[House Hearing, 110 Congress] [From the U.S. Government Publishing Office] CREDIT CARDS AND OLDER AMERICANS ======================================================================= FIELD HEARING BEFORE THE SUBCOMMITTEE ON FINANCIAL INSTITUTIONS AND CONSUMER CREDIT OF THE COMMITTEE ON FINANCIAL SERVICES U.S. HOUSE OF REPRESENTATIVES ONE HUNDRED TENTH CONGRESS FIRST SESSION __________ AUGUST 7, 2007 __________ Printed for the use of the Committee on Financial Services Serial No. 110-56 U.S. GOVERNMENT PRINTING OFFICE 38-396 PDF WASHINGTON DC: 2007 --------------------------------------------------------------------- For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866)512-1800 DC area (202)512-1800 Fax: (202) 512-2250 Mail Stop SSOP, Washington, DC 20402-0001 HOUSE COMMITTEE ON FINANCIAL SERVICES BARNEY FRANK, Massachusetts, Chairman PAUL E. KANJORSKI, Pennsylvania SPENCER BACHUS, Alabama MAXINE WATERS, California RICHARD H. BAKER, Louisiana CAROLYN B. MALONEY, New York DEBORAH PRYCE, Ohio LUIS V. GUTIERREZ, Illinois MICHAEL N. CASTLE, Delaware NYDIA M. VELAZQUEZ, New York PETER T. KING, New York MELVIN L. WATT, North Carolina EDWARD R. ROYCE, California GARY L. ACKERMAN, New York FRANK D. LUCAS, Oklahoma JULIA CARSON, Indiana RON PAUL, Texas BRAD SHERMAN, California PAUL E. GILLMOR, Ohio GREGORY W. MEEKS, New York STEVEN C. LaTOURETTE, Ohio DENNIS MOORE, Kansas DONALD A. MANZULLO, Illinois MICHAEL E. CAPUANO, Massachusetts WALTER B. JONES, Jr., North RUBEN HINOJOSA, Texas Carolina WM. LACY CLAY, Missouri JUDY BIGGERT, Illinois CAROLYN McCARTHY, New York CHRISTOPHER SHAYS, Connecticut JOE BACA, California GARY G. MILLER, California STEPHEN F. LYNCH, Massachusetts SHELLEY MOORE CAPITO, West BRAD MILLER, North Carolina Virginia DAVID SCOTT, Georgia TOM FEENEY, Florida AL GREEN, Texas JEB HENSARLING, Texas EMANUEL CLEAVER, Missouri SCOTT GARRETT, New Jersey MELISSA L. BEAN, Illinois GINNY BROWN-WAITE, Florida GWEN MOORE, Wisconsin, J. GRESHAM BARRETT, South Carolina LINCOLN DAVIS, Tennessee JIM GERLACH, Pennsylvania ALBIO SIRES, New Jersey STEVAN PEARCE, New Mexico PAUL W. HODES, New Hampshire RANDY NEUGEBAUER, Texas KEITH ELLISON, Minnesota TOM PRICE, Georgia RON KLEIN, Florida GEOFF DAVIS, Kentucky TIM MAHONEY, Florida PATRICK T. McHENRY, North Carolina CHARLES A. WILSON, Ohio JOHN CAMPBELL, California ED PERLMUTTER, Colorado ADAM PUTNAM, Florida CHRISTOPHER S. MURPHY, Connecticut MICHELE BACHMANN, Minnesota JOE DONNELLY, Indiana PETER J. ROSKAM, Illinois ROBERT WEXLER, Florida KENNY MARCHANT, Texas JIM MARSHALL, Georgia THADDEUS G. McCOTTER, Michigan DAN BOREN, Oklahoma Jeanne M. Roslanowick, Staff Director and Chief Counsel Subcommittee on Financial Institutions and Consumer Credit CAROLYN B. MALONEY, New York, Chairwoman MELVIN L. WATT, North Carolina PAUL E. GILLMOR, Ohio GARY L. ACKERMAN, New York TOM PRICE, Georgia BRAD SHERMAN, California RICHARD H. BAKER, Louisiana LUIS V. GUTIERREZ, Illinois DEBORAH PRYCE, Ohio DENNIS MOORE, Kansas MICHAEL N. CASTLE, Delaware 4PAUL E. KANJORSKI, Pennsylvania PETER T. KING, New York MAXINE WATERS, California EDWARD R. ROYCE, California JULIA CARSON, Indiana STEVEN C. LaTOURETTE, Ohio RUBEN HINOJOSA, Texas WALTER B. JONES, Jr., North CAROLYN McCARTHY, New York Carolina JOE BACA, California JUDY BIGGERT, Illinois AL GREEN, Texas SHELLEY MOORE CAPITO, West WM. LACY CLAY, Missouri Virginia BRAD MILLER, North Carolina TOM FEENEY, Florida DAVID SCOTT, Georgia JEB HENSARLING, Texas EMANUEL CLEAVER, Missouri SCOTT GARRETT, New Jersey MELISSA L. BEAN, Illinois GINNY BROWN-WAITE, Florida LINCOLN DAVIS, Tennessee J. GRESHAM BARRETT, South Carolina PAUL W. HODES, New Hampshire JIM GERLACH, Pennsylvania KEITH ELLISON, Minnesota STEVAN PEARCE, New Mexico RON KLEIN, Florida RANDY NEUGEBAUER, Texas TIM MAHONEY, Florida GEOFF DAVIS, Kentucky CHARLES A. WILSON, Ohio PATRICK T. McHENRY, North Carolina ED PERLMUTTER, Colorado JOHN CAMPBELL, California C O N T E N T S ---------- Page Hearing held on: August 7, 2007............................................... 1 Appendix: August 7, 2007............................................... 31 WITNESSES Tuesday, August 7, 2007 Billet, David, Director of Legislation and Government Affairs, New York State Banking Department.............................. 12 DeCelle, John T., Executive Vice President, State Employees Federal Credit Union........................................... 16 O'Connell, Robert, Executive Council Member, AARP-New York....... 4 Porter, Katherine, Associate Professor, College of Law, University of Iowa............................................. 6 Whipple, Barbara, Barbaruolo Law Firm, PC........................ 9 APPENDIX Prepared statements: DeCelle, John T.............................................. 32 O'Connell, Robert............................................ 