HR 109-31 INDEX





MARCH 16, 2005

House of Representatives,

Committee on the Judiciary,

Washington, DC.

The Committee met, pursuant to notice, at 10:07 a.m., in Room 2141, Rayburn House Office Building, Hon. F. James Sensenbrenner, Jr. [Chairman of the Committee] presiding.

Chairman SENSENBRENNER. The Committee will be in order, and a working quorum is present.

Pursuant to notice, I now call up the bill Senate 256, the "Bankruptcy Abuse and Consumer Protection Act of 2005," for purposes of markup and move its favorable recommendation to the House. Without objection, the bill will be considered as read and open for amendment at any point.

[The bill, S. 256, the "Bankruptcy Abuse and Consumer Protection Act of 2005," is not reprinted here but can be accessed at—cong—bills&docid=f:s256rfh.txt.pdf:]



Chairman SENSENBRENNER. And the Chair recognizes himself for 5 minutes to explain the bill.

Today we consider a bill with an extensive history before this Committee and the Congress. S. 256, the "Bankruptcy Abuse Prevention and Consumer Protection Act of 2005" represents the culmination of nearly 8 years of intense and detailed consideration by this Committee. Over the course of the last four Congresses, this legislation has benefitted immensely from an exhaustive hearing and amendment process as well as meaningful bipartisan and bicameral negotiations.

Last week, the Senate passed this legislation by a vote of 74 to 25, marking the fifth time that body has registered its overwhelming support for bankruptcy reform legislation in the last four Congresses. The House has also repeatedly expressed its overwhelming support. To date, the House has passed bankruptcy reform measures on eight occasions since the 105th Congress. This legislation reflects the product of intensive process before this Committee. Over the past four Congresses, the Judiciary Committee and the Subcommittee on Commercial and Administrative Law have held 18 hearings on the need for bankruptcy reform, 11 of which were devoted specifically to predecessors of S. 256. In addition, the Senate Judiciary Committee has held 11 hearings on bankruptcy reform, including a hearing held last month.

During the 106th Congress, this Committee entertained 59 amendments over the course of a 5-day markup on H.R. 833, which included 29 recorded votes. Of these amendments, 27 were agreed to. On the floor, 11 more amendments were considered. After passage on the House floor during the 106th Congress, conferees spent nearly 7 months engaged in an informal conference to reconcile differences between the House- and Senate-passed versions of bankruptcy reform legislation. During the 107th Congress, this Committee considered an additional 18 amendments during the course






of its markup on S. 256 predecessor, and five more amendments were considered on the House floor.

After House passage of bankruptcy reform legislation in the 107th Congress, conferees formally met on three occasions and ultimately agreed, after an 11-month period of negotiation, to a bipartisan conference report. Finally, during the last Congress, the Judiciary Committee entertained nine amendments to bankruptcy legislation, and the House considered five more.

It's no secret that I will strongly encourage Members of this Committee to vigorously oppose all amendments to S. 256 as passed by the Senate based on this extensive record. The reasons are obvious. As the record makes clear, this legislation is the product of exhaustive consideration by the Congress. It is a well-crafted package of extensive bipartisan and bicameral negotiation and compromise.

As introduced, the bill is substantively identical to legislation that passed the House by an overwhelming vote margin, not on one but on two occasions in the last Congress. Although the Senate-passed bill we consider today includes a series of amendments, they all received bipartisan support and many were agreed to by unanimous consent.

Second, and perhaps most importantly, the need for bankruptcy reform is long overdue and crucial to our Nation's economy and the well-being of our citizens. Every day that goes by without these reforms, more abuse and fraud goes undetected. Every abusive bankruptcy filing adversely affects hard-working Americans in the form of higher interest rates and increased cost of goods and services. America's economy should not suffer any longer from the billions of dollars of losses associated with profligate and abusive bankruptcy filings. We need to close the so-called mansion loophole now. We need to ensure that deadbeat parents can no longer use bankruptcy to shed their child and spousal support obligations. We need to make Chapter 12, a specialized form of bankruptcy relief for family farmers, a permanent component of the Bankruptcy Code and need to extend that relief to family fishermen. And we need to enact important administrative reforms by direct appeals, streamlined reorganization procedures, and additional bankruptcy judges that will reduce unnecessary burdens upon the current system by those who must administer and use it.

