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Testimony Part II In terms of college students, the lack of information on their consumer debt levels (obscured by student loans, private loans, direct parental payments, and other forms of family assistance), has led to the surprising discovery that the fastest growing group of bankruptcy filers is 25 years old or younger. The credit card industry has funded research studies that present an idyllic world of tech savvy and financially responsible college students that belie the escalating social problems associated with credit card debt. Through the Arose colored glasses” of the credit card industry, which claims that approximately 3 out of 5 college students pay off their charges at the end of each month, the credit card is portrayed as a “knight in shining armor” a la Jerry Seinfeld’s advertisements for American Express. Instead, the flawed research methodology of these few industry sponsored studies ignores such crucial trends as the use of student loans to pay credit card debts (80% of college students are enrolled in public schools), surveys that explicitly exclude students that have dropped out of college due to high credit card debts, informal family loans or payments for reducing high interest credit card debt, supplementary private loans for paying off credit card debts, and inclusion of parents’ credit cards (where students are secondary card users that are not responsible for monthly charges). Furthermore, by focusing on the lifestyle enhancements that credit cards offer to “mature” students, public attention has been directed away from the social problems that have emerged from their unprecedented expansion over the last decade. These include physical maladies (from anxiety, excessive smoking and drinking, depression), parental authority conflicts, loss of scholarships due to extra jobs for monthly payments (low grades), job rejection, denial of auto and home mortgage loans, rejection for student loans for graduate and professional school, decline of apartment rental applications, increasing defaults on federal student loans, and, in the most extreme cases, student suicides; the latter was recently reported in a Sixty Minutes II program (www.cbs.com and www.creditcardnation.com). Not incidentally, the sharp increase in consumer debt among college students has defied the recent decline in consumer bankruptcies; last year, the number of bankruptcy filers 25 years old or younger jumped to nearly 150,000. In view of the enormous increase in consumer credit offered to college students and the ongoing slowdown in the U.S. economy, the experiences of recent college graduates offers instructive insights into industry responsibility in the rapidly growing group of bankruptcy files. Significantly, the case-studies reported in my 1999 study include students whose parents emphasized the importance of credit as a convenience and debt as a moral vice. Even in these cases, the promotion of credit cards on college campuses--where universities “earn” multi-million dollar annual ‘royalties’ for exclusive credit card marketing agreements--quickly erodes cautious family values toward the use of consumer credit and the accumulation of debt. For example, beginning with his middle-class upbringing in Indiana, where his father inculcated the Midwestern values of frugality and debt avoidance, Jeff entered Georgetown University in 1995 with a commitment to conduct his financial affairs on a cash-only basis. Initially, he socialized with students like himself--from moderate income Midwestern families--whom shared similar social backgrounds and cultural experiences. But, Jeff soon realized that he wanted to transcend his family background and enjoy the more exciting lifestyle of his more affluent and urbane friends such as his roommate. At first, his adherence to the “cognitive connect” (i.e., that his income/resources must determine consumption) made him “stand out” among his peers. For instance, Jeff’s father always paid restaurant bills in cash. His motto is, “if you don’t have the cash then you shouldn’t buy it.” Jeff’s new friends, however, associated this behavior with the quaint and backward cultural practices of Depression era farmers. Rare is the situation when their parents use cash for common financial transactions. This clash of cultures led Jeff to apply for a credit card. He received two credit cards his first semester including a Gold MasterCard. Although Jeff initially obtained his credit cards for convenience, he was impressed by the favorable response of others to his Gold credit card, “It made me feel like I had made it... people treated me different when they saw [the Gold card].” Jeff acknowledges that this new respect was premature, since he did not yet have a “real” job, but perceived it as an early recognition of his future social status as a graduate from a prestigious university. Significantly, Jeff first began using his credit cards like cash, paying off the balances at the end of the month, “Why pay cash. [Afterall] what’s the point of having a credit card.” His other reason for obtaining credit cards was for emergencies. Hence, as long as Jeff’s savings and loans could finance a carefree lifestyle, his credit cards served as a modern convenience that befitted his status as a student at an elite, private university. Of course, this situation quickly changed when his financial resources were exhausted in the fall of his sophomore year. As a freshman, Jeff saw his credit cards as his best friend, an angel of mercy during crisis situations. At first, I decided that my credit cards would only accumulate debt in case of emergencies, such as being stranded in an airport and needing a [plane] ticket. After a while, I decided that it was okay to charge necessary things like books and other school related expenses... Then, after charging for “needs,” it was just so easy... I decided that it was okay to charge anything I damn well wanted.” As his debt increased, with 8 new credit cards during his sophomore year, Jeff became disheartened. Although they enabled him to rebel against the strict social control of his father, Jeff was now encumbered with several thousand dollars of debt. Over time, Jeff confounded his pursuit of personal independence with the rejection of the cultural ethos of the “cognitive connect.” Afterall, he argued, consumer debt it is a common--even modern--trend of professionally successful people and “everyone else I knew was in debt... and so were many of their parents.” Among his peers, they rationalized their indolent spending behavior by emphasizing “the great jobs that we will get [after graduation] that will enable us to pay off our credit card [debts].” At the onset of his college career, Jeff’s conservative Midwest background made him a most unlikely candidate for accumulating a large credit card debt. However, with tuition over $23,000 per year at Georgetown University, Jeff quickly exhausted the $40,000 “loan” that his parents saved for his college education. And, with a combined household income of over $100,000, his financial aid was primarily limited to student loans. Unlike students at less costly public colleges, moreover, Jeff was not able to transfer any of his personal debts into student loans. This is because Jeff’s student loans paid only a fraction of Georgetown’s tuition while his duties as an on-campus resident hall advisor (RA) provided his room and board. Jeff’s family inculcated the importance of adhering to the ‘cognitive connect’ of consuming only what could be paid in cash; credit card use was acceptable only if one had sufficient savings or earnings that “could back up your purchases.” Initially, Jeff succumbed to the temptations of credit cards for non-economic reasons. They offer emotional security in case of personal “emergencies” and alleviate social status anxiety because “people treat me so much better when they see my Gold [American Express, MasterCard] cards.” Jeff’s first credit card was an impulsive response to a Citibank advertisement “that was hanging on the wall in the dorm.” The Visa card offered a credit limit of $700 with an introductory rate of 4.9%. By the end of his freshman year. Jeff had received three credit cards which were used primarily for entertainment-related activities. The shift from using credit cards for convenience to financing an inflated standard