40 Porter, Katherine............................................ 48 Whipple, Barbara............................................. 62 CREDIT CARDS AND OLDER AMERICANS ---------- Tuesday, August 7, 2007 U.S. House of Representatives, Subcommittee on Financial Institutions and Consumer Credit, Committee on Financial Services, Washington, D.C. The subcommittee met, pursuant to notice, at 1 p.m., in Halfmoon Senior Center, 287 Lower New Town Road, Halfmoon, New York, Hon. Carolyn Maloney [chairwoman of the subcommittee] presiding. Present: Representative Maloney. Also present: Representative Gillibrand. Mr. Emmette. We welcome you to a congressional hearing. We have people here who are interested in seeing that senior citizens are protected as far as credit is concerned and everything else. It's with great pleasure, not only will you meet Congresswoman Gillibrand, but I turn the floor over to Congresswoman Maloney, from the east side of Manhattan. Chairwoman Maloney. Thank you very, very much, Robert, for welcoming us and I want to thank everyone for coming and participating today, and I particularly want to thank the Halfmoon Senior Center for providing us with an area where we could have our hearing. I am Congresswoman Carolyn Maloney and this hearing will come to order officially. This field hearing of the House Financial Services Committee, Subcommittee on Financial Institutions and Consumer Credit, called, ``Credit Cards and Older Americans'' is the third hearing of this subcommittee in the 110th Congress examining credit card issues. I want to note that the record will be held open without objection for all members' opening statements to be made a part of the record. Congressman McNulty and Congressman Walsh had indicated their interest in coming, as well as Chairman Frank, and all members of the committee in Congress who wish to put into the official record their comments will be made part of the official record. This field hearing is being held at the request of Congresswoman Kirsten Gillibrand who wrote to me as the chairwoman of the subcommittee requesting this hearing regarding credit cards and their impact on older Americans. I am absolutely delighted to be here and I would like to thank Congresswoman Gillibrand and her staff, and the Halfmoon Senior Center for helping my office to organize it, and I should also publicly thank the legislative director of the subcommittee, Ms. Eleni Constantine, who has come here to be with us today from Washington. I also would like to thank all of the witnesses for coming to provide their expertise on this important issue. Many of them traveled quite a distance, and we are very thankful. This hearing, as I said, is part of a series of hearings that this subcommittee is holding to examine credit card issues. The first hearing on credit cards was held on April 26th and examined facts about the market, the practices that are most criticized, and the enforcement problems that confront card holders, as well as State and local authorities. The second hearing was held on June 7th and examined the changes to credit card disclosures and the Federal Reserve's proposed Regulation Z. In addition, I convened a roundtable discussion with consumer groups and the top six credit card issuers on July 30th. The discussion focused on the development of principles the credit card industry should consider when issuing unsecured credit. We took what we had learned at the roundtable and issued the principles last week. They focus on the key areas of underwriting, disclosure, notice and choice and help for those in trouble, and I would say that this hearing focuses on the fourth principle. Often, older Americans and college students have reported to our subcommittee various abuses that they have confronted. This hearing will focus on issues surrounding credit card issues facing older consumers including rising levels of personal debt, especially among fixed-income older Americans. The hearing will also focus on options older consumers have when trying to reduce credit card debt and the special challenges that they face in this effort. As with all consumers, the use and acceptance of credit cards are a great convenience for older Americans. Transactions using credit cards also add a security to transactions that do not exist with other forms of payment. Access to credit has also provided a crucial financial safety net in certain emergency situations, particularly