The Acoustic Separation of Consumer Bankruptcy and Consumer Credit Laws

Abstract

With the COVID pandemic threatening to bring many individuals to the verge of bankruptcy, and with the introduction of a new consumer bankruptcy reform bill in Congress, now is a good time to consider the drawbacks of the current consumer bankruptcy regime. The Article argues that the principal failing of the current legal regime– the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA)– emanates from the underlying narrative of the legislation, which insulates consumer bankruptcy from the larger context of consumer indebtedness and consumer credit markets. This (mis)conception of the problem, I argue, has originated with the consumer creditor industry, which holds a strong interest in separating the regulation of consumer bankruptcy from that of consumer lending. The Article demonstrates that historically, the push by consumer creditors toward insulating consumer bankruptcy policy was facilitated by Congressional rules of committee jurisdiction, which assign consumer bankruptcy legislation and consumer credit legislation to different House and Senate committees. These jurisdictional rules, I argue, have generated 'acoustic separation' between committee deliberations, thereby allowing creditors to lobby for restrictions on bankruptcy access without concurrently having to concede to substantive regulation of their consumer lending practices. The historical analysis suggests that consumer bankruptcy reform should start by relaxing the acoustic separation between the Judiciary and Banking committees. Only then can Congress' deliberative procedure capture the complex, multi-faceted nature of consumer bankruptcy.

Keywords: consumer credit; consumer bankruptcy; legislation