In short, we need to restore a measure of personal responsibility and accountability to the bankruptcy system, and S. 256 advances this crucial goal. I will, accordingly, urge my colleagues to report this bill without amendment.

I yield back the balance of my time and recognize the gentleman from Michigan for 5 minutes.







Mr. CONYERS. Thank you, Mr. Chairman and Members. This is the first time I've heard us urge that amendments be rejected before they've even been named, identified, or offered. So I suppose this is a very serious effort as the majority continues their assault on the American consumer. Last month, and starting from this Committee, we passed into law special interest class legislation—class action legislation which slams the door on court statehouses for millions of individuals harmed by fraud, deception, civil rights, and labor abuses.


Now, today we take up the bankruptcy bill which massively tilts the playing field in favor of credit card companies and against ordinary workers and families.

Last year, nearly 1.5 million ordinary working individuals filed for bankruptcy. Their average income was less than $25,000, and the principal causes for their filings were layoffs and medical bills. In my judgment, it would be a grave mistake to punish these individuals while rewarding credit card companies and business lobbyists at a time when corporate greed is being reported regularly and has already destroyed or harmed the lives of millions of American workers.

To those who think the bill is a fair compromise that only punishes wealthy debtors, then check on how this bill gives creditors massive new rights to bring threatening motions against low-income debtors, how the bill permits credit card companies to reclaim common household goods, if anybody would want them, of little value to anybody but themselves but very important to the debtor's family.

Check in this legislation we are considering how it makes next to impossible for people below the poverty line to keep their house or their car in bankruptcy. For those who might think that the bill protects alimony and child support problems in families, look and see if they find where the bill, as I have found, creates major new categories of non-dischargeable debt that compete directly against the collection of child support and alimony payments; whether they're—we're aware of the fact the bill allows landlords to evict even battered women without bankruptcy court approval, even if the eviction poses a threat to the woman's physical well-being.

If you think the bill cracks down on creditor abuse, then look again because the bill does absolutely nothing to discourage abusive, underage lending, nothing to discourage reckless lending to the developmentally disabled, nothing to regulate the price of so-called sub-prime lending to persons with no means or little ability to repay their debt, and nothing to crack down on unscrupulous payday lenders that prey on the members of our Armed Forces.

The bill—does the bill fix the problems of homestead exemption abuse? Well, look again, because there we don't repeal or even cap homestead—the homestead exemption. The bill does nothing to prevent the very worst abuses of the Bankruptcy Code, for example, avoiding claims for bilking seniors out of billions of dollars of their life savings or denying workers their hard-earned pension payments. It ignores in this legislation, after all these years, the asset trust loophole whereby high-income individuals stash away millions of dollars in special trusts to avoid their debts in bankruptcy as we go after ordinary workers who may have been forced into bankruptcy by medical bills.

I urge every Member of this Committee to reconsider the real-life consequences of what we're doing in one of the worst consumer bills I have ever had the sorrow to have to speak against in this Committee. This is a bad bill. The time has come that we stop writing these bills for credit card companies and that these businesses that use their political muscle must be stopped. Here's a great place to do it today.

I thank the Chairman.











Chairman SENSENBRENNER. The time of the gentleman has expired. Without objection, all Members may insert opening statements in the record at this point.

Are there amendments?

Mr. WATT. Mr. Chairman?

Mr. CANNON. Mr. Chairman?

Chairman SENSENBRENNER. The gentleman from Utah.

Mr. CANNON. If I could enter into colloquy with the Chairman, I am pleased that we are reporting this legislation today, but I would note that the bankruptcy judgeship numbers in the Senate bill are outdated and do not reflect the current numbers submitted by the Judicial Conference this year. Additional judgeships are sorely needed in a number of districts across the country, including in my State of Utah. I am wondering, Mr. Chairman, if we can deal with this issue in some manner, either a technical bill or a free-standing bill, and if the Chairman will commit to doing that in the near future.

Chairman SENSENBRENNER. Would the gentleman yield?

Mr. CANNON. Certainly.

Chairman SENSENBRENNER. It is the hope of the Chairman that additional judgeships and not just bankruptcy judges can be dealt with later on this year in response to an updated Judicial Conference recommendation where the judgeships are needed, and this includes article III judges as well.