of living was a normal extension of Jeff’s college experience. As he explains, “Everyone has to take on debt to go to college... everyone is expected to have student loans... Even in my Midwestern [culture] which emphasizes that debt is bad, college loans are viewed as good debt... Low interest rates... High price of college equals high value... [produces] a greater return on your investment.” By the middle of Jeff’s sophomore year, he had exhausted his parents’ college “loan.” At this point, he confronted a profound crossroads in his college career. Either he fundamentally altered his consumer oriented lifestyle or abandon his familial attitudes toward debt. Faced with the choice of losing his more “sophisticated” and urbane friends, whom view debt as a necessary means to a justifiable end, Jeff easily accumulated 8 more credit cards in 1997. The most striking feature of Jeff’s credit card use is how quickly he abandoned the virtue of frugality as a necessary means for establishing his own social identity outside of his father’s strict control. Afterall, the culture of consumption that permeates collegiate life views saving as a practice of “hicks” while debt is the “breakfast of champions.” By the end of his sophomore year, Jeff had accumulated a couple of thousand dollars in credit card debt. Instead of beginning his junior year with savings from his summer job, most of Jeff’s earnings were used to pay off his credit cards. Significantly, as his credit card balances rose, Jeff received congratulatory letters from credit card companies extolling his good credit history and raising his credit limits as a “courtesy to our best customers” so that he could avoid over limit fees. Although he has never earned $10,000 in annual income, the deluge of credit card offers obscured the fragility of his Jeff’s financial circumstances, “with the constant arrival of new “pre-approved” credit card applications AND the raising of my credit limits the credit card companies made it seem like [my level of debt] was okay... When I started to fall behind, I even received letters that allowed me to ‘skip a payment-because the company ‘understood’ that sometimes debts can back-up such as during the holidays.” It was during this period that Jeff eagerly embraced the marketing ploys of the credit card industry so that he could accumulate “miles” or “points” for frequent flier and consumer gift programs. More importantly, this practice led to surfing” or transferring debt from high to low interest “introductory rate” credit cards. As Jeff learned to “tread water” by “surfing” in this period, he learned the next lesson of the credit dependent: the “credit card shuffle.” That is, paying his credit card bills with other credit cards through monthly balance transfers and ‘courtesy checks.’ This acceptance of his new debtor status was disheartening but I rationalized it by telling myself that everyone else is in debt... Afterall, I’m going to get a great job and pay it off.” The “good” or “responsible” credit card debt such as school related expenses, a personal computer, and work suits was soon taken over by entertainment on weekends, restaurant dinners, spring break in Florida and then London and Canada. With one ten-day vacation costing over $5,000, AI even charged the passport application fee,” Jeff found himself on the verge of exhausting his available cash and credit. Fortunately, the university credit union is willing to assist students like Jeff whom find themselves “drowning in credit card debt... most of the people I know that go to the credit union are getting loans to pay their credit cards.” Without the option of federally guaranteed student loans to service his credit card debts, Jeff received a $10,000 loan at a moderate 11.9 percent. This credit union loan essentially “bought some time” for Jeff before entering the job market--an option not available to most college students. Not incidentally, a condition of the loan disbursement was that $3,000 had to be used to pay off one of his credit cards. The balance of the loan was spent on school expenses as well as catching up on his other monthly credit card payments. During his junior year, Jeff began to engage in riskier and more creative credit card schemes. For instance, he began “surfing” which entails transferring debts from high interest rate cards to those with much lower albeit temporary “introductory” rates. As Jeff learned how to lower his monthly payments through this technique, he began to exhaust his lines of credit. Instead of triggering cautionary warnings from his credit card companies, Jeff received new “Pre-Approved” credit card solicitations and congratulatory letters announcing that he had “earned” an increase in his credit limits. He even began receiving letters that encouraged him to miss a payment, such as during holiday gift-giving seasons, while lauding his good credit history. These mixed messages are easy for college students to misinterpret. Indeed, Jeff rationalized that his accumulating debt was not very serious since the credit card companies “made it seem that everything was okay by sending new applications AND raising existing credit limits.” During this period, moreover, Jeff became so dependent on ATMs (his parents never used them) that he did not even think about the transactional costs ($1.50-$3.00). As cash advances became more frequent, he did not want to know that the fees and higher interest rates made their cost comparable to short-term pawnshop loans. Eventually, he “hit the [financial] wall” when his meager stipend as a residence hall advisor made it difficult to send even minimum credit card payments. The $10,000 debt consolidation loan from the university credit union temporarily averted an economic crisis. But, this proved to be only a temporary financial “band-aid.” Ironically, a contributing factor to his financial crisis was two failed business ventures with his roommate which were intended to eliminate their debts. The first was a service to translate resumes of Mexican and other Latin American students whom were seeking internships or applying to colleges in the United States. Encouraged by friends seeking their assistance, they purchased all the necessary office equipment of a high-tech company: computer, fax machine, cell phones, executive chairs, high quality business cards and fliers, web site fees, P.O. box, and legal fees for incorporation in Delaware. After several months without clients and rapidly depreciating business technology, Jeff and his “partner” opted to “cut our losses” and terminate the business. Each lost over $2,500. To add further financial insult, they had to pay additional legal fees to dissolve their corporation and are still paying the contract for their listing with an internet “search engine.” Following this entrepreneurial debacle, they sought to recoup their losses through the stock market. Instead of becoming more cautious about debt, “our credit cards allowed us to get too big for our britches” According to Jeff, Amy roommate found out that his company was going to be bought out. So, he was convinced that we would make a quick profit if we bought some stock before [the acquisition]... a sure winner! We each bought $5,000 worth of stock with cash advances from our credit cards... with e-trade we even saved on brokers’ commissions... The company was bought-out alright but then it was cannibalized and the stock fell... We each lost over $3,000.” When asked why they pursued such risky ventures while still in school, Jeff responded, “Because we could! The courtesy checks gave us the opportunity act on our impulses.” By the end of Jeff’s junior year, the social empowerment provided by his 11 bank and 5 retail credit cards had changed dramatically: they had evolved from friends to foes. The social “doors” that they had previously “opened” were now increasingly closed. Jeff was “so concerned about meeting the right people and fitting in with them... that [he] did not think twice about $50 bar tabs and spending spring break in London... To think otherwise would have meant certain social death.” Fortunately, Jeff was forced to confront his situation after realizing that “I no longer had control over my credit cards. Now, they controlled me.” The earlier freedom to “act like an adult” had been replaced with the financial responsibility of paying for his earlier excesses. Indeed, rather