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Some Congressmen, though, would like to curb the credit-card industry. Two bills have been introduced in the Senate to set a cap on the amount of interest that can be charged to credit-card users. Under current law, cards are regulated by the legislature of the state in which they were issued or in which the cardholder resides. Congress may also require that companies disclose more information when they solicit new customers. Under the provision of one bill, offers would have to state clearly the card's interest rate, annual fee and any potential penalties for late payment.
Moreover, the tax-reform plans that Congress is considering would put limits on the amount of interest that people can deduct on their income-tax returns. At present, the tax system certainly eases the accumulation of debt by allowing taxpayers to subtract all interest from their income. Says Black: "I got into debt partly because the interest payments were the only tax deduction I had. I felt that if I saved money, I'd be losing money."
More and more debtors are deciding that the only way out of their bind is to declare personal bankruptcy. A law that became effective in October 1979 made the process much less onerous than before. No longer, for example, do borrowers have to give up their homes and cars to gain protection from creditors. As a result of the new rules, the number of bankruptcies jumped from 179,112 in 1978 to 523,825 in 1981. While the filings predictably declined after the economic recovery got under way in 1983, they have recently been on the rise again. Last year the number of personal-bankruptcy filings increased about 20%, to 341,189.
A growing number of beleaguered borrowers, though, are trying to dig themselves out of debt without taking the extreme step of filing for bankruptcy. For that reason, business is brisk for credit counselors. The 240 offices of Consumer Credit Counseling Services, a national nonprofit organization, last year advised 127,000 families. Clients now must wait for up to eight weeks before they can meet with a counselor; a year ago, they would have received assistance in less than ten days.
Most credit-counseling services offer extensive financial advice. Says G. Bennett Perry, associate director of Credit Counselors Corp., a Fort Lauderdale-based firm: "We go over the entire budget, from rent to haircuts." Debtors are advised to keep a written record of all their expenditures and to refrain, under any circumstances, from borrowing more money.
For truly compulsive debtors, there is Debtors Anonymous, a ten-year-old national group. Modeled after Alcoholics Anonymous, it encourages debtors to admit that they have been unable to exercise any control over their impulse to spend money. One first piece of advice offered by both credit counselors and D.A.: cut up all credit cards and pay only cash. Reformed Debtor Barbara Aissen, a 49-year-old nurse at Miami Children's Hospital, recalls her own reaction upon hearing this suggestion. Says she: "I didn't have to think about it twice. I said, 'Where's the scissors? I'll slice these cards in half right now.' "