Mr. CANNON. Thank you, Mr. Chairman. I yield back.

Mr. CONYERS. Mr. Chairman?

Chairman SENSENBRENNER. Are there amendments?

Mr. WATT. Mr. Chairman?







Mr. CONYERS. I have an amendment.

Chairman SENSENBRENNER. The gentleman from Michigan. The clerk will report the amendment.

The CLERK. Amendment to S. 256 offered by Mr. Conyers, page 687, after line 18, insert the following: "(and make such technical and conforming change as may be appropriate'——

Mr. CONYERS. Mr. Chairman, I ask that the amendment be considered as read.

Chairman SENSENBRENNER. Without objection.

[The amendment follows:]




Chairman SENSENBRENNER. The gentleman is recognized for 5 minutes.

Mr. CONYERS. Thank you very much.

Ladies and gentlemen of the Committee, this is going to be the amendment that just checks where we all are and what the temperature is in the room. This is an amendment in support of our military personnel to crack down on unscrupulous payday lenders that circle our military bases, who target members of our armed services with high interest rate loans. It would deny these companies a claim in bankruptcy where they make a loan secured by a military paycheck, pension, or disability payment if the annual interest rate and fees exceed 36 percent a year, a number that I don't think anybody in this room would even think twice about signing up for.

This is happening to our military personnel as we meet today. The military service constitutes a significant and real hardship for soldiers and their families that are called into action. We have had 16,000 active-duty members of the military who've had to file for bankruptcy relief over a 12-month period. The Pentagon found that 4 years ago nearly a third of all military families reported a drop in income, obviously, when a spouse was deployed. For members of the National Guard and Reserve, the rate was even higher. More than 40 percent reported lost income when a provider—a spouse provider was deployed to active duty.

If you need another reason, it is this: The greedy payday lenders are directly and aggressively targeting our Nation's armed services. The National Consumer Law Center report found that scores of consumer-abusing businesses directly target the active-duty military men and women daily. These payday lenders are the loan sharks of the 21st century that offer small, short-term loans at interest rates that are incredible. They use deceptive names, like "Force One Lending," "Armed Forces Loans." They go after military members because they know they have a steady source of income, small as it is, and many of these military members are young, have family obligations, and are often strapped for cash and are easy to find.

During a time of war, it's imperative that we go to the extra mile to protect the men and women of our armed forces. These individuals face not only the challenge of protecting our country, but the difficulty of managing their finances when they are called to service. When the Soldier and Sailors Relief Act can be used to delay tax payments, suspend legal proceedings, and reduce interest payments, none of the relief is automatic. Moreover, these protections only apply if the service member can establish that he or she has not been materially affected, quote-unquote, by being called to duty and ends as soon as the duty ends. Unlike the bankruptcy laws, the Relief Act buys some time, but not forgiveness.

The last thing we should be doing is putting our military personnel into this kind of loan shark debacle, and I am urging the Members that if you want to disregard one of the Chairman's requests that you vote down all amendments, that this be the one amendment that you do support. And I return my time.

Ms. WATERS. Mr. Chairman, on the amendment? Mr. Chairman?

Mr. CANNON. Mr. Chairman?

Chairman SENSENBRENNER. The gentleman from Utah.










Mr. CANNON. Thank you, Mr. Chairman.

Let me first express——

Chairman SENSENBRENNER. Recognized for 5 minutes.

Mr. CANNON. Thank you. Let me first of all express my concern for the issue raised by the gentleman from Michigan, which is a profoundly important issue. I've been surprised around the country at the proliferation of these check-cashing, lending institutions which I think are a terrible problem, and I would hope that the gentleman would recognize that I and all the Members of this full Committee recognize the problem that our servicemen have. It is a difficult problem, a complex problem. We deal with it here in Congress on many different levels. For instance, we've dealt with the pay issue with legislation here. In the past we have amended recently the servicemen—Servicemembers Civil Relief Act, and that provides for a cap on interest rates at 6 percent on debts incurred prior to a person's active entry into military service and sets forth procedures for requesting a reduction and clarifies how that works.

So we as a Congress, as a body, I don't think there's any question but that left and right, Republicans and Democrats, are all concerned about military and the burdens that they have as they serve our country. And so I want to first of all express my agreement with Mr. Conyers and about his expression of concern.

