105th Congress [1997-1998]
The on-going battle over consumer bankruptcy "reform" legislation really began in 1995 with the formation of the National Bankruptcy Review Commission (NBRC). The NBRC was charged by Congress to undertake a review of the bankruptcy laws. For well over a year, the NBRC conducted public meetings throughout the country, gathering testimony from witnesses that rarely included users of the system.
The credit industry was well-represented at those meetings. It pitched a highly restrictive "means test" for consumer bankruptcy--as it had without success to Congress for well over 50 years--as well as a host of other restrictions on consumers using the system. Consumer debtor attorneys also participated. The Consumer Federation of America (CFA) presented its findings about increased consumer credit card debt and its impact on families.
The NBRC was comprised of nine members from a variety of political perspectives, but none of them primarily represented consumer interests. In 1997, it began to issue drafts of its report. It was apparent from the consumer bankruptcy draft that the credit industry had not prevailed in its demands to radically restructure Chapter 7, although the Commission made many recommendations that would minimize debtor and creditor abuses. The industry sent a letter to Congress denouncing the direction of the NBRC and escalated its multi-million dollar public relations and lobbying campaign to discredit the NBRC. Turning to Congress for relief, the industry found sponsors for a bill [HR 2500] introduced in September 1997, about a month before the NBRC issued its final report.
Initial opposition efforts were led primarily by the National Association of Consumer Bankruptcy Attorneys (NACBA), the National Consumer Law Center (NCLC) and CFA. Narrowly-targeted reforms designed to address real abuses by debtors and provisions to end creditor abuses under the current Code were suggested by these groups. They worked to craft a balanced bill [HR 3146] designed to reign in abuses by both debtors and creditors without making the radical changes proposed by credit industry groups.
Given the negative direction of the legislation, NACBA, NCLC and CFA stepped up efforts to organize other stakeholders -- reaching out to groups including civil rights organizations, labor unions, seniors and the faith community (the "Coalition").
During the 105th Congress, House and Senate bills (HR 2500, substantively reintroduced as HR 3150, and S.1301) moved through hearings and sub- and full-committee mark-ups and passed both chambers. The Senate bill was less rigid in parts, but both bills, and the compromise that emerged from them, were opposed by the Coalition. The White House also weighed in with many concerns.
A key issue emerged: harm to women trying to collect child support who, because of provisions in the bill, would have to compete with credit companies for the limited assets of the debtor-fathers. Although the bills' sponsors claimed that they had made changes to protect child support creditors, these changes were merely cosmetic in the view of womens' groups, especially child support enforcement experts.
Many of the arguments raised by the Coalition and the bill's opponents (threat to child support, failure to sanction the credit card industry, etc.) were picked up in media accounts. Editorials from all over the country condemned provisions in the bills. In addition, judges, scholars, bankruptcy trustees, attorneys and national bankruptcy groups from a range of political perspectives--indeed, virtually every constituency involved in the bankruptcy system other than consumer creditors-- uniformly expressed both doubts about the credit industry message behind the bill [widespread abuse by people able to pay] and concern that the bill would cause hardship to families in need of relief and disrupt the bankruptcy system.
Because the issue got a relatively late start in the 105th Congress, the Coalition was greatly aided by the clock and the fact that the Conference compromise was much harsher than the Senate bill, causing a few Senators to examine delaying the bill on the floor. Although the House passed the Conference report by a wide margin, the session ended without a Senate vote.
106th Congress [1999-2000]
In a macro sense, the path of the bankruptcy bill in the 106th was not materially different from the previous session, but more focus was brought to specific provisions in the bill considered particularly harmful to the consumer bankruptcy process: the means test, child support, nondischargeability of certain debt and proposed changes that would damage the operation of Chapter 13. Substantial attention and news coverage also focused on abuses of the unlimited homestead exemption that exists in Florida, Texas and several other states. In these states, a wealthy person can protect a primary residence of unlimited value from judgment creditors-a situation that creates havens for scam artists and worse.
Ironically, the bill that emerged in the 106th Congress was, in the Coalition's opinion, worse than the Senate version in the previous Congress. This did not bode well for the conference process. The investigative reporting team for TIME Magazine filed a lengthy special report discrediting the claims of the credit industry and validating the position of the Coalition ["Soaked by Congress", May 15, 2000; attached]. Despite the TIME article and the continued onslaught of editorials, news stories and lobbying in favor of the Coalition's position, little progress was made on the fixes needed to prevent the bill from stripping away an important safety net for middle and lower-income families.
That the Coalition was able to prevent the bill's enactment is due to the efforts of a small cadre of Senators and the growing opposition of the White House. In particular, Senator Paul Wellstone exercised several procedural levers to slow the bill down. These efforts were enough to again allow the Coalition to use the clock against the bill. Although the Conference Report passed overwhelmingly, it was subject to a pocket veto by President Clinton.
107th Congress [2001-2002]
With little substantive discussion, bills roared through both the House [HR 333] and Senate [S. 220] very early in 2001. Two issues were front and center in the Senate debate: the homestead provision and the so-called clinic violence amendment. By an amendment, which passed with overwhelming bipartisan support, the unlimited homestead was replaced with a uniform cap. An amendment that would have prevented the discharge of civil judgments against those convicted of violent acts at abortion clinics was also adopted with overwhelming bipartisan support.
While the conferees negotiated very little over consumer bankruptcy provisions, the homestead and clinic violence provisions were contentious. Congressional members from the unlimited homestead states, Texas and Florida in particular, were unhappy that their state laws were overridden. After several rounds, a compromise was reached that in the opinion of law professors and the Coalition would not prevent abuse.
The compromise on the clinic violence language, which was not part of the House bill, served to grow opposition to the bill in that the pro-life caucus and labor unions were concerned that the new language would have a chilling effect on peaceful picketing at clinics, employers and in other civil rights contexts.
It also is fair to say that the passion of some of the bill's leading supporters was tempered by new priorities [national security issues following 9/11], major corporate scandals and bankruptcy [Enron and WorldCom] and a declining economy.
Opponents of the bill were able to keep the Conference Report from coming up before the 2002 election because pro-life and labor/consumer-friendly Members of Congress signaled their intent to vote against the Rule that would bring the Conference Report to the House floor.
Then, at the end of a short lame-duck session and under intense pressure from the banks and credit industry, House leaders forced the Rule to the floor where it was defeated. After conferring for several hours, House leaders brought to the floor a version of the Conference Report minus the clinic violence/picketing provision. It passed by a wide margin, although many Members already had left town. Because of the unprecedented procedural ploy by the House leaders, the Majority Leader in the Senate refused to consider the new bill.
Prepared by Mary Rouleau, UAW [202-828-8500], January 2003
