Wednesday, October 1, 2008

John McCain and the Bankruptcy Bill of 2005*

*Or why even the Democratic Senator from MBNA is a better bet for consumers than the Republican maverick from Arizona.

In 2005, John McCain was an enthusiastic backer of the Bankruptcy Abuse Prevention and Consumer Protection Act (S. 256) which ultimately became law on a 75-24 vote. This is the bill that stripped away many of the protections individuals used to have when falling into bankruptcy. Amendments to protect victims of identity theft, those who fell into debt due to medical or natural catastrophes, and to provide homestead exemptions were all rejected. Attempts to place restrictions and regulations on creditors, such as disclosure obligations, restrictions on predatory lending practices and limits on the interest rate that could be charged also failed (the figure above shows how each Senator voted on consumer protection amendments to the bill; red are Republicans, blue are Democrats and green is the Independent Jeffords).

As the name implies Republicans were concerned with what they considered abuses of the bankruptcy laws and McCain was no exception. As this letter to a constituent shows he believed that too many people were gaming the system at a time of prosperity:
The number of Americans filing for bankruptcy has increased dramatically in recent years. What is surprising is that this increase is coming at a time of low unemployment and high wages, when debt problems should be at their lowest. Significant numbers of people who can pay some of what they owe are opting to file for Chapter 7 bankruptcy, which permits them to erase almost all of their debt.
Despite being written explicitly to the desires of the credit card industry, in McCain's view the bill created a "fair and balanced approach" which restored personal responsibility to the system. And while "Bankruptcy Abuse Prevention" was the essence of the bill, there was little that could be called "Consumer Protection" in it.

With the exception of an amendment to protect disabled veterans (which passed 99-0), all attempts to add consumer rights to the bill failed. John McCain was one of 50 Republican Senators who voted against adding consumer protections to the bill every single time. McCain even voted against an amendment that would have protected active service members in Iraq from means testing and usury.

S.256 passed the Senate 74-25.

The Republicans were unanimous in their support for the final bill. 18 Democrats and Independent Jim Jeffords voted with the majority.

25 Democrats, including Barack Obama, voted against the bill.

Joe Biden voted for it.
In fact he championed it in the Senate, and his defense of the bill bordered on absurdity. Still he voted for the consumer protection amendments over 40% of the time.

McCain still defends his vote on the bill. His spokesman cites the bill as an example of McCain's bipartisan worldview and believes it compares favorably against Barack Obama.
"Eighteen Democrats and John McCain worked together on the bipartisan Senate bankruptcy bill, and Barack Obama's rigid partisanship and self-promoting political attacks show that he's a typical politician — which is the problem in Washington, not the solution." - McCain spokesman Tucker Bounds

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