But this is a complex issue, and as we deal with bankruptcy, I think we just need to be thoughtful and careful about how we deal with it. This amendment was included in Mr. Durbin's amendment in the Senate, and that was defeated 38 to 58, not because people have a problem with military, but because of the complexity of the bill that we're dealing with today. The Sessions amendment, which was submitted in lieu of the Durbin amendment, passed by 63 to 32 on the other side. So we have dealt with the issue, I think, to some degree. But in this complex environment, I just think it's important that we recognize that we need to get a bill passed today. And I suspect in the end much of this debate is going to be—and Mr. Conyers himself has pointed out that the issue here is, you know, are we going to do something with this bill, and the answer is America needs a bill, and we need a bill that we can get signed by the President, which means I think there ought to be a fairly high threshold before we make changes.

There are protections in the current bill. It has a needs-based test which includes numerous safe harbors and exceptions for special circumstances. As amended, the special circumstances exception specifically mentions a debtor who is subject to a call or order to active duty in the armed services. As amended, the needs-based test has a special exception just for debtors who are disabled veterans if the indebtedness occurred primarily during a period when the debtor was on active duty or performing a homeland defense activity.

As amended, the bill specifies that the absolute safe harbor from all types of dismissal motions under section 707(b) applies to a veteran, and, as amended, the bill excuses a debtor if he or she is on active military duty in a military combat zone from the mandatory credit counseling and financial management training requirements.

I think we have done a number of things along this line. I think the bill is good. We can't make—we can't legislate a perfect bill











that is going to deal with all the circumstances of everybody in America.

Mr. CONYERS. Would the gentleman, my friend, yield for a moment?

Mr. CANNON. I would be pleased to yield to the gentleman.

Mr. CONYERS. First of all, the Durbin bill—the Durbin amendment had lots of other things surrounded with it. That's why I took it out. I took out the military exemption.

Number two, tell me what it is you don't like about exempting military people unequivocally, not playing around, from bankruptcy from these loan sharks?

Mr. CANNON. Well, reclaiming my time, the gentleman has expressed the issue with great clarity. I appreciate that. And the answer is that all people who deal with debt have to have some responsibility. And a blanket exemption for any group, including a group as large as the military, I think is problematic. So what we need to do is deal with the possibilities for assisting and protecting them from extreme activities, but not removing any kind of personal responsibility from their lives which, as I understand your amendment, it would do.

Ms. WATERS. Mr. Chairman?

Mr. CANNON. Thank you, Mr. Chairman. I yield back.

Ms. WATERS. On the amendment?

Chairman SENSENBRENNER. Does the gentleman yield back?

Mr. CANNON. I yield back, Mr. Chairman.

Chairman SENSENBRENNER. The gentlewoman from California.

Ms. WATERS. Thank you very much, Mr. Chairman. I am so pleased and so happy about John Conyers" amendment. This is a subject that I've spent an awful lot of time on, and it's a subject that needs to be addressed by the Congress of the United States.

I am shocked that the gentleman from Utah could even come up with any excuses about why we can't protect the military from these scavengers who surround our military bases and who place——

Mr. CANNON. Would the gentlelady yield?

Ms. WATERS. No, I will not. Who place up neon signs about easy money, green money, come and get it as fast as you can. They have some of the most outrageous advertisements where they solicit our military. They have set them up as sitting ducks all over America at these military bases. They are paying between 400 and 1,000 percent interest when you calculate it on a yearly basis. For those people who wave the red, white, and blue flag and talk about how much they love America, how much they care about our military, how much they want to be of assistance to our military families, and yet cannot take this bill, this bankruptcy legislation, which is—actually should be named the "Credit Card Company Protection Act of 2005," and do something for our military is just shameful. It is outright shameful.

And I want every Member of this Committee and everybody that is looking or listening to pay attention today to what is going on. We have a very simple amendment by John Conyers that would deal with the fact that military families are ladened with debt from these scavengers, many of whom are supporters of too many Members of Congress with their big military—with their big contributions, and who seem to have some measure of protection from the










Members of Congress who won't go after them. Whether it is this Committee or the Financial Services Committee, for those people who will not stand up for our military against these scavengers, it needs to be noted everywhere, and the press needs to pay an awful lot of attention to this, because this is a way by which we could give them some kind of help. These are unsuspecting families.

