Consumer creditors began to set the stage for this year's quick House victory in 1994, after Congress created the National Bankruptcy Review Commission to review federal bankruptcy law. That same year, Republicans won control of Congress and consumer creditors' campaign contributions followed the shift in power.
From 1987 to 1994, Democratic national party committees and congressional candidates received $20,406,070 in soft money and PAC contributions from the consumer credit industry, slightly more than the $18,111,851 received by their Republican counterparts. Since 1995, however, Republicans have received $15,518,206 in soft money and PAC contributions from the consumer credit industry, more than twice the $7,592,272 received by Democrats during the period.
Creditors' generous PAC and soft money donations buttressed a many-pronged, multi-million dollar Washington lobbying operation that went into high gear as the Commission's work neared its conclusion last year.
Lobbying disclosure forms covering 1997 show that the nation's top 10 credit card debt issuers alone spent $21,300,000 on lobbying during the year (see box). Half a dozen major lobbying groups representing consumer creditors spent another $8,474,751 on lobbying in 1997.
The industry also enlisted the help of high-profile lobbying firms that employ a constellation of Washington insiders, including former Republican National Committee chairman Haley Barbour, former Nixon aide William Timmons, and former Clinton Administration Treasury Secretary Lloyd Bentsen.
Other allies included the National Retail Federation, which represents large creditors in the retail industry. While the Common Cause analysis does not include retailers' political contributions, some are large donors. JC Penney, for instance, has given $1.5 million in political contributions since 1987 and has been actively lobbying on the bankruptcy issue.
When creditors saw that the Commission was not going to recommend the types of changes the industry wanted, they began to mobilize a lobbying campaign to discredit any of the Commission's potential recommendations. Weeks before the Commission had even issued its report, creditors descended on Capitol Hill warning of the consequences of spiraling bankruptcies.
Pointing to the dramatic increase in consumer bankruptcies - 1.35 million in 1995, nearly triple the number in 1986, creditors argued that more and more families were using bankruptcy laws as an easy way to escape their debts. The way to reduce bankruptcy filings was to tighten the rules, they claimed.
Creditors found support from Representatives McCollum (R-FL) and Boucher (D-VA), members of the Judiciary Committee who together have received $528,276 from credit industry PACs. Prior to the release of the commission report, the two introduced bankruptcy legislation containing key creditor-backed provisions.
A key provision of the McCollum bill was the notion - strongly advanced by creditors - that thousands of families should not be eligible to file for bankruptcy under Chapter 7 of the bankruptcy law, which permits debtors to keep a certain amount of personal property determined under state laws, and to erase many of their unsecured debts, including a large portion of their credit card debts. Creditors pushed for a drastic change in the bankruptcy law that would prevent families from receiving debt forgiveness under Chapter 7 if they might have enough income to pay back some of their debts over time.
"We are giving [the Commission] a hint of what we think should be in the report," Representative McCollum told Consumer Financial Services Law Report.
Top Consumer Credit Industry Pac Recipients Among Current Members Of Congress 1/1/87 through 3/31/98 Member PAC Receipts Senator Alfonse D'Amato (R-NY) $504,073 Representative Richard Baker (R-LA/6) 444,809 Representative John LaFalce (D-NY/29) 441,761 Senator Richard Shelby (R-AL) 418,771 Representative Bill McCollum (R-FL/8) 363,076 Senator Phil Gramm (R-TX) 320,910 Senator Lauch Faircloth (R-NC) 315,637 Representative Marge Roukema (R-NJ/5) 294,005 Representative Martin Frost (D-TX/24) 290,992 Senator Christopher Bond (R-MO) 284,563 But the National Bankruptcy Review Commission found that the increase in filings was not caused by a wholesale misuse of the law, concluding: "[M]ost families came to the bankruptcy courts as they have for many years - seeking relief from debts they have virtually no hope of repaying."
The Commission's report, issued in October 1997, recommended only moderate changes to the bankruptcy law, including measures to prevent high-income persons from abusing the bankruptcy system.
While unable to sway the Commission, creditor lobbyists continued to have more luck where it counted - with Members of Congress. The bill passed in the House this spring would make changes to the bankruptcy laws that are much tougher on consumers than the changes recommended by the Commission - a victory for creditors. One such victory was the inclusion of provisions, similar to those in McCollum's 1997 bill, that would exclude some debtors from eligibility for Chapter 7.
Members of Congress' support of the bill seems to parallel the amount of financial support they have received from creditor interests over the years. According to a Common Cause analysis of consumer credit political donations since 1995:
The 75 House cosponsors of the House-passed Bankruptcy Reform Act received on average $35,296 in creditor PAC contributions since 1995.
The 306 House Members voting for the Act received on average $25,091 each in PAC contributions, nearly twice as much as those voting against the bill, who received on average $14,947 each since 1995.
Republicans, who received more than twice the PAC and soft money contributions from consumer creditors since 1995 as Democrats, voted wholesale for the bill. In the end, the Bankruptcy Reform Act had the support of every single House Republican and 84 Democrats. The consumer credit industry also has a long history of lending financial support to the Republican leaders who helped speed bankruptcy changes through the House, and has been especially generous toward them since 1995. House Speaker Newt Gingrich (R-GA) has received more than $177,000 from creditor PACs since 1987, with more than $94,000 coming since 1995. Majority Leader Richard Armey (R-TX), has received more than $154,000 since 1987 with more than $96,000 coming since 1995. House Judiciary Committee Chair Henry Hyde (R-IL) has received nearly $130,000 since 1987 with more than $64,000 coming since 1995, and House Whip Tom DeLay (R-TX) has received more than $115,000 since 1987 with nearly $95,000 coming since 1995.
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