I opined, back when the banking industry was lobbying for restraints on Chapter 7 bankruptcy filings, that it was rather the banking industry that should be restrained.

Today’s New York Times carries a front page story on how banks are very aggressively marketing credit cards to those who filed for Chapter 7 just before the new, tougher bankruptcy filing law went into effect. The credit cards being offered to this susceptible group of consumers carry extremely high interest rates; a typical starting interest rate is 23%.

This is an obscenity.

A nearly analogous situation is to be found in that of alcoholics who have successfully refrained from drinking thanks to AA counseling. Would it be ethical for whiskey salesmen to approach such people?

Interviewed for the Times article, Ellen Schloemer, a researcher at the Center for Responsible Lending said: “The whole business model of the credit card industry is built around outstanding debt. This is the only industry that calls people deadbeats when they pay all their bills every month.”

The bankers’ unacceptable rebuttal to criticism is that soliciting the newly bankrupt gives them a chance to build a new credit history.

Were the bankers genuinely concerned about giving Chapter 7 people a chance to rebuild their credit history, they would limit the line of credit extended to any one of them to 1% of that person’s demonstrated yearly income. They would give them a fair and reasonable interest rate on that loan, similar to the interest rates the banks pay to holders of savings accounts. By being permitted to charge only a few hundred dollars at a time, and then not being permitted to charge any more until the debt is cleared, a person could begin accruing a good credit record. After a period of regularly paying off their debts, the customers could have their credit line increased by a very modest amount.

But bankers are not interested in having people establish a good credit record. They are interested in collection on their usurious interest rates. Legislators should immediately reinstate the old Chapter 7 laws, pass new bills placing legal limits on credit card interest rates, and prohibit credit card companies from extending multiple tens of thousands of dollars of credit to a person who has no means of repaying the whole debt promptly.