I find myself looking at a 32 page report, complete with colorful graphs and charts, written by a gentleman by the name of Michael Simkovic. Mr. Simkovic was a fellow in law and economics at Harvard Law School between 2006 and 2007. He published this report last July. His subject is the effect of the 2005 “Bankruptcy Abuse Prevention and Consumer Protection Act.” Many of us call that BAPCPA (pronounced “bapceepa“).
The report begins by reminding us that supporters had claimed that ultimately this law would benefit consumers, because it would lower the cost of credit card debt. The data shows, however, that while credit card company losses decreased, and the card companies had record profits, costs to consumers actually increased. “In other words,” says Mr. Simkovic, “the 2005 bankruptcy reform profited credit card companies at consumers’ expense.”
No big surprise there. But thanks to Mr. Simkovic for laying out the details and proving it beyond a reasonable doubt. This seems to be very consistent with a series of articles published in the Star Tribune last October which stated, among other things, that BAPCPA has been one of the contributors to our current economic meltdown.