health care. But problems occur when consumers' use of credit cards creates a cycle of debt that they are unable to escape. In September 2004, the consumer organization, Demos, released a report that documented increases in credit card debt held by older Americans between 1992 and 2001. Among the report's key findings were that average self-reported credit card debt among indebted seniors increased by 89 percent between 1992 and 2001, to over $4,000. That's quite a substantial increase. Seniors between the ages of 65 and 69 years old, presumably the newly retired, saw the most staggering rise in credit card debt, 217 percent, to an average of well over $5,000. Female-headed senior households experienced a 48 percent increase in credit card debt between 1992 and 2001, to well over $2,000 average debt. Among seniors with incomes under $50,000, which is 70 percent of all seniors, about one in five families with credit cards are in debt hardship, spending over 40 percent of their income on debt payments, including the mortgage debt. Importantly, it is not just that older consumers have more credit card debt than before, but that many are buried in unaffordable debt. In a 2006 survey, AARP found that close to half of U.S. adults age 40 or older see their current level of debt as a problem. About 30 percent of retirees in a survey describe their debt as a problem, and only 7 percent of retirees said they did not have any debt. I repeat, only 7 percent of retirees say they don't have any debt. During this same time period, the number of older Americans filing for bankruptcy tripled, making them the fastest growing group in the bankruptcy court. Conventional wisdom suggests that seniors with a lifetime of financial experience, high homeownership rates, and a record of thrift would be immune to the record debt increases of the 1990's among other age groups. Unfortunately, what the data suggests is that many older Americans use credit cards as a plastic safety net to make essential purchases they cannot otherwise afford, including out-of-pocket medical expenses, energy and utility bills, and rising property taxes. At the same time, the most important bulwark seniors have against debt, savings and assets, also has diminished. Finally, there are concerns about the level of financial literacy among older families confronted with rapidly changing financial service products. The growing debt level of this Nation's older consumers is a very real and growing concern. We are here to examine these issues in detail and I look forward to hearing from all of the panelists and hearing personal stories from the seniors. And with that, I'd like to recognize my colleague, Kirsten Gillibrand, who requested this hearing. Ms. Gillibrand. Thank you, Chairwoman Maloney. I really appreciate your leadership very much. I appreciate the fact that you've come to Saratoga County in order to hold this hearing on an issue that is very troubling for many seniors in our District. I want to thank all of the witnesses for testifying and for providing expertise: Mr. Robert O'Connell, executive council member, AARP, New York; Ms. Katie Porter, associate professor, College of Law, University of Iowa; Ms. Barbara Whipple, from the Barbaruolo Law Firm; Mr. David Billet, director of legislation and government affairs for the New York State Banking Department; and John DeCelle, executive vice president, State Employees Federal Credit Union. Your testimony will be very useful for today's proceedings. In addition, I'm very grateful for the AARP's help coordinating the hearing, and for Eilleen Pettis and Lisa Perry's assistance for the Halfmoon Senior Center, and to our president who gave the opening remarks. You've all graciously allowed the subcommittee to host this hearing here and for all of the seniors here in the room, it's wonderful to see you to represent our community so effectively and to lend your very important voice to this discussion. It's exceedingly meaningful and it's something that Congress very much relies on as we begin to write legislation to address some of our concerns. I recently expressed my concern to Chairwoman Maloney about the growing issue of credit card debt affecting senior citizens. I'm grateful that the chairwoman decided to hold a field hearing here in upstate New York to investigate this issue that affects such an important demographic of our country. Soon the Baby Boom generation will begin to retire and I believe that the prevalence of credit card debt among older Americans is an issue that needs to be studied further and in depth. A third of all seniors have at least one credit