Statement of Senator Dianne Feinstein on her
Decision to Vote Against Bankruptcy Reform Legislation
December 8, 2000

Washington, DC – U.S. Senator Dianne Feinstein today voted against bankruptcy reform legislation outlined in Conference Report H.R. 2415, citing concerns that the legislation fails to protect consumers against irresponsible creditor practices. The following is the text of her statement:

Mr. President, I support bankruptcy reform, and I voted in favor of the Senate bankruptcy bill, this past February. Simply put, people who can afford to repay their debts, should repay their debts.

However, I cannot support the version of bankruptcy legislation outlined in the Conference Report to H.R. 2415. The Conference report has dropped key provisions from the Senate-passed bankruptcy bill, and has failed to protect consumers against irresponsible creditor practices. Thus, I intend to vote “No”.

Let me recount my concerns.

First, the Conference Report lets wealthy individuals continue to purchase multimillion dollar homes that are shielded from creditors’ bankruptcy claims. The Senate bill curbed this abuse, voting 76-22 to approve the Kohl amendment placing a $100,000 nationwide cap on homestead exemptions. The Conference replaced the Kohl amendment with a two-year ownership or residency requirement that wealthy debtors can easily sidestep. Debtors should not be able to avoid their obligations by funneling money into extravagant estates. The Conference Report lets this egregious practice continue.

Second, I am proud to be an original cosponsor of Senator Schumer’s amendment to prevent anti-abortion extremists from using bankruptcy laws to avoid paying civil judgements against them. The Senate passed the Schumer amendment by an overwhelming 80-17 vote. It protects a woman’s right to choose and the ongoing effectiveness of the Freedom of Access to Clinic Entrances (FACE) Act.

The FACE Act has led to successful criminal and civil judgements against groups that use intimidation and outright violence to prevent people from obtaining or providing reproductive health services. I am deeply disappointed that the Conference Report has omitted this important provision.

Third, I had hoped that the Conference Report would work to improve the limited consumer credit card protections in the Senate bill. Unfortunately, the Conference Report has gone the other way --- consumer protections have been deleted. For example, the Senate passed an amendment by Senator Byrd that would have required any credit card solicitation on the Internet to be accompanied by information from the Federal Trade Commission (FTC) that gives consumers advice about selecting and using credit cards. The Conference Report dropped this provision.

Additionally, the Conference Report deleted an amendment by Senator Levin that would have made it clear that consumers do not owe interest for on-time credit card payments. Presently, many credit card solicitations advise consumers that interest is not charged on payments made within a grace period ( such as 25 days). However, in the fine print, these agreements state that if the entire debt is not paid back, the cardholder is liable for interest on the full amount charged. Say $995 is paid off of a $1,000 credit debt, most people reasonably assume that they owe interest on just the unpaid $5. Not so. The credit card company will charge consumers interest retroactively on the full $1,000. This important amendment would have brought interest charges in line with consumer expectations.

When analyzing legislation, it is often telling to review the opinions of those groups with no financial stake in the outcome. Overwhelmingly, the non-partisan experts on bankruptcy -- the judges, trustees, and academics -- have expressed serious concerns or opposition to this bankruptcy bill. These organizations include the National Bankruptcy Conference (NBC), the National Conference of Bankruptcy Judges (NCBJ), the National Association of Chapter 13 Trustees (NACTT), the National Association of Bankruptcy Trustees (NABT), and law professors from many of our nation’s law schools. On October 30, 2000, for example, 91 law professors wrote to me that the “bill is deeply flawed,” and will not achieve balanced reform. The professors state that “... the problems with the bankruptcy bill have not been resolved, particularly those provisions that adversely affect woman and children.”

Congress should also take note that , after soaring to record-levels in the mid-1990s, bankruptcy filings declined in recent years. In 1998, bankruptcy filings totaled 1,442,549. In 1999, bankruptcy filings totaled1,319,540 cases, a decline of almost 10 percent from the previous year.

A final note, Mr. President. When the 107th Congress convenes, the Senate will be evenly divided for the first time in over a century. If we are to govern, to conduct the nation’s business, we have to be able to work across party lines. The bankruptcy Conference Report we are considering this afternoon is a case study of how not to govern. There was no conference; this report emerged as the product of negotiations held exclusively between House and Senate Republicans. Maybe if they had consulted with the minority, they could have fashioned a bill the minority could support. But they didn’t. They deliberately excluded us. The result is a Conference Report the President has vowed to veto.

Bankruptcy reform requires a balanced bill that is fair to both debtors and creditors. This bill doesn’t measure up. I intend to vote no on passage of the Conference Report to H.R. 2415. I hope that Congress will revisit bankruptcy reform in the 107th Congress, and work in a bipartisan way to address known abuses in our bankruptcy laws.