Key Democratic lawmakers are pushing legislation that would block creditors charging high interest rates on credit cards from collecting from consumers in bankruptcy proceedings.
The proposal would change bankruptcy laws to dissolve claims for repayment of debt carrying interest over a certain level, now 18.5 percent. It could affect millions of dollars in claims made by credit card companies from consumers who have filed for bankruptcy protection.
"American consumers are relying more than ever on credit cards to make ends meet each month," Sen. Sheldon Whitehouse, D-R.I., a sponsor of the bill, said at a Senate Judiciary subcommittee hearing. "At the same time, banks losing money in mortgages and their other areas of business are attempting to squeeze more and more profit out of their credit card customers."
With the leverage of a bankruptcy threat and high-interest claims dissolved, Whitehouse said, "a customer struggling under a 30 percent penalty rate could negotiate for more reasonable terms."
Stringent legislation to change credit card practices has been put forward in recent years in the Democratic-controlled Congress. With a Democratic president in the White House, prospects for such measures and other consumer-friendly proposals have advanced.
Democrats are tapping into rising public anger over corporate excesses and the conduct of banks and other companies receiving billions of dollars in taxpayer money. A crescendo of outrage over millions in bonuses paid to employees by embattled insurance company American International Group spiraled into a House vote last week approving a bill to slap punishing taxes on big bonuses at all bailed-out companies.