Do you know that we are recruiting young people who are 19 and 20 and 21 years old who have never managed any money, who have never had any debt, who have never had any credit? And the first thing that happens to them, they go into the military, some at 21 years old, with a wife and maybe two children, find out that the military pay does not carry them to the end of the month, and there the scavengers are waiting for them with bait. And they lend them money, and they have to sign a personal check. And if they don't come back within 2 weeks and pay that $200 or $300, then they threaten them with the personal check that they're going to put them in jail if they don't pay the money.

And then they flip the loan if they can't pay it, and they pile on more interest to it, and that's where you get this 400 to 1,000 percent interest that piles up for these military people.

Unfortunately, my friend on the opposite side of the aisle from Utah has no excuse, and that which he pointed to, to try and make you believe that there is some protection for the military is not protection. There's nothing in this bill, unless we adopt John Conyers' amendment, that would protect these poor military families from these scavengers and these people who are gouging them for the meager pay that they get to take care of their families. And to tell you the truth, whenever someone who votes against this amendment stands up and talks about how much they love the military, I'm going to call them out on it, and I'm going to call them out on the fact that they had an opportunity here today to do just a little something for these military families.

These payday loan scavengers are the worst.

Mr. CANNON. Would the gentle——

Ms. WATERS. No, I will not yield——

Mr. CONYERS. Would the gentlelady yield?

Ms. WATERS. No, I will not yield. I will yield to the gentleman from Michigan.

Mr. CONYERS. I just want to make it clear what you said about what's in the bill helping military people get a break in bankruptcy. It applies only to the disabled military, only, and nobody else. So there is no protection in——

Ms. WATERS. On my own time, yes, Mr. Leader, I know. That's why I wanted to make it clear, because the gentleman from Utah tried to confuse the public and make them think that somehow it was already covered.

Now, anybody who says it's too complicated, the bill, to cover them——

Chairman SENSENBRENNER. The time of——

Ms. WATERS—does not make good sense.

Chairman SENSENBRENNER—the gentlewoman has expired.

Ms. WATERS. And so I would ask everybody to please vote——

Chairman SENSENBRENNER. Who seeks recognition?

Ms. WATERS—for this amendment?










Chairman SENSENBRENNER. The gentleman from California, Mr. Issa.

Mr. ISSA. Thank you, Mr. Chairman.

Chairman SENSENBRENNER. The gentleman is recognized for 5 minutes.

Mr. ISSA. And I do rise—I won't stand, but I do rise in opposition to this amendment. And if the gentlelady will take note, I am a veteran. My brother is a disabled veteran. And I have 40,000 Marines, more than half of whom are serving in Iraq right now. And looking at this piece—this amendment, I have serious reservations on its merit. And I would like to speak to that. This fairly narrow piece of legislation looks good until you see that it is not talking about interest. It is talking about interest and fees. With all due respect to the gentlelady's example, if you were to borrow $200 for 2 weeks and they were simply to charge you $2 as a fee as part of writing up the paperwork, which is not an insignificant thing, that's 26 percent all by itself.

The fact is that when you look at 36 percent—I have a problem with usury-type interest, but when you write a piece of legislation and you include fees on an extremely short-term loan—because if this were a 1-week loan on $200, and they said, well, you know, I'll give you $198 today for your $200 promissory note, well, that's 52 percent. And that's the practical reality that on small loans for short periods of time, a very small fee, a reasonable fee, particularly considering the potential risk, can, in fact, end up being in excess of what seems to be an extraordinarily high number.

I would love to deal with this piece of legislation—or this amendment in another piece of legislation, and I'd love to deal with it in a way in which it would clearly still allow the small loans, if appropriate, to go to somebody without including the fee language which makes it essentially——

Mr. CONYERS. Would my friend——

Mr. ISSA—impossible to make small loans——

Mr. CONYERS—from California yield for one question.

Mr. ISSA. I certainly would yield to——

Mr. CONYERS. And I thank you. Now, look, let's be frank here. Let's take the fee out of the amendment that I offered. Would you support it then?

Mr. ISSA. I look forward to——

Mr. CONYERS. Would you support it then?

Mr. ISSA. Reclaiming my time, I look forward to this type of reform being something that we work on in a comprehensive way. I would be more than happy to work with the gentleman to author a separate piece of legislation—I suspect the Chairman would help support it—that would look at these issues very specifically, as I said, without the fee or with some sort of a reasonable thing on the fee, and I think that would be wonderful.

