached the age of 21, except where the person submits a written application that is either co-signed by a parent or legal guardian or provides evidence of independent means for repaying any debt obligation.

Sec. 8. Penalties for On-Time Payment: Prohibits card issuers from canceling credit cards, reimposing annual fees, imposing maintenance fees or minimum finance charges, misrepresenting payment due dates to gain early payment on the account, or other actions which are intended to penalize any card holder solely on the basis that the card holder routinely pays off their monthly credit balances on time without incurring interest charges..

Sec. 9. Freeze on Interest Rate Terms and Fees on Canceled Cards: Requires that credit card holders who receive notice of an increase in the interest rate applicable to their account be permitted to cancel the account prior and repay any balance at the interest rate and terms applicable at the time of the rate increase. Requires card issuers to provide notice of the consumers' right to cancel the account as part of any notice of an increase in annual interest rates.

Sec. 10. Disclosures on Credit Advances through Third-Party Checks: Prohibits card issuers from providing card holders with any negotiable or transferable "convenience" check for use in making payment or transfer to a third-party unless the issuer also provides prominent notice of any additional fees and interest costs applicable to any use of these checks.

Sec. 11. Limitation on Over-The-Limit Fees: Prohibits a card issuer from charging a fee or penalty for an extension of credit that exceeds a card holder's maximum credit limit where the issuer had provided specific prior approval for the extension of credit.

Sec. 12. Unsolicited Dual Purpose Cards: Prohibits card issuers that seek to avoid current prohibitions against mailing unsolicited credit cards to consumers from sending unsolicited cards that have multiple purposes (i.e., calling cards, stored value, check guarantee, discount/award cards, etc.) but are connected to a credit plan and can be used, either initially or upon later activation, to obtain credit.

Sec. 13. Civil Liability: Extends civil liability protections under the Truth in Lending by incorporating specific references to new protections authorized by the legislation and by striking language that restricts issuer liability in credit card solicitations only to consumers that use credit cards and pay annual fees.

Sec. 14. Regulations: Requires the Federal Reserve, within six months of enactment, to issue final regulations implementing the amendments and authorizes the Fed to issue such staff commentary and publish model disclosure statements and forms as it determines necessary.

[-------------------------------]

Rep. Rick Boucher (D-Va.)
Click here to email Congressman Boucher
'The typical American family pays a hidden tax of $550 each year because of increased charges for credit and higher prices for goods and services attributed to bankruptcies of mere convenience.
Web posted and Copyright © February 25,
1999, American Bankruptcy Institute.

Statements Made Upon the Introduction of the

"Bankruptcy Reform Act of 1999"

February 24, 1999

Congressmen*

Rep. Rick Boucher (D-Va.)

Click
here to email Congressman Boucher

"The typical American family pays a hidden tax of $550 each year because of
increased charges for credit and higher prices for goods and services attributed to
bankruptcies of mere convenience.

"Bankruptcies of convenience are driving this enormous increase. Bankruptcy was
never meant to be used as a financial planning tool, but it is becoming a first stop
rather than a last resort because our current bankruptcy system encourages people to walk
away from their debts regardless of whether they have the ability to repay any portion of
what they owe."

Rep. Steve Chabot (R-Ohio)

"We probably would have passed this bill in the last Congress but essentially ran
out of time."

Rep. George Gekas (R-Pa.)

"Our bill then and now provides for the fresh start that is required for the
individual and family that finds itself in financial bedlam that they have no choice by to
get a fresh start.

"With the overwhelming margin voting in favor of the bill, it could not be
anything but a bipartisan result."

Rep. Henry Hyde (R-Ill.)

"Our nation’s bankruptcy system is one of the world’s most progressive,
and we must keep it that way. ... Congress must confront the [bankruptcy] issue directly
and curb abusive and predatory practices of those who would game the system."

Rep. Sheila Jackson-Lee (D-Texas)

Click
here to email Congresswoman Jackson-Lee

"This is old legislation that has risen its unseemly head. ...The bill
doesn’t deal with the constant pounding of credit card opportunities and the
opportunity for debt.

"The constituents used to support this legislation last year need to really wake
up and find out if this is the way you want to go."

Rep. Bill McCollum (R-Fla.)

