The National Consumer Law Center is featuring a report on bounce protection scams. (Known in the bizarro-speak of the credit industry as “sound financial strategies.”) I wrote about these earlier, but apparently it’s even worse than I thought. Some highlights:

ATMs include the overdraft line of credit on-screen as part of the available funds. ATM users aren’t notified that they’re withdrawing more than they have until the bill arrives later.

Annualized interest rates on the cash lent to cover bounced checks and withdrawals can reach 1520%. That is not a typo. And thanks to a loophole in the federal Truth in Lending law, banks never have to reveal the actual interest rates

Customers automatically get “protection” whether they want it or not, and must specifically request to be taken out.

Consultants hyped bounce protection to banks as a way to compete with payday lenders – barely legal loan sharks that prey on our cash-strapped troops (among others).

A highly recommended read. If you like horror stories.

The hearing room hadn't even cooled off before we received this email from reader JA:

Did I hear an attorney lie to Congress?

I watched the hearings today. I missed the first hour due to time constraints, but I did catch most of it.

MBNAs Honorable Louis Freeh, Senior Vice Chairman and General Counsel has specifically and clearly denied that MBNA uses Universal Default yet there is this complaint on the Consumer Affairs website. Did he lie to Congress or is the Consumer Affairs website reporting wildly off base? Is there a penalty for perjury when testifying before Congress?

Here is a list of some of the questions we've received from readers that should be asked at Tuesday's hearing:

We don't know if he's a reader, but we feel that it can be inferred that Representative James Sensenbrenner (R-Wis), Chairman of the House Judiciary Committee, would ask credit card companies:

"Now that the risk of consumers failing to pay back their debts has been reduced, will this reduction in risk be returned to consumers in the form of lower interest rates?"

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One reader has a three-part question along the same lines as Rep. Sensenbrenner:

1) "Now that Uncle Sam has transferred your risk to consumers, how much savings will you pass on to consumers, in the form of lower rates and fees?" (this one was the most common question from our readers)

2) "How much will go straight to your shareholders?"

3) "How much went to Joe Biden?"

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Reader SJ asks:

"If the practices by the Credit Card industry are not predatory, why am I - who went to court for a bankruptcy in April of this year - receiving offers for credit cards when my bankruptcy has not even been fully discharged yet?"

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Reader LP asks:

"Why has the gap between interest rates at which banks borrow money and the interest rates they charge credit card customers remained so large over the years?"

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Reader DR asks:

"Do you feel that you have gotten your money's worth from Congress in the passage of the recent bankruptcy bill, and are you pissed it took so long?"

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Reader KM asks:

"Why are banks allowed to apply your payments in order of interest rate, such that credit card loan-types with the highest rate are paid off last regardless of when it was borrowed?"

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Reader DN asks:

"Would you (the credit card companies) be willing under any circumstances short of legislation to ever place information on statements about how long it would take consumers to pay off their debts making only the minimum payments?"

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Reader JA asks:

"Why are you taking advantage of teenagers in high school and college and then suing their parents when they can’t pay, without first asking for their cosigning on the account? Isn’t this dishonest? "

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One observer asks credit card companies:

"How do you justify hitting consumers struggling to pay their balances with $35 late fees and 30% “penalty” interest rates that might force them over the financial brink into bankruptcy? If the goal is to protect the company’s financial commitment, why not just cut off their credit and help keep them solvent?"

Do you get burned up over credit card practices? Think it isn’t fair that they can change the price of the credit after you borrow the money—even if you make your payments on time? Aggravated over bait-and-switch advertising? Stung by fees that you think are unfair? Do you even know the terms of your credit cards?

On Tuesday the Senate Banking Committee will be holding hearings about disclosure and marketing in the credit card industry. They have some real live witnesses: VPs from Capitol One and CitiCards, and the acting director of the Office of the Controller of the Currency—the head of the agency partly responsible for regulating national credit cards.

These people are supposed to be there to answer hard questions. So how about asking some? Give us some questions, and we’ll post them. There will be some good consumer advocacy folks testifying, and Senators Akaka and Feinstein are also planning to testify. We think some of the questions you want to pose just might get asked. And if they get asked, we can talk about the answers.

This is your chance. What do you want to know?

I recently wrote about consumer bankruptcy and promise-breaking. Of course, the same can be said about corporate bankruptcy. But this point is lost on “Will” Wilkinson of the Cato Institute, whose Fox News report on Social Security harps on the difference between government “promises” to pay Social Security benefits and the “property” people keep in corporate (and government) stocks and bonds. His big sales pitch seems to be that stocks and bonds, unlike Social Security promises, “cannot be held hostage, whittled down, or bargained away by future Congresses.”

Let’s start with bonds. “Bond” is just a fancy name for a debt that a corporation owes its creditors, the bond holders. As TPM readers know, a debt is just a promise now to pay later. (Pensions are promises now to pay later, too, and we know where those are headed.)

Through bankruptcy, the federal government offers both corporations and real people a chance to break these promises with relatively few consequences, although the government is trying its darndest to take back the offer when it comes to real people. Just ask Enron’s employees, whose pensions full of Enron bonds disappeared in bankruptcy without even a puff of smoke, about bonds never being “whittled down.”