Mr. CANNON. Would the gentleman yield?

Mr. ISSA. I would be glad to yield to the gentleman.

Mr. CANNON. Thank you. I suspect that the place to deal with this would be the Servicemembers Civil Relief Act, and I think it's highly appropriate to deal with it in that regard.

If I might take another moment of the gentleman's time?

Mr. ISSA. Please.










Mr. CANNON. I appreciate the fact that Ms. Waters referred to me as "a friend" because I think that she is. We've gained a significant amount of respect for each other, and I appreciate that. I think that the debate cast in harsh terms like "shame" is unfortunate because this is not a matter of shame. This is a matter of policy, and there may be a difference of opinion about how policy affects the world. But I think, Mr. Issa, what you're suggesting is that there needs to be ways for people to get credit who need credit. And the last thing we want to do on either side of the aisle is shove people out of the market either because the costs are too high or because the risks are so great that no one will take the cost. And so it's, I believe, a much more complicated issue, as you've able expressed, Mr. Issa, than it is portrayed to be at this point.

Let me just point out that 19-year-olds who enter the military, and older people, may be young, may be inexperienced, but they're not dumb. And they have the ability to make decisions. And if we try and insulate them from the effects of the decisions, they will make bad decisions for their whole lives. I've trained my kids in their credit card usage—very painfully, I might point out, mostly for them. But if they don't have some pain in their lives over these issues, they don't learn.

And I have enormous respect for the military, enormous respect for the young people who join the military. They come from all kinds of backgrounds and from all kinds of decision perspectives. And because of that, I think that we owe it to them to not include this——

Ms. JACKSON LEE. Mr. Chairman?

Mr. CANNON—amendment. I would request that the Committee vote against the amendment.

Chairman SENSENBRENNER. The time belongs to the gentleman from California.

Mr. ISSA. Reclaiming my time, and in conclusion, Mr. Chairman, I look forward to working with the gentleman from Michigan on these types of issues in the days to come, and will be voting against the amendment, urge my colleagues to vote against the amendment because this is not the right place, right time. But I would like us all to agree to work on this in the future, and I yield back.

Chairman SENSENBRENNER. The gentleman from New York, Mr. Nadler.

Mr. NADLER. Thank you, Mr. Chairman.

Mr. Chairman, I very much urge support for the gentleman's amendment. It illustrates just one of the imbalances in this bill, which is simply a collection of 60 or 70 different ways to stick one's hands into the pockets of low- and middle-income people in a time of distress and take the money out and give it to the big banks and credit card companies.

One of the things this bill does in many different ways it to make a discharge in bankruptcy more elusive. Making discharge in bankruptcy more elusive will make it harder for consumers to get a fresh start and continue to make consumer purchases, which is one of the mainsprings of our economy. Household debt has reached record levels. With that come more bankruptcies, but no serious economist would argue that a precipitous drop in consumer spend-










ing would help our economy.

Bankruptcy is a tradeoff. The safety net encourages risk taking in business, allows distressed families to remain in the economy, and maintains demand for products businesses must sell to survive. Bankruptcy doesn't cause default any more than a hospital causes people to be sick.

We have been told as a justification for this bill that bankruptcy is a free ride. The facts are the contrary. A debtor in Chapter 7 must give up all non-exempt assets in order to obtain a discharge. Secured debts must be paid, or the property is subject to foreclosure. The bankruptcy remains on the debtor's record for 10 years, and the debtor may not refile for 6 years. It is harder to get a job, an apartment, or a loan. As a majority witness who had been a debtor told the Committee a few years ago, had she known the consequences of filing, she might not have done so.

No one believes that people should avoid paying their debts if they can afford to do so. The question is, rather, does this bill make sense? Members should ask themselves why the overwhelming majority of bankruptcy professionals, scholars, trustees, creditor lawyers, corporation lawyers, and judges are appalled with this bill. There is a terrible disconnect between Congress and the people who actually have to make the system function. Regardless of their role or interest, they almost universally oppose this bill. Yet here in Congress, the demands of the special interests who have a stake in some provision in this bill are generally viewed as a great idea that requires no further consideration.