than enjoying his final year at college, Jeff is enduring social hell by working full-time while taking a normal course load and applying/interviewing for jobs. He works at least 30 hours per week at two part-time jobs (in addition to his position as a resident advisor) simply to make the minimum payments on his $20,000 credit card debt and $10,000 debt consolidation loan. Most of his friends have stopped calling to make plans for the weekend because he is “shackled to my credit cards... I can’t go out with them like I used to because I have to work... ultimately, to pay for the fun that I charged on my credit cards a couple of years ago.” Today, Jeff views his credit cards with complete disdain, AI hate them.” He is delinquent on many of his accounts and has threatened to declare bankruptcy unless the banks offer him more favorable interest rates. Ironically, Jeff’s social odyssey of the last four years has brought him “full-circle” in affirming his father’s mantra toward debt: “if you can’t afford it, don’t buy it.” What angers him the most about credit card marketing campaigns on campus is that they extol the benefits of ‘responsible use’ but neglect to inform impressionable and inexperienced students about their “downside” such as the impact of poor credit reports on future loans and even prospective employment. This is crucial, according to Jeff, because he now understands that “the credit card industry knows exactly what it is doing [in encouraging debt] while taking advantage of students whom are trying to learn how to adjust to living away from home, often for the first time... Let’s face it, how can these banks justify giving me 11 credit cards on an annual income of only $9,000. These include a Gold American Express and several Platinum Visa cards.” Although Jeff does not dismiss his financial responsibility, he states that AI almost feel victimized... giving credit cards to kids in college is like giving steroids to an athlete. Are you not going to use them after you get them-” Furthermore, as a dorm Resident Advisor (RA), Jeff emphasizes that the university offers an wide range of student informational programs and services but with one notable exception, “there if nowhere to go for debt counseling... everything is discussed in Freshman Orientation or incorporated in Resident Advisor training and residence hall programs... AIDS, suicide, eating disorders, alcohol, depression, peer pressure, sex ed, academic pressures, learning handicaps... all but financial crisis management.” As Jeff has “gone full circle” in his attitudes toward credit cards, he is now coping with the unexpected “pain” of his past credit card excesses. Over $20,000 in credit card debt (plus his $10,000 debt consolidation loan and over $30,000 in student loans), Jeff has washed ashore from his “surfing” escapades. Although working two part-time jobs during his senior year, Jeff is now delinquent on several of his 16 credit cards. A business major, Jeff is anxiously awaiting the outcome of his job search. He is optimistic as some of his peers have already received starting salaries that range from $40,000 to $55,000 per year. In addition, several have received signing bonuses between $3,000 and $10,000. For Jeff, the latter is especially important because he plans to use this money to reduce his credit card debt. Unfortunately, Jeff’s promising career is encountering obstacles from an unexpected source--his credit cards. During a recent interview with a major Wall Street banking firm, Jeff was asked, “how can we feel comfortable about you managing large sums of our money when you have had such difficulty in handling your own [credit card] debts-” Jeff was stunned. It was obvious that the interviewer had reviewed his credit report--without prior notification--in evaluating Jeff’s desirability to the firm. “Can you believe it,” Jeff declared, “they want an explanation about my personal finances in college and yet they lost over $120 million last year!” In their decision not to offer him employment, Jeff wonders how much was based on his GPA and how much on the “score” calculated by the consumer credit reporting agency. This is certainly not a potential consequence that is explained by the credit card industry when it exclaims, “Build your credit history... you’ll need [it] later for car, home or other loans.” As Jeff passes by the MBNA Career Center on campus, which is named after the credit card company that he owes several thousand dollars, the irony of his “catch-22” situation is not lost on him, “how can I pay them back when their credit reports are hurting my chances of getting a good job!” It is not surprising that growing numbers of students like Jeff are increasingly using sexual analogies in describing their unforeseen circumstances. More bluntly, they are denouncing the predatory policies of the credit card industry as a form of “financial rape.” As Jeff’s experience shows, student financial strategies are becoming increasingly complex as credit card companies offer “the [financial] freedom to hang ourselves.” Even students at expensive private schools are finding ways to transfer their credit card debt into supplementary loans without the knowledge of their parents. This increasingly popular practice helps to explain the wide vacillation in student credit card balances due to infusions of cash from other sources of loans. In addition, Jeff demonstrates how access to credit facilitates costly purchases that would not have been considered under the financial constraints of a typical student budget. The latter is especially disconcerting. It reflects the strong influences of escalating peer consumption pressures as well as sophisticated marketing campaigns that target the youth culture. One of the most seductive is the Sony advertisement, “Don’t deny yourself. Indulge with the Sony [Visa] Card from Citibank... The official currency of playtime,” Or, more succinctly, the ubiquitous NIKE slogan, “Just Do It.” Although Jeff has so far avoided personal bankruptcy by securing a well-paying job with a commercial real estate developer, he notes with concern that some of his classmates have already been laid off due to the slowdown of the economy. In fact, some of his highest salaried classmates have become victims of the “reality check” that many dot-com companies are only recently confronting. If Jeff is forced into the ranks of the unemployed for an extensive period, he anguishes over the prospect that bankruptcy may be his most realistic option. Cris’ initial encounter with “plastic money” began early in the fall of 1989--her first semester of college. Citibank Visa advertisements “were plastered all over the university” and she thought that there was nothing to lose in submitting an application. Besides, Cris was curious about the “power of plastic” since her parents would not permit her to use a credit card in high school and she did not want to provoke an argument by asking now. Furthermore, all of her friends were receiving financial assistance for college from their parents and thus they had considerably more discretionary resources for “play.” Emboldened by the prospect of financial independence, Cris eagerly filled-out the form which did not require the consent of her parents--only a copy of her student ID. At the time, Cris was 18 years old and working part-time at a telephone answering service for about $5.00 per hour. To her surprise, Citibank granted a $500 line of credit, which she immediately used to pay a large library fine and “buy a bunch of clothes at the mall that I couldn’t otherwise afford.” More importantly, Citibank’s decision had a much more profound impact on Cris than the monetary value of its loan because, “It made me feel emotionally and financially mature... [The credit card] helped me become independent [in my relations] with my family and my friends... It made me realize that I deserved to be responsible. That I should not have to beg my stepfather for money or call my grandfather for [financial] help.” Cris’ new social and economic empowerment transformed her attitudes toward consumption and debt. No longer forced to “earn” the ability to consume through work related savings (“cognitive connect”), Visa also “liberated” her from the social control of her parents. At first, Cris limited her charges to school expenses and personal items. By the end of the academic year, Cris