The 2005 Bankruptcy Law

Joe Biden and Elizabeth Warren are old adversaries. In 2005 Biden sponsored a bill to update bankruptcy law and Warren, an expert in bankruptcy law, wanted nothing to do with it.

The major criticisms revolved around the claim that the law made things better for the credit card companies at the expense of the consumer. Considering the credit card companies apparently spent around $100 million pushing the bill that sounds like it's pretty accurate.

Bankruptcy law is complicated especially when you combine it with credit card companies and their often barely ethical practices.

The 2005 Bankruptcy law was based upon the erroneous claim that fraud and abuse of the bankruptcy system were widespread. Like the claim that voter fraud is widespread no one ever found any evidence to support that claim. It turned out that unexpected medical expenses were the most likely cause of bankruptcy. There’s no real surprise there.

In the meantime, remember that Delaware is the credit card capital of the country because of two things.

1. Marquette National Bank v. First of Omaha Corp. in 1978 where the SCOTUS held that credit card companies could export interest rates from the states where they were located to other states.

2. Delaware’s 1980 Financial Center Development Act which, according to Forbes, provided the following incentives, with commentary in parentheses, to credit card companies.

• Invitations: It gave out-of-state banks permission to enter Delaware, provided that they met certain conditions — for example, employing at least 100 people in the state
• Interest rate flexibility: It largely eliminated usury ceilings (so 24% interest became OK)
• Option to charge fees: It allowed banks to impose several types of fees on revolving and closed-ended credit, if they were disclosed (disclosed usually on pg 178 in teeny print)
• Tax breaks: It implemented an inverted tax rate for banks making more than $20 million, taxing big banks at a lower rate than smaller banks (I’d like to meet the guy that came up with this one)

In 1980 there were hopes that the act would add 1,000 jobs. As of 2017 some 47,000 people are employed in Delaware’s financial sector.

So, I wonders why a senator from Delaware would be friendly to credit card companies. It’s hard to figure out but MAYBE if I try REAL hard I might be able to work it out.