Over the years, we have heard from, among other people, Ken Klee, one of the leading bankruptcy scholars and business bankruptcy lawyers in the country, former Republican bankruptcy counsel to this Committee. He has drafted Supreme Court briefs signed by Members of this House, and he strongly opposed the bill.

We have heard from consumer rights organizations, women's groups, child advocacy groups, unions, civil rights groups, and every national bankruptcy organization in the country that this bill will hurt consumers, businesses, families, children, employees, minorities, and the economy. It will raise costs to the system and disrupt the efficient management of bankruptcy proceedings. This bill would turn the Government into a debt collector for private industry.

Let me remind you what George Wallace, a representative of the Creditors Coalition, told this Committee a few years ago. I asked him if he was familiar with the many ways under current law that a creditor could pursue his rights in bankruptcy, including obtaining documents, examining the debtor under oath, and objecting to a discharge of debts. He said, and I quote, "I have done these things, and they take a fair amount of time, and I bill my clients for them. They're expensive."

I asked him, "Why should the Government spend money to do the job that creditors should be doing?" He responded, "Because it is a Government program. It is not the job of the creditor."

That's what this bill is—a Government program for big banks who don't want to spend their own money to collect their own debts, the debts that they freely entered into. Talk about welfare cheats.

Mr. Chairman, we know, unfortunately, this bill is going to pass. It's going to pass with a good number of votes. Someone asked me










the other day why he should vote against this bill despite the manifold demerits in the bill, when it was clear it was going to pass anyway. And I think that the answer is that when this bill really takes hold, 2, 3, 4 years down the road, when middle-income people, low-income people, our constituents, start finding out it's impossible to get a fresh start, they cannot get out from under their credit card debts, they're paying higher and higher interest rates, more and more money, it costs more money to file, there are more and more coercive instruments on the part of the creditor's lawyers to force debtors to reaffirm debts and to surrender their rights, and the bankruptcy system becomes less and less usable for people, they're going to ask, "Who the heck did this?" And I hope that Members of Congress—that too many Members of Congress won't have to be ashamed in front of their constituents, as I am sure they will.

So I urge adoption of this amendment and defeat of this bill because this is a day of shame, and when we pass it on the floor, it will be a day of worse shame that will probably go down in history as one of the worst days in the history of the Congress in this century.

Thank you, Mr. Chairman. I yield back.

Chairman SENSENBRENNER. The question——

Ms. JACKSON LEE. Mr. Chairman? Mr. Chairman?

Chairman SENSENBRENNER. The gentlewoman from Texas, Ms. Jackson Lee.

Ms. JACKSON LEE. Thank you very much, Mr. Chairman, and thank you for the opportunity to participate in the legislative process. And I do not say this with reflection on the responsibility that we have inasmuch as the Senate has moved forward on this legislation. But I will say the speed at which we're now addressing this particular legislation, the speed in which it will find its way to the floor of the House, and the sense that I am getting from my colleagues on the other side of the aisle—and might I welcome two new Democrats who I see are sitting on this side. It gives us a good number. Thank you. Mr. Inglis, I am delighted, my Chairman. We welcome you and look forward to you supporting our amendments. But it gives me great hope and inspiration.

But as I look at the speed in which we move to the floor of the House—I understand we might be on the floor as early as the beginning of April—might I simply say that the fix is in, that this is a prime example of class warfare, because this bill is wrapped with special interests. It clearly does not evidence thoughtfulness as it relates to the crux of the need for helping Americans save and helping Americans understand credit and balancing between Americans who consume credit and those who market credit. I would use a lesser word, but I think I'll keep it at a level of sophistication at this point.

I support the Conyers amendment, and I am so disappointed and saddened, frankly, by my colleagues who I know have spent time in Iraq and Afghanistan, and if they have spent time in Iraq and Afghanistan, they have spoken not only to young soldiers, but they've spoken to reservists, Mr. Chairman. If you speak to reservists, you will know that they have been taken out of their prime of their life or they have been called into battle in the midst of their life where they have wives or husbands or family responsi-










bility. In taking them out of their cycle of income, they have caused them to lose a major part of the breadwinner's contribution to the family, jeopardized them and put them in the line for bankruptcy.