was routinely using her credit card for mall excursions, restaurant meals, bar tabs, concert and professional sports tickets, and weekend trips to the beach. These activities underscored Cris’ newfound “freedom” and were reflected in her rising credit card debts. Indeed, the “power” of Cris’ first credit card convinced her to get a second by the end of the fall semester and two or three more in the spring. During this period, Cris learned the flip side of the “power of plastic:” the need to refuel its financial engine with monthly infusions of cash. By the second semester, Cris’ top priority was maintaining her lifestyle and she began working full-time at the answering service company. Not surprisingly, Cris’ grades plummeted. For the first time in her life, she received a ‘D’ and an ‘F’ which resulted in academic probation from the university. As conflicts with Karl intensified over her social activities, Cris moved into an apartment with some of her college girlfriends. These additional financial pressures reinforced Cris’ dependence on her credit cards. As her most dependent asset,” Cris saw them as both her personal savior” and best friend.” When she needed economic help, they were always there for her. And, they did not ask questions about why she needed the money or moralize about her spending patterns. The only problem is that they are high maintenance” friends with a small financial price to pay for their invaluable assistance. At least that was what Cris thought at the time. Cris enjoyed a largely carefree summer and, to reduce her expenses, she enrolled in a local community college for the fall semester. Already over $3,000 in debt and earning only $5.00 per hour, Cris was deluged with “Pre-approved” credit card offers. She attributes her desirability to the credit card industry by her prompt remittance of minimum monthly payments. During this period, Cris began to view her credit cards differently. “After spending my paycheck, I used my credit cards like savings... I used them for everything ... books, tuition, gas, food, hotel rooms at the beach... whether for school, emergencies or simply to enjoy an evening with friends.” This intermingling of credit and earnings was reinforced by unexpected situations such as car repairs and medical emergencies. Afterall, she had to get her car fixed in order to drive to work and her health deserved immediate attention or she could not perform her job. During this period, Cris began to engage in more creative and costly credit card practices that would foreshadow her eventual debt crisis. First, she began to regularly use her credit cards to generate additional cash flow. This strategy usually entailed charging all of her friends’ meals at a restaurant and then collecting their money afterwards. Second, she began to routinely take cash advances from her credit cards “when I realized that I could.” Initially, Cris would use cash advance checks to pay bills like rent, utilities, or car loan. As she got further into debt, however, Cris learned a sophisticated version of the “credit card shuffle.” She would take cash advances at the end of the month and then deposit the money into her checking account so that she could send the minimum payments to the credit card companies. According to Cris, “it got to the point where I had written down all of the PIN numbers of my credit cards and, at the same ATM, I would take cash advances and then deposit the money directly into my [checking] account.” Significantly, this financial management “system” was encouraged by her credit card companies whom profit from high interest rates, cash advance fees, and over limit penalties, “Every time I began to bump against my limit, the banks would raise them. [Because of this practice] it did not become a crisis early when I could have realized the seriousness of my situation.” At the same time, marketing inducements such as 10% off with a new retail credit card such as Hechts or a free Orioles bag with an application for an MBNA MasterCard were “too easy” to pass up. Over the next two years, Cris’ credit card debt jumped from about $5,000 to over $15,000. Cris marveled as she reflected on how she was unaware of the amount of debt that had accumulated on her 8 or 9 credit cards: “after being relatively stable for a couple of years it just [tripled] overnight.” She moved back with her parents to reduce expenses which now included payments on a stereo, VCR, and TV. However, the recurrent conflicts with her stepfather ensured that this was only a short-term move. The following year, she moved in with her boyfriend. Although Cris had received a moderate raise to $6.50 per hour and earned as much overtime as possible, the economic burden of rent and utilities plus her car payment led to a sobering realization: her basic expenses exceeded her income. At the time, Cris had been content to send minimum payments on her credit cards because she had convinced herself that she would soon get Aa good job and pay them all off.” Instead, at 21 years old, Cris was forced to accept the reality that she would have to work full-time and remain a part-time student while attempting to reduce her credit card debts. A $5000 debt consolidation loan offered only temporary relief. As Cris slipped closer to her financial abyss, she was astounded by a debt counseling announcement that she saw on television. It explained that merely sending minimum payments would require over 30 years to pay off existing credit card balances. “With no end in sight,” Cris’ attitude toward her credit cards changed dramatically. From being her “best friend,” they became her worst enemy--”I hated them.” Dependent on the credit card shuffle to “simply get by,” Cris sought help at a local debt counseling agency. What she received was a “shock... I thought that they could help anyone... instead, they told me that they could not help me at all... that I should declare bankruptcy. I was mad, they implied that I was beyond help... I had nowhere else to go... I could not believe that this was happening to me.” Cris did not want to abandon her debts but, on the other hand, she could not find anyone whom was interested in helping her “put my life back together” unless she “started over again.” In fact, the first bankruptcy lawyer that she consulted recommended that she “max-out” all of her credit cards before filing for bankruptcy. Cris was appalled by his suggestion. Afterall, she emphasized, “I am not irresponsible. I was not looking for an easy way out... He made me feel bad about myself and the whole [bankruptcy] process... I was doing it because there was no other option.” Cris declined his offer to represent her during the bankruptcy proceedings. In December 1994, at the age of 23, Cris’ bankruptcy petition was approved. With the guidance of her attorney, which cost $695, the court discharged a total of $22,522 from 13 credit cards and a $5,000 consumer loan; she “reaffirmed” two credit cards and continued payments on her car loan. According to Cris, “I felt awful about abandoning my debt. Afterall, I tried to renegotiate through Debt Counselors but no one was interested in helping me renegotiate my debts.” Indeed, the striking feature of Cris’ story is her emphasis on individual responsibility while at the same time criticizing credit card companies for aggressively marketing excessive lines of credit to naive and emotionally vulnerable students, AI admit that I charged way too much... my debts were all my fault... [However] they should NEVER have given me all those credit cards at my age [under 22]... There was just too little effort to get them. The banks make it TOO EASY to get into debt.” Fortunately for Cris, bankruptcy was a prudent decision because it enabled her “to put the pieces of my life back together.” In fact, she was able to complete her junior college studies as a full-time student and is now enrolled to a four-year university. In May 2001, almost twelve years after receiving her first credit card, Cris is scheduled to graduate with a BA in accounting. For those whom contend that the consequences of bankruptcy are too lenient, Cris’ experience is instructive. Although she agrees that the social stigma is diminishing, Cris emotionally responds that, “you don’t know how bad [bankruptcy] is. They said [my bad credit] would last only 7 years but it will take ten years before the bankruptcy is erased