Banks and credit card companies lobby strongly against bill

There is major lobbying going on by banks as well as credit card companies before Governor David Paterson as they are against the bill that puts limitations on banks while recovering amounts from their consumers who have gone bankrupt. As per the bill the larger portions of all the property and assets of a bankrupt customer would be shielded. So, creditors as well as well as collection agencies can no longer sue the customer in order to recover unpaid debts.

Everything from the amount of money, home equity, car value, tools, computers, cell phones and everything else comes under the protected assets according to the bill. The levels of these protected assets are then indexed to inflation as it automatically increases each year.

Since the small business owners use their personal credit cards in order to finance their businesses, these changes could potentially benefit them. These changes are likely to hit hard as the filings for bankruptcies remain quite high. In the Albany district alone they are at 5,000 this year too and it is a 16% increase ever since the recession began.

The banks have already stated that this move will only lead to increases in the lending rates as they have no other choice to tap to recover from their losses. Along with this banks will also become more and more apprehensive while lending or extending credit in the future.

The lawmakers at the state and national levels are trying hard to expand credit after the end of the recession period. But this bill will adversely impact this effort as this legislation would only send the message that "there will be less tomorrow than what there is today" says Roberta Kotkin from New York Bankers Association.

Roberta Kotkin also went on to state that banks enter into agreements in good faith that the customers will pay back and this bill will really hurt the banks as well as those people who will be seeking credit in the future.

Paterson has time until the 27th of December to either sign or veto this bill. If nothing is done by that time, then this bill will become a law. This would impact the credit card companies in a big way. This would also impact hospitals where they have to deal with patients who have medical bills that remain unpaid. It would be interesting to wait and watch what unfolds by the end of this month.

Doug Nicholas

Doug Nicholas, a financial consultant by profession with a Masters degree in International Business from Brown University, is also an ardent writer. Though he has a full time job at one of the companies listed on Wall Street, he does manage to squeeze in time to follow his passion. He puts his ideas to words in his articles related to finance and business.