MR. AKAKA. Mr. President, I rise today to speak on my pending amendment, #105.
Mr. President, Section 106 of the bill does not allow consumers to declare personal bankruptcy in either Chapter 7 or Chapter 13, unless they receive a briefing from an approved nonprofit credit counseling agency within six months of filing. The bill also requires each consumer who receives bankruptcy protection to take a credit counseling instructional course. The credit counseling instructional course requirement is intended to provide financial education to consumers who declare bankruptcy so they can attempt to avoid future financial problems.
Approximately one-third of all credit counseling consumers enter a debt management plan. In exchange, creditors can agree to offer concessions to consumers to pay off as many of their debts as possible. These concessions can include a reduced interest rate on the amount they owe and the elimination of fees. However, most credit card companies have become increasingly unwilling to significantly reduce interest rates for consumers in credit counseling. A study by the National Consumer Law Center and the Consumer Federation of America revealed that five of 13 credit card issuers increased the interest rates they offered to consumers in credit counseling between 1999 and 2003. Only two issuers, American Express and Wells Fargo, completely waive all interest for consumers in credit counseling. The majority of credit card issuers charge interest rates in credit counseling above nine percent, with several charging more than 15 percent.
The amendment would amend section 502(b) of the bankruptcy code to prevent unsecured creditors, primarily credit card issuers, from attempting to collect accruing interest and additional fees from consumers in credit counseling if the creditor does not have a policy of waiving interest and fees for debtors who enter a consolidated payment plan at a credit counseling agency.
Since it appears that Congress will require that consumers enter credit counseling before filing for bankruptcy, we must ensure that credit counseling is truly effective and a viable alternative to bankruptcy.
Credit card issuers, undermining the good intentions of consumers who enter intro credit counseling, have sharply curtailed the concessions they offer to consumers in credit counseling, contributing to increased bankruptcy filings. According to a survey by VISA USA, 33 percent of consumers who failed to complete a debt management plan in credit counseling said they would have stayed on the plan if creditors had lowered interest rates or waived fees.
A large body of research, conducted by such entities as the Congressional Budget Office and the Federal Deposit Insurance Corporation, shows that aggressive lending practices by credit card issuers have contributed to the current high level of bankruptcies in this country. Credit card companies have an obligation to ensure that effective alternatives are readily available to the consumers they aggressively pursue.
As a show of support for the effectiveness of consumer credit counseling, especially as an alternative to bankruptcy, credit card issuers should waive the amount owed in interest and fees for consumers who enter a consolidated payment plan. Successful completion of a debt management plan benefits both creditors and consumers. Mr. President, for many consumers paying off their debt is not easy. My amendment will help people who are struggling to repay their obligations. I encourage all of my colleagues to support this amendment to help consumers enrolled in debt management plans to successfully repay their creditors, free themselves from debt, and avoid bankruptcy.
Mr. President, my amendment has been endorsed by the Consumer Federation of America, U.S. Public Interest Research Group, Consumer Action, and the National Consumer Law Center. I ask unanimous consent that a letter of support for my amendment be included in the Record. Thank you, Mr. President.