from my credit report... I can’t get a real credit card, AT&T just rejected me for their card, and forget about a house mortgage... I’ve talked to people who are thinking about declaring bankruptcy for only $4,000-$5,000 of debts. As little as they knew about credit cards, they know even less about bankruptcy... Kids need to understand the future repercussions of accumulating multiple credit cards. Many young people see only the immediate benefits/gratification. They are so [financially] ignorant. It is so sad.” At the beginning of the employment life-cycle, “Daniel” illustrates how the impact of credit card debt acquired in college can be obscured by the middle class squeeze after graduation. That is, recent graduates tend to assume greater levels of consumer debt during their job search. This includes employment related expenses (resumes, business clothing, transportation) as well as personal living expenses (rent, food, car, entertainment). Significantly, recent graduates that are financing their lifestyle with credit cards are neither classified as students or new workers. It is during this transitional period that personal credit card debt often grows at a rapid rate--especially during a “tight” labor market. Daniel’s unexpected odyssey into the financial depths of credit card debt began innocuously when he was offered a Citibank Visa application by a corporate representative while walking through the student center. A sophomore at a Howard University, he was struggling to pay for his college expenses and enjoy a modest social life in Washington, D.C. Daniel’s middle-class, professional family is from Kenya and his goal was to become an accountant. With limited funds, Daniel was eager to receive “free money” but was skeptical that a major bank would give him a credit card since he was several years away from earning a middle class salary. From Daniel’s perspective, an undergraduate college student is a major loan risk. In 1988, however, Citibank was aggressively marketing credit cards to college students like Daniel whom it viewed as potentially lucrative customers for high interest, consumer loans. Citibank was so desperate to expand its credit card portfolio that it abandoned the industry policy of requiring parental co-signatures for unemployed students. Banks realized that they could “persuade” parents to pay for their children’s credit card debts with threats of lawsuits and today “inform” parents of the disastrous consequences to their children’s credit reports if their credit card debts are not repaid. By only requiring a copy of his university ID, Daniel quickly completed the application and received a $600 line of credit. He immediately used all of his “new money” for school books, food, and an occasional cash advance. At the time, Daniel thought that his “plastic cash” had been exhausted and he would have to survive on his previous “starving student” budget. Instead, to Daniel’s surprise, he began receiving new credit cards in the mail--a peculiar reward for maxing-out his Citibank Visa. Over the next seven months, Daniel received Citibank MasterCard and Visa “Gold Cards” with rapidly rising credit limits as well as several retail credit cards. For Daniel, it was amazing that all of these credit card applications were “pre-approved” before he had applied for his first job. Apparently, he thought, this reflected the banks’ confidence in his future earning ability. By the time Daniel finished his B.A. degree in 1990, he had over five thousand dollars in credit card debt. Although he does not remember most of these purchases, Daniel is grateful that his credit cards enabled him to enjoy a middle class lifestyle before he had a well-paying job. In fact, this consumer debt did not seriously concern Daniel because he was convinced that he would earn a good salary soon after completing his studies. This is why he justified the frequent payment of his consumer debts through cash advances and balance transfers from bank cards--the credit card “shuffle.” Over the next two years, Daniel used students loans and credit cards to finance his Masters’ degree in accounting. Upon graduating in fall 1991, Daniel had amassed over $15,000 in credit card debt. As a Certified Public Accountant (CPA), Daniel expected that he would be able to quickly payoff these high interest consumer debts. To his shock, however, the 1989 recession severely affected his employment prospects. Daniel spent the summer interviewing for jobs as an accountant and paid his living expenses with his credit cards. Although no longer a student but still looking for his first job, Daniel’s credit card debts were approaching $20,000 when he took a “temporary” position as a security guard. Daniel was stunned that his first annual salary of approximately $15,000 was less than his total credit card debt. Even when a “good job” did not materialize, Daniel did not perceive his credit card debt as a serious problem. He was certain that it was simply a matter of time before he became financially solvent. Undeterred by his escalating consumer debt, Daniel’s full-time job and extensive credit history enabled him to obtain even more credit and “buy whatever I wanted. In stores, I would apply for instant credit cards and be set to buy in a few minutes.” Unfortunately for Daniel, his temporary position lasted nearly two years. As he explains, “During this time, I was basically surviving off credit cards. They paid my rents, entertainment, gas, and shopping...” In 1993, Daniel finally joined a Washington, D.C. firm as an accountant. As a CPA, his initial salary was over $50,000 and he believed that he could begin reducing his over $25,000 in credit card debt. However, Daniel’s newfound professional success persuaded him to ignore his original goal of escaping credit dependence and he quickly accepted “pre-approved” offers for Chevy Chase Gold Visa, American Express, and Diner’s Club cards. Emboldened by his new buying power, Daniel bought a condominium and furnished it with his credit cards. He rationalized the condominium as a good investment and, after all, the mortgage unlike his credit card debts is tax deductible. After a couple of salary increases, Daniel’s rising standard of living soon included a new car and of course auto loan payments in 1994. Now Daniel felt like his hard work was being rewarded as a tax paying member of the American middle class. By 1996, even with an annual salary of nearly $60,000, Daniel’s credit card debts exceeded $30,000--and rising. According to Daniel, “My paycheck could only pay my condo, car, and credit cards. Then I had to depend on the credit cards for gas, groceries or anything else I wanted to buy. No savings. [Over] a few months, I would make thousands of dollars in credit card payment and the debts were not going anywhere.” Efforts to replace his high interest credit card debts with lower interest debt consolidation loans were time consuming and ultimately fruitless. Banks were reluctant to approve new consumer loans with such a high debt to income ratio. Reluctantly, Daniel believed that he had no other option but to file for personal bankruptcy. In early 1997, his Chapter 7 filing was approved by the D.C. bankruptcy court and all of his credit card debts were discharged. Today, Daniel is recovering from the personal pain of bankruptcy and thankful for the opportunity to rebuild his financial future. “Without it [bankruptcy], I would still be increasing my credit card debt and they [banks] would still be increasing my credit limits... instead of relying on cash [advances] from my credit cards I can now get cash from my savings account.” Daniel still uses “plastic” but only for convenience and “prestige.” That is, to minimize suspicions about his past financial problems; he has a debit card and a ‘secured’ Visa credit card. The credit line on his collateralized secured card has been raised twice and Daniel hopes that he will be approved soon for a retail credit card following two previous rejections. Although the days of “easy credit” are temporarily over, Daniel knows that it is only a matter of time before he is able to rejoin the ranks of the middle class with the full privileges of a Gold credit card. You know office politics.” In sum, a review of Daniel’s bankruptcy petition portrays a well-paid professional who appears to have been unable to control his consumption desires. In