But what about stocks? Stocks are a stake in the company – a chance to actually own a part of Google or, dare we say, Citibank. That’s gotta count for something, right?

Not so fast. Corporations that offer stocks can liquidate or reorganize under the bankruptcy code too. When that happens, stockholders have it even worse than bondholders.

The downside of owning something is, if you’re in debt, your creditors can foreclose on what you own. So when a corporation has debts it can’t pay and files for bankruptcy relief, the creditors have the right to take what the stockholders “own” - their shares. When asbestos maker Johns-Manville filed for Chapter 11 to deal with lawsuits by workers it injured and killed, for instance, all its stockholders suddenly found themselves sitting on a worthless pile of certificates.

So much for stocks and bonds as “property.”

Of course, “Will” Wilkinson is technically correct. Stocks and bonds cannot be “bargained away” by future Congresses — but they don’t need to be. The laws are already in place for every one of those promises to disappear in a puff of smoke. Compared to the alternative (depending entirely on a system in which stock and bond holders lost billions of dollars worth of “property” in over a million companies over the past 10 years) promises by a publicly accountable Congress seem like a pretty safe bet.

On Monday, I posted a note about the increase in the bankruptcy filing fee from $155 to $200. The increase was supposed to pay for 28 new bankruptcy judges (at a 5-year cost of $25 million) but the government now estimates that the increase will raise an additional $125 million over the next five years. In other words, we have a new tax just for people who are broke.

But the bankruptcy bill started in the Senate, and only the House can impose new taxes. So the House added section 6042 to (of all things) the Emergency Supplemental Appropriations Act For Defense, The Global War on Terror, and Tsunami Relief, so that Congress could initiate this new tax. The day after I posted my note, the House and Senate Conference on that bill met and raised the Chapter 7 filing fee again by another $20—to $220. We hear that it will pass this week or next.

Why extract $225 million over five years in general tax revenue from people who are already broke? Are they kicking debtors just because they can? Or is this just another play at the margins—a way to keep the poorest, most desperate families from declaring bankruptcy? Is this one more move to keep bankruptcy available only for the well-to-do?

We know most people go numb over numbers. But this is wrong, and hiding it behind decimal places won’t make it right. Where are the no-new-taxes folks? Where are the help-struggling-families advocates? Let’s gear up again and let our senators and representatives know that this “fix” is whipping families that have already been beaten unconscious.

Imagine this conversation:

You: I'd like a bar of soap, please.
Cashier: Sure. That'll be ten dollars.
You: Ten dollars for a bar of soap?
Cashier: It's very good soap.
You: Yes, but --
Cashier: Besides, you can afford it, can't you?
You: Sure, I can afford it today. But what happens when my cell phone bill comes in tomorrow and I find out my daughter's run four hours over our minutes?
Cashier: Oh, don't worry. It sounds pricey, but if it turns out you can't afford it, just give back the soap and we'll write it off.
You: Wait, you'll really do that?
Cashier: We promise. We have to. It's the law.

This is the the conversation every cardholder has with Visa. Credit's pricey. Sometimes it's so pricey you find out later you can't afford it. A million and a half families found this out last year.

To make up for it, Visa promises to forgive the debt if you're stuck with unexpected bills. True, bankruptcy laws force them to make this promise. But it's part of the deal from the start.

So what if, after the deal is done and you're giving Visa your money, they tear up the contract and rewrite the terms in their favor? You're stuck paying a high price for something worth a lot less.

In law school, we call that "breach of contract." Most people call it welching on a deal, not meeting your end of the bargain, or just plain breaking your promise.

It turns out that all the Hill debate about bankruptcy as promise-breaking wasn't far off. They just fingered the wrong suspect. Debtors weren't the ones breaking their promises. Debt forgiveness was part of the deal from the get-go.

The real promise-breakers were creditors, whose welching (leaving a hundred million families stuck paying the old, high prices for new, harsh terms) is now known as the Bankruptcy Bill of 2005.

Nowadays politicians’ favorite mantra seems to be “lower taxes.” Corporate taxes. Estate taxes. Taxes on millionaires. Taxes on working folks. The We-Hate-Taxes leadership in Washington says “cut ‘em all.”

This “No New Taxes” routine (with a little “No Old Taxes, Either” tacked on) has one glaring exception: A big tax increase on folks who are broke. The Bankruptcy Bill President Bush signed into law last week raised the fees on every family that files from $155 to $200.

What, you thought no one below median income would suffer? The new taxes, like almost every other provision in the bill, apply to everyone—no matter how low their income.

The (public) reason was to pay for 28 new judgeships created by the bill, but the numbers are a little off. The government estimates the five-year cost of the new judges at $25 million, but the government puts the five-year net revenues (from the fee increase alone) at about $150 million.

So will the fee be lowered? Of course not. That money will go where taxes usually go -- straight to the general revenue coffers – fresh from the hides of people in desperate financial trouble.

Congress has kicked these families when they are down by passing a harsh new bankruptcy bill, and then kicked them again with a tax to fatten general revenues. Get sick? Lose your job? Trying to save your house? Boy, have we got a tax for you.