Credit card debt is currently $40 million; no one is disputing that. The question is, can the debtors afford to pay or should bankruptcy laws protect them?
Many in our industry, especially credit card companies, feel it is too easy for consumers and cardholders to wipe away debt and start over, without having to pay the credit card companies. This camp feels there is a need to revamp the bankruptcy laws. They cite, in part, an Ernst and Young survey commissioned by Visa and MasterCard, which found that 10% of those who were protected by bankruptcy actually had to ability to repay their debts.
In response, the American Bankruptcy Institute, a group of 6400 judges, attorneys, bankers, and professors, recently released the results of their study. They found that just three percent of consumers who file for bankruptcy could actually repay their debts.
"Clearly, the case for a radical rewrite of the bankruptcy code is simply not there, and this independent and impartial study proves it," says Representative Jerrold Nadler of New York.
Some groups have suggested a solution that may suit both camps: before allowing them to file for bankruptcy protection, give petitioners a test to determine if they can repay their debt. Whatever the solution, there is $40 million in question and the card companies want that money. The question is, will they get it? And if not, will it affect their marketing efforts to new cardholders?
