Bankruptcy Abuse Prevention and Consumer Protection Act of 2005

BANKRUPTCY ABUSE PREVENTION AND CONSUMER PROTECTION ACT OF 2005 -- (Senate - March 02, 2005)

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Mr. NELSON of Florida. I thank the Chair.

Mr. President, as we debate the merits on this bankruptcy bill, I offer an amendment, and I believe it is critical to improving this piece of legislation. This amendment will create an exemption from the requirements of this bankruptcy bill for victims of identity theft. The long and short of the amendment is, if you have had your identity stolen and charges have been run up on you because your identity was stolen, and if that causes you to go into bankruptcy, then you are going to have an exemption from the provisions of this legislation that said you would not be able to file bankruptcy.

It is carefully tailored as an amendment. It would not apply to every single identity theft victim. Rather, it would require identity theft victims to show they were defrauded out of the minimum dollar amount.

There is an epidemic of identity theft that has plagued millions of Americans. There are 60 Senators in this Chamber who had Bank of America Government credit card information lost or stolen over the weekend. 1.2 million other Americans, including this Senator from Florida, had personal financial information that was lost or stolen. In my particular Senate office, two other of our senior staff members had sensitive financial account information that was compromised in this incident. The lost data tapes could have names, Social Security numbers, and addresses on them.

How long down the road before we find that our Social Security numbers and other personally identifiable privileged financial information come into the hands of the thief to be used in stealing our identity, and we suddenly start finding we have charges we never made.

This phenomenon of identity theft is happening. We saw it in a big case called ChoicePoint, an Atlanta, GA, company that had hundreds of thousands of records purloined as a result of someone disguised as a regular customer of that information broker, and instead their identities are now stolen. Mr. President, 10,000 of those 400,000 stolen we know are in the State of Florida--at least 10,000. This is a phenomenon that is continuing to occur.

Identity thieves typically take advantage of the electronic records to steal people's names, addresses, telephone numbers, Social Security numbers, bank account information, or other personal, financial, and medical data.

If you were a customer of something such as ChoicePoint, an information broker, not only do you have information, such as your credit, which is covered under existing law for protection, but you have a lot of other information in there, such as I mentioned, Social Security numbers and bank accounts. What about job applications, what about drivers' licenses, what about DNA tests, what about the records of all kinds of different medical tests?

This is the alarming theft that is occurring today, and it is not being done with the hammer and crowbar of a typical thief. It is being done by sophisticated methods as we are living in this technological age.

Listen to these alarming statistics. The Federal Trade Commission says 10 million Americans were affected by identity theft last year. Identity theft is now the most common fraud perpetrated on consumers. In 2004, identity theft accounted for 39 percent of consumer fraud complaints, the Federal Trade Commission tells us. And a figure that will blow your mind is that identity theft cost the United States $52 billion last year.

Because identity thieves misuse people's personally identifiable information, some individuals are denied jobs, they are arrested for crimes they did not commit, or they face enormous debts that are not their own.

Last week, in Orlando, I met with six of those victims of identity theft. One of them was an elderly mother who was there with her daughter who, upon the passing of her husband of half a century, the daughter taking over all the financial records, and paying her mother's bills--her mother had always provided for the children's needs, so when the daughter started getting these credit card bills on the mom's credit card of $5,000 and $10,000, she paid them. It was not until a store owner in California, on the other side of the country from where this couple lives in Coca, FL, an alert store owner called and said: We want to make sure that you are willing to have this charge of $26,000 charged to your mother's credit card. Your mother is standing right here in the store in San Francisco to ring up this charge. The daughter, of course, replied: My mother is sitting right here with me in Florida. Obviously, someone is masquerading as my mother with a stolen identity.

The sad result is that even though that $26,000 charge was averted, the daughter had already paid what she thought were the legitimate debts of her mom to the tune of $40,000, and because of that stolen identity, she can never get that back.

What happens if that is a debt that would drive a person like that into bankruptcy? Should that be used against them to prevent them from being able to have bankruptcy? I do not think we want to do that in this legislation.

