Instant gratification

Guess who's drowning under the weight of credit card solicitations these days? The newly declared bankrupt.

TACOMA, Wash., Dec. 9 - As one of more than two million Americans who rushed to a courthouse this year to file for bankruptcy before a tough new law took effect, Laura Fogle is glad for her chance at a fresh start. A nurse and single mother of two, she blames her use of credit cards after cancer surgery for falling into deep debt.

Ms. Fogle is broke, and may not seem to be the kind of person to whom banks would want to offer credit cards. But she said she had no sooner filed for bankruptcy, and sworn off plastic, than she was hit with a flurry of solicitations from major banks.

"Every day, I get at least two or three new credit card offers - Citibank, MasterCard, you name it - they want to give me a credit card, at pretty high interest rates," said Ms. Fogle, who is 41 and lives here. "I've got a stack of these things on my table. It's tempting, but I've sworn them off."

If it seems odd to Ms. Fogle that banks would want to lend money to the newly bankrupt, it is no mystery to the financial community, which charges some of the highest interest rates to these newly available customers.

Under the new law, which the banking industry spent more than $100 million lobbying for, they may be even more attractive because it makes it harder for them to escape new credit card debt and extends to eight years from six the time before which they could liquidate their debts through bankruptcy again.

"The theory is that people who have just declared bankruptcy are a good credit risk because their old debts are clean and now they won't be able to get a new discharge for eight years," said John D. Penn, president of the American Bankruptcy Institute, a nonprofit clearinghouse for information on the subject.

Credit card companies have long solicited bankrupt people, on a calculated risk that income from the higher interest rates and late fees paid by those who are trying to get their credit back will outweigh the losses from those who fail to make payments altogether. The companies also directed many of those customers toward so-called secured cards, which require a cash deposit.

But the new law makes for an even better gamble for lenders, consumer groups say. It not only makes bankrupt debtors wait eight years to clear their debts again, but it also requires many of those who do go back into bankruptcy to pay previous credit card bills that may have been excused under the old law.

Bankers defend the practice of soliciting the newly bankrupt, saying it gives them a chance to build a new credit history.

"The people coming out of bankruptcy need an opportunity to get back on their feet," said Laura Fisher, a spokeswoman for the American Bankers Association, the industry's largest trade group.

"If you take away the opportunity to get credit," Ms. Fisher said, "it's like taking away the want ads from a job-seeker."

Sure, and it gives people who suddenly find themselves in a medical emergency the chance to join the ranks of those in servitude to the financial companies, courtesy of the new bankruptcy law.

I don't really blame the credit card companies. Revolving debt is, to paraphrase Dillinger, where the money is. I blame Congress, who, in a rare show of bipartisanship gave the the companies everything they'd been begging for for ten years, and gave no protections to consumers in return.