reality, however, about two-thirds of his credit card debt was accumulated during college and his initial job search. Hence, the roots of Daniel’s financial insolvency were sown by his credit dependency as a university student and the unforeseen difficulty in obtaining a job in the aftermath of the 1989 recession. Jeannie May has worked hard, all of her life, to raise three children and generally to “just get by.” Divorced for over 40 years, she survives on a social security check of $648 per month and part-time work in the “old folks home” where she lives in a small town in upstate Illinois; the rent for her subsidized, one-bedroom apartment is $196 per month. Unlike many of her generational peers, Lawson lacks an accumulated “nest egg” for retirement. Her low-income, blue-collar jobs did not offer a private pension and divorce deprived her of the opportunity for greater household savings. More importantly, the modest home that she and her husband purchased with a VA loan after The War, was sold years ago. This seemingly uneventful decision has had a major, unforeseen impact on Lawson’s “Golden Years.” That is, home equity is the most important source of personal wealth for retirement, especially among working class families. Today, nearly four out of five (79.1%) seniors over 64 years old are home owners and only 8 percent are still paying on their first mortgages while 28 percent have various home equity and second mortgages. Not surprisingly, home equity accounts for most assets of older adults. Jeannie May symbolizes the plight of America’s working class elderly. Born in 1915, the United States was still a largely rural society--especially in the Midwest-- when she was growing up in northern Illinois. The youngest of five children, her parents worked the small family farm that produced mostly corn and some vegetables for the market as well as pigs, cows, and chickens primarily for household consumption. Money was scarce as the family, second-generation immigrants from England, struggled to make ends meet in a local farm economy where credit was informally negotiated and debts were commonly satisfied through bartered exchanges. For example, the local dentist was frequently paid for his services “n-kind” with eggs, butter, and freshly dressed chickens while the school teacher received food and housing which was supplemented with a small monetary salary. This practice of non-monetary exchange was especially common during the 1930s when Lawson’s most vivid memories concerning credit and debt were molded. “Money was hard to come by in those days... many people were losing their farms and even their homes... it was tough times.” Jeannie May’s rural life experiences, Calvinist religious upbringing, and recollections of the Great Depression profoundly shaped her attitudes toward personal debt. On the one hand, the economic rhythms of the seasonal farm economy required rural families to rely on credit for agricultural and household supplies during the planting and fallow seasons and then repay their debts after harvesting the corn or selling some livestock in the cash economy. Hence, even among yeoman farmers, credit and debt were “natural” features of their modest lifestyle. On the other hand, the local Protestant churches emphasized the Calvinist values of hard work and frugality as evidence of a virtuous life. This emphasis on savings as a “sign” of potential spiritual salvation contrasts sharply with the negative views toward leisure activities and personal consumption. Lawson remembers sermons in the little white church that chastised “idle hands” and indolent “material desires” as moral sins that would lead to disastrous personal debt. Together with the painful experiences of the Great Depression, when friends and family members “lost everything to the banks,” Lawson entered her “golden years” with very conservative attitudes toward credit and debt. At 78 years old, Jeannie May still enjoys an active lifestyle that belies her age. Unlike her affluent brother, John, she was unable to translate the generational advantages of rising wages, inexpensive housing, and low educational costs into economic security in retirement. This is partially due to Jeannie May’s divorce and inability to re-marry which forced her to assume the economic responsibility of raising her three children on a single income. Although national poverty rates among older adults at least 65 years old have been falling over the last two decades, from 15.7 percent in 1980 to 10.8 percent in 1996, older women are nearly twice as likely as older men to live in poverty. Also, African American and Latino seniors are nearly three time as likely as Whites to live in poverty; Asian and Pacific Islander rates are nearly the same as Whites (9.7 versus 9.4%).11 For Lawson, her fragile financial circumstances mean that she can not enjoy a leisurely life in her final years; she would prefer to catch up on her ‘patchin’ [a quilt] or knittin’ an Afghan]” for a newborn nephew or niece. Instead, when her health permits (she has diabetes and high blood pressure), Jeannie May works 15 to 30 hours per week in the A[retirement] home’s” kitchen as well as housework and errands for “neighbors” who are usually several years younger. Lawson’s experience, of course, is not unusual. The U.S. Census Bureau reports that 8.6 percent of women and 17.1 percent of men over 64 years old are still “officially” employed in 1997, with projected increases in 2006 to 8.7 percent for senior women and 17.8 percent for senior men. Significantly, this rate for men has declined from 19.0 percent in 1980 whereas it has risen from 8.1 percent for women.15 Although Lawson occasionally receives small financial gifts from a son in Seattle, her older brother is the only source of economic assistance that she can depend on in case of an emergency. That is, until the day that she received that miraculous piece of plastic in the mail--her secret financial savior. Jeannie May does not recall the first VISA solicitation that arrived in late 1987. What she does remember is her excitement over the financial “freedom” that it offered. Afterall, as a struggling single mother, Lawson was always grateful for the higher standard of living that installment credit had provided for her and the children in the 1940s and 1950s. The VA home mortgage loan, used car loans from finance companies, corporate loans for appliances and furniture, store credit from local merchants for clothing, and a charge card for gasoline. Lawson confides that she rarely paid off the balance of her credit accounts at the end of the month and was often late with her payments. Although she accepts most of the responsibility as a poor “budget keeper,” she laments that her ex-husband’s irregular child support increased her dependence on consumer credit by “stretching” her meager earnings. Unlike her past experience with proprietary credit cards (Sears, Montgomery Ward), the new “universal” VISA card offered her the “magic” of purchasing items nearly anywhere she wanted and whenever she wanted them: local merchants, mail order, and even over the telephone. More importantly, it enabled Lawson to the avoid the scrutiny of her financially secure brother (a successful dentist) and his condescending wife who frequently criticized Jeannie’s lifestyle when “helping” with her financial crises. Hence, by avoiding such embarrassing financial assistance, Jeannie May did not have to confront the Calvinist guilt that would eventually erupt from her escalating mountain of consumer debt. This attitudinal denial was reinforced by the marketing strategies of the credit card industry. As long as she “paid her minimums [monthly credit card payments],” Jeannie May convinced herself that she was satisfying her financial obligations and thus adhering to her generation’s moral code of conduct. Unaware of the technological advances in mass marketing, Lawson was flattered by the personalized “invitations” for bank cards that arrived in her mailbox. Jeannie’s limited education (she did not complete high school), low self-esteem (modest family background), meager income as a divorced, blue-collar worker (“scarred” credit history), and respect of authority figures (bankers), made her especially susceptible to the marketing ploys that affirmed her self-worth as a “valued” client. Even after violating her own Calvinist values and life experiences during