The law does not require creditors to automatically erase a person's debt arising from identity theft. Creditors sometimes refuse to erase these debts or they allow credit investigations to drag on for years. This leaves some identity theft victims with no choice but to file for bankruptcy.

Let me give some more examples.

Last year, a Pennsylvania woman was victimized by a brazen identity theft. This thief was actually renting a room in the lady's house. The identity thief stole her checks, her bank card, her personally identifiable financial information. Then the thief used that information to wipe out the lady financially. One month before Christmas, this woman was forced to file for bankruptcy relief. Shouldn't this bankruptcy reform bill cut people such as that some slack? I think that is the humane thing to do.

There is another example. It is in New York. An identity thief stole the personal information of a girlfriend, and then he ran up huge debts in the victim's name. Pretending to be the victim, the identity thief took out three personal loans and even purchased two automobiles. In total, the thief ran up a tab of over $300,000. The local postal inspector in the victim's area called it the worst case of identity theft they had ever seen. In that case, the victim had no choice but to file for bankruptcy.

Should not there be an exemption in a case like this? This is a very straightforward amendment. It states that people who have been victims of identity theft and have to file for bankruptcy because of that identity theft should get a break from the stringent means test in the bill. As identity theft becomes more prevalent--and it happened last week with the revelation of ChoicePoint, an information broker, 400,000 people. It could have happened Friday night after 5 when Bank of America released the information that 1.2 million Federal employees' identities had been stolen, including 60 Senators in this Chamber. As it becomes more prevalent, more innocent people are going to encounter this situation.

I think it is only right to be fair to those victims when they file bankruptcy and not to add insult to their injury.

The Consumer Federation of America has endorsed this amendment as being in the best interest of Americans. I urge my colleagues to support this amendment.

Mr. DURBIN. Will the Senator yield for a question?

Mr. NELSON of Florida. Of course, to the distinguished assistant Democratic leader, I yield.

Mr. DURBIN. I must be living under a dark cloud because I not only had my identity stolen several weeks ago, but I am also one of the 60 Senators who, like the Senator from Illinois, was a victim of this apparent theft of a computer tape of official business credit cards of the Senate which compromises our credit cards. In my situation 4 or 5 years ago, I received a phone call from a collection agency in my home in Illinois saying: DURBIN, we finally caught up with you. I do not know if you thought you could get by with this forever. We knew we would find you. You owe our company in Denver, CO, $2,000. I said: I have never been to your company's place in Denver, CO. I have never done business with you. It turned out to be someone using my name and my Social Security number, who had run up several thousand dollars in charges. It took several months to sort it out, but I was lucky. I sorted it out. There are some stories that have come to my office, and I am sure to the Senator's office as well, where it took years before they finally came to the bottom of it.

So I ask the Senator from Florida, for those people who were victims of identity theft, maybe a credit card where charges were run up out of sight, tell me exactly what the Senator's amendment will do to protect them in this new bankruptcy reform we are considering.

Mr. NELSON of Florida. I thank the Senator for his question. Yes, the Senator may well be one of the victims that was not announced until after work on Friday afternoon at 5, but we have identified that it is 60 Senators in this Chamber, along with 1.2 million Federal employees. We are talking about this credit card that is provided for official expenses of Government business, and all your personally identifiable information is on that file. So it may well be that a majority of this Senate finds they could become the victims and experience the similar kind of agony of the six people I just met with in Orlando, that it keeps going on and on and they cannot get their identity back.

I had one who was a truck driver with special permission to drive hazardous materials. His identity is stolen and there is somebody out there driving a truck of hazardous materials who has stolen his identity.

The Senator's specific question is: What does this amendment do? What it does is carve an exemption for the people who have debts that have driven them into bankruptcy because those debts have occurred through no fault of their own. Their identity has been stolen and someone has created a credit card that then runs up bills in their name, that they did not know about, they did not intend, nor could they afford, and as a result, because they cannot get it worked out--and I wish the Senator could hear these victims, how long it takes them to get their identity back--in a timely fashion, they have to file for bankruptcy.

My amendment says this is going to be an exception from all the rigors of the bill that say a person cannot file for bankruptcy.

