COUNTERCOLUMN: All Your Bias Are Belong to Us

I'd love to be the guy out front taking the pro-consumer line on this one. I'm an admirer of Dave Ramsey, who's been railing against this bill since the late 1990s. And even though I'm normally pretty conservative, I do tend to have a populist streak when it comes to financial services.

That said, I have a hard time joining the pro-consumer forces with this particular bill, because I don't quite share the same set of assumptions.

If we're not careful, the law of unintended consequences will rear its ugly head. Here's why.

The usual scenario the bill's critics come up with to cite the fundamental injustice of tightening up bankruptcy requirements is that in which the consumer has been driven into bankruptcy by medical bills.

Others have demonstrated convincingly that medical problems have been vastly overstated as a proximate cause of bankruptcy, but I'm not sure the number of cases are really relevant here.

Here's what's important to me:

If we go too far on the side of the consumer regarding medical bills and bankruptcy, and make it easier to default on medical-related debt, then health care providers will simply stop extending credit.

Who gets hurt?

Well, the poor, of course The well off and the well insured don't need medical credit. But we'll wind up hurting the exact same demographic we're trying to protect.

Really, these people will get hurt no matter what. But if we err on the side of making it possible to extend credit to them, on reasonable terms, then the health care companies at least get an account receivable, and those who are ill or injured won't have to put off receiving care--thereby very likely INCREASING health care costs in the long run.

And eventually, we'll end up increasing health care costs anyway, for everyone, since those losses will have to be made up somehow. Someone foregoing routine care for lack of access to credit or insurance will wind up coming back with a far more expensive condition that cannot be turned away, and the rest of us will wind up paying for him anyway.

The logic likewise applies to other industries. If it's easier to declare Ch. 7, then access to credit will quickly dry up, in the very areas that need it most.

That's not to say there aren't usurious lenders out there. I can't stand the check cashing stores and rent-to-own shops. But the solution is educating and developing the economically marginal so they no longer need their services, rather than on making it easier for them to get a free ride.

Otherwise, interest rates - especially for high-risk loans - will increase even further, and no one will get hurt except the people the liberals are trying to protect.

I'm not wildly in favor of the bill, but I have no fundamental problem with it.

Splash, out

Jason