Therefore, many of them have turned to the scavengers who have accelerated the rates on payday loans. It is a conspicuous and large problem. It saddens me to think that because it was associated with Senator Durbin rather than an issue that might have come to the attention of my colleagues on the other side of the aisle, and now in the wisdom of our Ranking Member, Mr. Conyers has put it forward as a single standing amendment, we can't get the support.

Allow me to put into the record the words of David Broder of The Washington Post. His headline says, "A Bankrupt 'Reform,'—"reform" in quotes. "A Bankrupt .Reform."

This reform, which parades as an effort to stop folks from spending lavishly and then stiffing creditors by filing for bankruptcy protection, is a perfect illustration of how the political money system tilts the law against average Americans. The simple fact that for 8 straight years it has gained a place on a crowded congressional calendar is testimony to the impact of the millions of dollars that banks and credit card companies have spent on lobbyists and campaign contributions. Two terms ago, it was $4 million that was utilized to lobby Members of Congress to vote for this legislation. I would imagine it is now double that amount.

We have a long list of individuals who oppose this legislation, and the reason why it will pass with no amendments is because, as I said, the fix is in. The American middle class is the backbone of America, yet this bankrupt legislation is going to exercise a means test to stand in the doorway of disallowing individuals to come in and to file bankruptcy.

One of the bloggers said, if this doesn't teach Americans not to have medical emergencies or get laid off, I don't know what will. Come to my city in 2003 and 2002, and watch the 4,000 Enron employees that were laid off, losing most of their livelihood, putting them in a dastardly downspin, causing them to lose their homes, having college students to come out of college, and simply driving them to the depths of depression. How you can pass this legislation in the light of devastation of our communities, middle class and others, is a tragedy. I would only hope that this particular amendment would reach the levels of common sense and have you think back on the soldiers that are now on the front line without the resources to pay their bills, taken advantage of by payday loans, and then being denied—having these payday loan—loaners come after them in a bankruptcy proceeding.

This is a common-sense amendment. This legislation will listen to us today. It will almost sound like blah, blah, blah, blah, blah, because, in fact, the legislation will pass out of this Committee. Very few amendments will pass out of this Committee. And the theme of class warfare will again be victorious, as this makes its way to the floor of the House and the people of America will suffer——

Chairman SENSENBRENNER. The gentlewoman's time has expired.

Ms. JACKSON LEE. I hope the amendment passes. I yield back.










Chairman SENSENBRENNER. The question is on the Conyers amendment. Those in favor will say aye? Opposed, no? In the——

Mr. CONYERS. Mr. Chairman, may I demand a record vote?

Chairman SENSENBRENNER. You may. The question is on agreeing to the Conyers amendment. Those in favor will, as your names are called, answer aye, those opposed, no, and the clerk will call the roll.

The CLERK. Mr. Hyde?

[No response.]

The CLERK. Mr. Coble?

[No response.]

The CLERK. Mr. Smith?


The CLERK. Mr. Smith, no. Mr. Gallegly?


The CLERK. Mr. Gallegly, no. Mr. Goodlatte?

[No response.]

The CLERK. Mr. Chabot?


The CLERK. Mr. Chabot, no. Mr. Lungren?


The CLERK. Mr. Lungren, no. Mr. Jenkins?


The CLERK. Mr. Jenkins, no. Mr. Cannon?


The CLERK. Mr. Cannon, no. Mr. Bachus?

[No response.]

The CLERK. Mr. Inglis?


The CLERK. Mr. Inglis, no. Mr. Hostettler?


The CLERK. Mr. Hostettler, no. Mr. Green?

[No response.]

The CLERK. Mr. Keller?

[No response.]

The CLERK. Mr. Issa?

Mr. ISSA. No.

The CLERK. Mr. Issa, no. Mr. Flake?

Mr. FLAKE. No.

The CLERK. Mr. Flake, no. Mr. Pence?

Mr. PENCE. No.

The CLERK. Mr. Pence, no. Mr. Forbes?

[No response.]

The CLERK. Mr. King?

[No response.]

The CLERK. Mr. Feeney?


The CLERK. Mr. Feeney, no. Mr. Franks?


The CLERK. Mr. Franks, no. Mr. Gohmert?


The CLERK. Mr. Gohmert, no. Mr. Conyers?


The CLERK. Mr. Conyers, aye. Mr. Berman?

Mr. BERMAN. Aye.











HR 109-31 INDEX