the Great Depression, by. consuming more than she could afford, Jeannie willing accepted the banks’ explanation that she was credit worthy and that she “deserved” to be “rewarded” with a higher line of credit. After all, she did what she was told, at least for the first few years: promptly remit the minimum payment at the end of each month. As Lawson recounts, “I never really looked at the credit card bills much. What was important [to me] was what I had to pay at the end of the month... I didn’t really keep track of how much I owed. I paid ‘em what they wanted [minimum payment]. They were happy and I was happy.” What is striking and especially disturbing about Jeannie May’s experience is the ease of manipulating her to assume debt levels that she was incapable of financing much less eventually able to pay-off. Indeed, the predatory marketing strategies of the credit card companies are very effective in exploiting the low self-esteem and falling standard of living of America’s senior citizens. As a divorcee who never remarried, for example, Jeannie May’s material lifestyle had plunged below that of her brother and even her children--especially after her retirement. Although she accepted the Calvinist ethos of hard work and frugality, Lawson yearned for some of the indulgences that members of the middle class take for granted: vacation trips, new cars, household furniture, restaurant outings, gift-giving, and even chocolate candies. With few friends (most deceased or in nursing homes) and a disconnected extended family (children in Seattle, Milwaukee, New York), she began coping with her loneliness by embracing material rewards during her leisure time. In the process, Jeannie May sought to emulate the consumption privileges of many middle-class wives (such as her sister-in-law), whom balanced their husbands’ economic success as “producers” by being the primary household “consumers.” It was through the magic of Jeannie May’s piece(s) of plastic that she was able to finally enjoy a comfortable life that previously had been withheld from her. For Lawson and millions of elderly citizens, credit cards are serving increasingly important purposes during the current era of fragmented families and an increasingly fractured social-welfare system. Indeed, Jeannie May did not use her credit cards frivolously by middle class standards, at least at the beginning. The car needed repairs and new tires, her automobile insurance premiums were raised, her diabetes and high blood pressure medications were more costly, she replaced her reading glasses, and finally bought a new winter coat. Lawson’s newfound purchasing power also unleashed the ability to satisfy other “wants” that she felt had been unfairly denied. This led to such purchases as a sofa and dining room table for her apartment, a set of pots and pans for the kitchen, new clothes, knitting and sewing materials/supplies, restaurant dinners, and small gifts for family members during the holiday season. Although supermarkets did not initially accept credit cards, she charged groceries and household supplies at drug stores and even mail-order steaks (delivered by dry ice) from Nebraska. Later, Lawson began making purchases over the telephone via the Home Shopping Network. Jeannie May described with irrepressible glee her anticipation of the UPS truck as it made its appointed deliveries of her eagerly awaited “surprises.” For Lawson, the magic of plastic offered the opportunity to enjoy the consumer lifestyle promoted by mass advertising yet denied by Social Security. By the time Jeannie had maxed out her first credit card in late 1988, about $3,000 in less than a year, she truly believed the banks’ form letters that extolled her responsible credit history. In fact, she began to accept the “pre-approved” credit card solicitations that arrived in her mail box with the now familiar logos of VISA and MASTERCARD, as these were not just any banks that were Acallin’ on her.” Esteemed financial institutions such as Citibank, First Chicago, Continental Bank, and Chase Manhattan were actually vying for her business. According to Lawson, AI figured if the banks keep on sending ‘em to me, then I figured I’d keep on usin’ em... [Afterall] they’re in the business of lending money. I trusted ‘em. I thought they knew what they were doing.” And they did. Instead of eliciting a financial warning after reaching her credit card limit, Jeannie’s “mature” account status triggered a second and then a third card in 1989 followed by a fourth credit card in early 1990. By 1991, Lawson had a huge credit card debt and was having difficulty “making all my [minimum] payments.” Jeannie May really did not know how much debt she had accumulated (over $12,000) or even how bad her financial situation was at the time. What she did admit was that the infirmities of old age were finally catching up to her. AI never thought of myself as one of the old folks [in the retirement home]... I could get around on my own and even helped them with their own chores. With my car and job, my life really hadn’t changed much [in retirement]... I just didn’t have to work as hard [at a full-time job].” The reality, however, was that she could not live adequately on her Social Security income--even with participation in public programs for the elderly such as subsidized housing and medical care. As a result, it became increasingly difficult to budget her modest monthly income due to rising health-related expenses and an uncertain level of supplementary earnings. On the one hand, her high blood pressure and diabetes required more costly medicines--even with Medicaid assistance--which increased her need to work. On the other, her poor health meant that she could not work regularly at ‘the home” and thus could not rely on extra earnings to supplement her meager Social Security check. Although Jeannie’s children remain in contact with her, they provide little financial help; occasionally they send money, but it amounts to only a “couple a hundred dollars a year.” Hence, with a limited family support system and America’s shrinking social safety-net, Lawson’s credit cards became her most reliable form of assistance against the unforeseen and debilitating exigencies of the aging process. It was primarily for economic reasons that Jeannie May ignored her doctor’s advice to ‘slow down” and stubbornly continued to work part-time. For Lawson, employment was crucial to maintaining her newfound independence. That is, work enabled her to shield the escalating credit card debt from outside scrutiny while continuing to enjoy her relatively comfortable lifestyle. Unfortunately, the combination of financial duress, failing health, and a long life of arduous manual labor finally culminated in a mild stroke at the end of 1991. Already stretched to her financial limit, the temporary end of her part-time job forced Jeannie May to finally confront the reality that she could no longer make the minimum payments on her credit cards. While convalescing at home, moreover, the tone of her credit card statements shifted radically--from friendly to concerned and then to threatening. It was at this time that Lawson desperately sought help from the source of last resort: her brother. And, she knew that this decision would require a humiliating explanation as well as the end of her credit reliant lifestyle. For Jeannie, her Calvinist guilt and personal shame would soon be supplanted with the punishment of her previously spartan lifestyle. Lawson’s brother, John, remembers the phone call that led to his dismay over the predicament of his sibling. John lived in a posh, northside suburb of Chicago and immediately made the three-hour drive to Jeannie’s apartment. He had always been protective of his youngest sister and was surprised by her agitation over what he assumed was a relatively minor problem. Afterall, she was a frugal person and there were no obvious warning signals to indicate a sudden change in her lifestyle. In fact, John was unaware that Jeannie May had any bank cards. Upon reviewing her credit card charges, he found not one but four separate accounts. Furthermore, John was able to reconstruct her consumption patterns. What were normal and modest purchases for him were often unnecessary or too costly for Jeannie. Even so, John was impressed by the general pattern of essential charges: car repairs, gasoline, medicine, groceries, clothes, insurance, and