NEW YORK — Today Tamara Draut, Director of the Economic Opportunity Program at Demos, a leading nonpartisan research and advocacy organization, issued the following statement as the new bankruptcy law goes into effect:
"This is a dark day for American families. New research shows that low- and-middle income households in the United States face explosive increases in living expenses such as housing, medical care and education, and have turned to high-cost credit cards to make ends meet. The new bankruptcy law will prevent these families—many of whom are the victims of a medical illness, job loss or divorce—from ever reaching financial stability.
"This legislation was aggressively lobbied for by the credit card industry, whose abusive practices make it nearly impossible for families to climb out of debt. The credit card companies are the only winners here. Everybody else loses.
"With interest rates rising and the threat of bankruptcy defused, credit card companies are likely to escalate the abusive tactics that have buoyed them to record profits in recent years. Real consumer bankruptcy reform would curb the practices that make it virtually impossible for households to pay off their debt, which include $35 penalty fees, capricious interest rate hikes that double or even triple the rate on the card and the odious new 'universal default' clause that can multiply consumers' entire debt loads because of activity on a single account.
"Members of Congress owe the American people a real inquiry into the factors driving the debt crisis in America. Any bankruptcy 'reform' that ignores the structural economic issues facing families is short-sighted, dangerous to family economic security and does nothing to address the long-term health of our economy."
For more information about the Economic Opportunity Program, or to download The Plastic Safety Net: The Reality Behind Debt in America, a new report with findings from a national debt survey, visit www.demos.org.