Credit Card Debt Management

The U.S. Senate finally passed a controversial housing bill, designed to help overextended homeowners deal with mortgage pressures. Many critics say the bill would ultimately do more harm than good in many ways. They say it would increase pressures on mortgage giants Freddie Mac and Fannie Mae, onto which the government would essentially transfer some of the financial burden accumulated by overeager lenders stuck with bad loans. Furthermore, critics say the bill would cost the federal government some serious coin.

But, as always, the government has a plan — it may arguably be a terrible one, but it’s there. To offset some of the costs associated with government assistance, there will very likely be an increase in government regulation. Sounds vaguely familiar, doesn’t it, China and Russia?

Lingo inserted last-minute by Sen. Chris Dodd (D-Conn.) would require credit card processors (including online ones like eBay and Paypal) to report businesses’ credit card sales to the IRS. According to the Wall Street Journal, this would raise $1 billion per year for the next decade and “would allow the government to identify possible cases of underreporting when determining who to audit.”

The measure is also considered a source of revenue to offset the costs of another bill currently floating through Congress revising the Alternative Minimum Tax. This whole credit card reporting thing is probably going to happen, but those crying privacy invasion and intrusive government may be knee-jerk reactionaries. This is what Kate Szostak of the Senate banking committee staff, said to the Hartford Courant’s On Background blog:

“This is not a controversial provision or a new one. Republicans and Democrats on the Senate Finance Committee have supported it for months, and it has been included in the Administration’s budget proposal for years. This provision simply requires banks–not small businesses–to report sales transactions to the IRS each year and to merchants at the end of each day. It makes the tax system fair for everyone, without burdening small businesses and without putting consumers’ privacy rights at risk.”