other necessary household items. After compiling all of Lawson’s outstanding credit card bills, John was shocked by what they revealed. In less than five years, Jeannie May had amassed over $12,000 in consumer debt. Fear and shame had led her to ignore the cumulative outstanding balance while the marketing campaigns of the credit card industry continued to persuade Lawson that she was a “good” customer. For Jeannie May, her elevation to a middle class standard of living proved to be a temporary respite. After paying the rent, Lawson’s Social Security check barely covered the minimum payments of her credit card accounts. Clearly, if she ever was to regain economic self-sufficiency, Jeannie May had to escape from this financial albatross and return to her more modest lifestyle. With the help of John’s lawyer, Jeannie May filed for personal bankruptcy and is no longer responsible for her past credit card debts. In addition, John purchased a small annuity that supplements Lawson’s retirement income (about $200/month) for the rest of her life. Although a compassionate and foresightful act, John’s recent death of a heart attack at age 87 means that Jeannie May has lost her only dependable source of economic assistance. For her and increasing numbers of the impoverished elderly, the ability to secure a bank credit card is the most realistic strategy for obtaining a modicum of financial security in their later years. And, this is not an unlikely prospect in view of the intensifying competition by credit card companies over new accounts of revolvers. Surprisingly, with heightened concern over the lack of financial awareness of the average American household, the consumer financial services industry has responded by reducing its “fair share” contributions to nonprofit consumer credit counseling organizations at the same time that the demand for these services is rapidly escalating.12 This has resulted in an ineffectual consumer financial education provision in both versions of the consumer bankruptcy reform bill. Like replacing small business loans with high interest credit cards, the question is whether the financial services industry is truly committed to reducing the national rate of consumer bankruptcies by supporting institutionally responsible policies that balance the often unrealistic consumption desires (”Just Do It!”) of U.S. households that are shaped and/or reinforced by enormous credit card marketing budgets that effectively promote consumption-based visions of the “American Dream.” With the ongoing efforts of the financial services industry to enact more stringent personal bankruptcy laws, bankers could exacerbate a national and even a global recession by forcing financially insolvent households to continue paying off a portion of their consumer debt--years after filing for personal bankruptcy. Indeed, this is the most controversial provision of the Congressional legislation: restricted use of Chapter 7 (discharge of unsecured liabilities). Of course, what this really means is that the federal government will become the “muscle” for reducing the risk of the credit card industry’s current policy of offering revolving credit to increasingly risky teenagers and moderate income households. It appears that the banking industry has effectively mobilized political support against government regulation of “sticky” (slow to fall) credit card interest rates while embracing government intervention in the form of federalized debt collectors for unsecured consumer loans. In its current incarnation, the bankruptcy legislation demonstrates that the credit card companies can have their cake AND eat it, too. The industry’s call for greater individual responsibility belies its disregard for its own traditional underwriting criteria. For example, grandparents with stellar past job histories are often rejected for credit cards while their grandchildren (who often have not had a full-time job) are inundated with solicitations during and even before entering college. Similarly, recent college students may be rejected for credit cards after graduation when their entry-level salaries suggest an inability to service higher levels of debts. Indeed, a striking finding of my 1999 study of college student credit card debt is that recent graduates of the late 1980s and early 1990s were more likely to assume most of their credit card debt while seeking gainful employment than while enrolled in college.13 Today, college students routinely graduate with credit card debts of from $5,000 to $15,000 plus student loans before they enter the job market. With the specter of a tight job market in the near future and the continued corporate promotion of inflated consumer expectations, it can be expected that the bankruptcy rate of recent college graduates will continue to soar with potentially disastrous long-term consequences. Indeed, the fastest growing group of bankruptcy filers last year were individuals 25 years old or younger. Clearly, the recent assumption of tremendous levels of consumer debt--provided by financial services institutions that have routinely ignored their traditional underwriting criteria--requires accountability and financial responsibility from both sides: borrowers and lenders. Indeed, lending policies that routinely require the poor and heavily indebted to subsidize the low and even free cost of credit card loans to the affluent through escalating interest rates and penalty fees, does not reflect an appropriate policy of shared individual and institutional responsibility. One “rational” proposal is to charge “convenience” users a “break-even” fee that would pay for the operating costs for their credit card accounts. For example, the cost of borrowing (2.5%) plus administrative costs (2.0%) would lead to either a membership fee or finance charge of about 4-5 percent. This would enable the more disadvantaged consumers to pay a lower fee that more accurately reflects their credit worthiness and fragility of their household budgets. Another issue concerns the financial education of previously perceived “marginal” credit groups whose inexperience with consumer credit has led to especially duplicitous marketing strategies and egregious borrowing terms. Young students (especially recent high school graduates), senior citizens, and the working poor need adequate education and training so that the financial learning curve only benefits the financial interests of the credit card companies. It is far too late after the consumer has no other recourse but to file for personal bankruptcy. In fact, increasing the financial obligations of filers to their creditors after bankruptcy would encourage banks to continue extending “easy” credit to those least able to assume their financial responsibilities during a period of economic uncertainty and distress. Banks and other financial services institutions should share the pain as well as the gain associated with the “easy” extension high cost, consumer credit. The banking industry, after 9 out of 10 successive years of record annual profits, no longer can persuasively argue for lenient federal oversight in order to survive the new challenges of the deregulated financial services environment. Like the recent collapse of many fast growing, hi-tech “dot.com” industries, the unprecedented growth of credit card behemoths and financial services conglomerates can not be sustained through escalating finance charges and penalty fees without intensifying the distress on economically fragile families as well as draining the national economy of desperately needed consumer demand. Under these circumstances, it is imperative that the Committee seriously examines and scrutinizes the business practices of the credit card industry before the long-term consequences lead to a substantial decline in the standard of living of middle and working class families as well as dramatic changes in the quality of life of future generations of senior citizens.
12 Consumer Federation of America, Large Banks Increase Charges to Americans in Credit Counseling: New Practices Will Hurt Consumers on the Brink of Bankruptcy, 28 July 1998 at www.consumerfed.org. (return) 13 Robert D. Manning,
Credit Cards on Campus: The Social Consequences of Student Debt,
Washington, D.C.: Consumer Federation of America, 9
June 1999. (return)
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