Mr. DURBIN. If I could further ask the Senator from Florida, this bankruptcy reform is going to affect millions of Americans. About 1 million to 1 1/2 million a year file for bankruptcy, and all of their members of their family, of course, are affected by the bankruptcy so these people filing for bankruptcy have reached a point where their bills are so large they have said: I cannot do it, it is far in excess of what I can ever pay off, and they go into bankruptcy court asking that they have their debts relieved. They give up most of their assets in life and their debts are then paid off partially, as much as they can, and they walk out of the bankruptcy court with a new day ahead of them. That has been the law for a long time.

This bill we are considering says, wait a minute, we may not let you walk out of the court with all of your debts behind you. You may walk out of the court with some of the debts still on your shoulders that you have to keep paying. So if I understand the Senator's amendment, he is saying if the debts we are talking about were incurred not by the person filing bankruptcy but in their name because of identity theft, then for goodness sakes it should not be said at the end of the bankruptcy process that they still have to carry these debts which some criminal has incurred in their name.

Is that my understanding of what the Senator is trying to achieve?

Mr. NELSON of Florida. Indeed, the Senator has put his finger on the problem and the attempted solution to the problem, recognizing that we want to work with the banking industry and the credit card industry so this does not become a loophole that somebody can get out of following the law and be irresponsible about filing bankruptcy. We have even put it in the amendment that there has to be a threshold for the person who would have this exemption because of identity theft. For example, it would have to be a claim against the debtor in excess of $20,000, or 50 percent of all the claims asserted against the debtor, or 25 percent of the debtor's gross income for a 12-month period.

With that reasonable protection, so that somebody is not abusing the law, we come back to the basic issue of fairness.

Mr. DURBIN. If I could ask the Senator from Florida, yesterday we considered an amendment, which the Senator supported and cosponsored, which said take into consideration the members of the National Guard and Reserve who are being activated and sent overseas to Iraq and Afghanistan, risking their lives for America, that if they are gone for a year or more they may have an economic misfortune; maybe that small business they were running fails because they are gone serving their country. So we offered an amendment yesterday which said when it comes to that bankruptcy situation we should be more tolerant, more lenient and more sensitive to these men and women who have risked their lives serving America in the Armed Forces.

When we offered that amendment the Senator from Florida may recall that yesterday some 58 Senators voted against it, many of whom will be the first to welcome these guardsmen and reservists with open arms, thank you for your service to our country. Now Senator Kennedy has an amendment pending which says, what about the category of Americans who have overwhelming medical bills because of a medical condition they never could have anticipated and they get trapped in bankruptcy? Can we take that into consideration and not hit them as hard as others and not take their homes away from them at the end of the day? Now the Senator comes in with another category, which I think is equally legitimate, of victims of identity theft.

If I understand the Senator from Florida, he is following in the same line of argument, and that is the bankruptcy court should not be blind to reality, to the reality of the guardsmen and reservists serving our country and paying a heavy price at home in terms of their personal finances. Nor should this bill be insensitive to a single mother raising children, diagnosed with breast cancer, who as a waitress with another job cannot pay off her medical bills, or in the Senator's case an elderly person whose identity was stolen and charges were run up beyond anything that she could handle.

It is my understanding that what you are saying is this law should be sensitive to the realities of people who are doing the right thing but are being victimized, either by medical illness or by identity theft. Is that the intention of the Senator?

Mr. NELSON of Florida. The Senator is correct. Indeed, this amendment is saying that under the circumstances, where a person, through no fault of their own, because they have been preyed upon by larceny, by a thief, and bills have been run up because their identity has been stolen, and that happens, tragic as it is, to cause them to go into bankruptcy, that they should be exempted the harsh means test provision of this bill and should be allowed to file Chapter 7 bankruptcy under those circumstances. The stolen identity is enough. The debts run up are enough. The harassment of trying to get your identity back is enough. Lord help them, then when they have to file bankruptcy, that ought to be enough. But to say that they cannot file Chapter 7 bankruptcy under this condition? What are we trying to do to our fellow Americans? This amendment perfects that glaring error and inconsistency.

I yield the floor.

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