Click
here to email Congressman McCollum

"Bankruptcy will cost consumers more than $50 billion in 1998 alone. That
translates into over $550 per household in higher costs for goods, services and credit. If
we do not make reforms now, responsible borrowers and consumers will continue to pay the
prices in the form of higher costs for goods, services and credit."

Rep. Jim Moran (D-Va.)

Click
here to email Congressman Moran

"The current bylaws are in dire need of reform. ... No one’s rights will be
taken away; a judge will always make the final call on all of these matters.

"[Bankruptcy] should not be an easy way to pile up debts people have no interest
paying on."

Rep. Jerrold Nadler (D-N.Y.)

Click
here to email Congressman Nadler

"This bill would still allow credit card companies to have their debts survive
bankruptcy and force children to compete with the credit card companies for the
debtor’s post-bankruptcy income–something they do not have to do now.

"The bill uses an inflexible, one-size-fits all formula for deciding how much
families can repay, which relies on guidelines written by IRS bureaucrats for an entirely
different purpose.

"This bill is the purest case study of why we are in need of campaign finance
reform."

Rep. Pete Sessions (R-Texas)

Click
here to email Congressman Sessions

"Companies, banks, credit unions and other financial institutions who loan money
to people do that with the expectation that the person is going to pay back that which
they have taken. ... Reasonableness is what this bill is all about.

"The Rules Committee is aware of this bill and we’ll shepherd than on through
very quickly."

Rep. Ellen Tauscher (D-Calif.)

Click
here to email Congresswoman Tauscher

"There are two reasons why it is important to pass this bill: 1. It is important
to show the American people that we can work together. ... 2. It’s important to show
the American people that we can fix a law prejudiced against people who clearly want to do
the right thing."

*While not all Congressmen have email
addresses, communications can be sent to them by U.S. mail, care of

U.S. House of Representatives

Washington, DC 20515

Organizations

Coalition for Financial Responsibility

"We support this bill because it embodies the principles of fairness and personal
responsibility. No one wants to take away the option of filing for bankruptcy by those who
have suffered a serious financial crisis and need the opportunity for a fresh start. This
bill will ensure that those individuals have access to the bankruptcy system just as they
always have.

"But the bill will also ensure that higher-income filers re required to repay what
they can afford."

Consumer Federation of America, Consumers Union and National Consumer Law Center

"This version of bankruptcy reform would be disastrous for American families with
financial problems. Instead, we urge you to consider a more targeted and balanced
approach, which ends abuse by debtors and creditors, while preserving meaningful access
for those in need of bankruptcy protection."

National Bankruptcy Conference

"Re-introduction of this omnibus bankruptcy bill is especially disappointing
because it disregards the policy concerns expressed by the Administration, over 20 groups
representing the interest of women and children, civil rights groups, and consumer
advocates, along with a variety of other groups."

National Retail Federation

"[The] legislation provides complete relief for those consumers who encounter
serious financial difficulties. However, the legislation would also ensure that those who
blatantly misuse the system to wipe out debts that they can afford to pay would not be
allowed to do so."

National Women’s Law Center and National Partnership for Women & Families

"Contrary to claims by some, the child support enforcement provisions included in
the bill do not adequately protect women and children. Although in some cases they will
simplify the procedures for collecting child support during bankruptcy, they do not
address the fundamental problems created by the bill: the fewer debtors will be able to
get their finances re-ordered in bankruptcy, that more non-child support debts will
survive bankruptcy and compete with the payment of child support, and that custodial
parents forced into bankruptcy will lose protections against eviction and other coercive
practices."

U.S. Chamber of Commerce

"[T]he bill would close a number of loopholes in current law that encourages
debtors to take advantage of the system and avoid paying their debts. This legislation
provides a fair needs-based system that takes debtors’ special circumstances into
account while assuring that those who can afford to pay are required to do so.

Individuals

Philip Strauss, Assistant District Attorney

Family Support Bureau for the City and County of San Francisco

"Congress, in working with the states, has closed all loopholes [to avoid
repayment of child support] but those permitted by [the bankruptcy process]. This bill
will keep family support out of the bankruptcy system.

"This bill will drastically improve the ability of people like myself to enforce
child support obligations while people are in bankruptcy."

To amend title 11 of the United States Code, and for other purposes.

Committee on the Judiciary
Hearing Testimony Presented to
Subcommittee on Commercial & Administrative Law
Jurisdiction Oversight Plan