Credit Card Debt Management

By now, there’s been plenty of hoopla about U.S. Sen. Chris Dodd’s (R-Nev.) housing bill to provide some relief for homeowners (and their lenders) in mortgage distress. The bill would put about $300 billion in a fund to refinance overly burdensome home loans at an amount 15% less than the original loan amount. This would make the payments more feasible for homeowners, but it would mean huge losses for lenders, particularly industry giants Freddie Mac and Sallie Mae.

The bill, currently stalled on the Senate floor but expected to reach President Bush’s desk this week, has spurred some public outcry. There is a perception that we, the taxpayers, are forking over taxpayer money to “bail out” homeowners who never should have qualified for these home loans in the first place. Hartford Courant blogger Jesse A. Hamilton addresses that point fairly well:

“I have to point out that the money source for this loan guarantee of $300 billion actually comes from revenue of GSEs (loan giants Fannie Mae, Freddie Mac and the federal home-loan banks.) It’s not taxpayer funded, which was Sen. Shelby’s main contribution… And the money is actually supposed to sit in a kind of fund that will guarantee newly refinanced fixed-rate loans that replace questionable subprime loans… the amount of the financing must be less than the current market value of the home, so the chance of default is less. Those that do default will be backed up by the fund.”

However, the housing bill is now coming under fire for another reason. A provision, apparently inserted deep in the proposal mid-June, calls for more stringent reporting requirements on credit card transactions. This isn’t just Visa, MasterCard, American Express, Discover. This is Google, Amazon, eBay, Paypal — any card company or third-party payment processor.

There are obviously some serious privacy issues here. Not only with credit card data and transaction data, but also with the social security numbers that double as tax identification numbers for thousands of small business owners across the U.S. Costs associated with collecting, organizing reporting the data could be a serious threat to small business owners on a budget, especially in these tough economic times. Read a concise summary of the problem, as well as an excerpt from the Senate bill summary itself, at Fort Hard Knox blog or on FreedomWorks.org.

Why does the government need to include this monitoring provision in a bill on housing assistance? It doesn’t make sense. While I do believe there is a link between irresponsible credit card spending and inability to meet your mortgage obligations and other bills, I do not think the government should stick its nose in the pot. Either help distressed homeowners or don’t, but do not use it as an excuse for increased governmental oversight and nosing around.