card and the Baby Boom generation is especially vulnerable as they approach retirement as evidenced by the fact that seniors between the ages of 65 and 69 years old who have either recently retired or are preparing to retire have experienced a 217 percent rise in credit card debt between 1992 and 2001, and have an average credit card debt of $5,800. Credit cards play an important role in the lives of many Americans by offering convenience and financial security in unforeseeable situations. However, I'm concerned that too many seniors, after decades of hard work and service to this country, are drowning in unaffordable debt. Older Americans are the fastest growing age group to file for bankruptcy and I believe that increased financial literacy education is needed. It's important that seniors are not targeted for complex or confusing lending agreements and as a result become economically vulnerable. More than one third of the seniors depend on Social Security benefits for over 90 percent of their income and a high-interest rate fee can be devastating for a senior who lives on a fixed income. We are living in an era where pensions are no longer guaranteed and health care, energy, and housing costs are sky rocketing. It's important that seniors do not fall into the trap of relying on credit cards to survive. Credit card marketing needs to be accurate and honest and changing credit card term agreements are also causes of concern for the American seniors. It is critical that seniors clearly understand the contractual agreements that they enter into. Additionally, I'm very concerned about the effects that credit card issues have on women as they are more likely to experience financial insecurity, live longer, and rely on Social Security. I look forward to hearing from our witnesses on the causes of the increase in credit card debt amongst older Americans, any possible steps that Congress can take to protect our older Americans, and what seniors can do if they find themselves in unmanageable debt. Thank you again, Madam Chairwoman, for holding this hearing today. I'm very grateful. Chairwoman Maloney. Thank you. We have fine panelists and we're going to have 5 minutes of opening statements from each panelist, and then I'm just going to move the table in front of you and have everybody respond to questions jointly. So first up, Mr. Robert O'Connell, executive counsel, AARP. And thank you very much for really working with us on this hearing and giving us much needed information. Thank you. STATEMENT OF ROBERT O'CONNELL, EXECUTIVE COUNCIL MEMBER, AARP- NEW YORK Mr. O'Connell. Thank you very much. By the way, I'm a local resident of Clifton Park, so I'm in your territory, Representative Gillibrand. Chairwoman Maloney, Representative Gillibrand, and members of the subcommittee, on behalf of AARP's 39 million members, I want to thank you for the opportunity to testify on credit card practices. An estimated 3 out of every 4 Americans age 65 and older have credit cards, and for many of these older Americans, the credit card is a great convenience. They can afford to pay their balance in full each month and generally enjoy lower annual percentage rates. These are the so-called ``convenience users'' who collect airline miles, reward points, and even can get cash back on their purchases. However, a growing number of older Americans find themselves deep in credit card debt or even filing for bankruptcy. Although older households long have been considered among the most frugal and resistant to consumer debt, changing economic conditions--particularly declining pension and investment income and rising costs for basics such as prescription drugs, health care, and utilities--have made credit card debt a more serious financial issue for older Americans. What is of greatest concern to AARP is not just that older consumers carry more credit card debt than ever before, but that more seniors are being buried in what may be considered unaffordable debt. You've already referenced the survey that AARP did about the number of people who, over the age of 40, find themselves with debt as a problem, and I won't go into those statistics any further. For those who are unable to make more than the required minimum monthly payments on their cards, industry practices-- including sky high penalty interest rates, high accumulating fees, and interest on fees--often push them into unmanageable credit card debt. Permit me to give just one example to illustrate this point: Ruth Owens was in her 50's, and on Social Security disability, when she found herself with a $1,963 balance on her Discover Card. At that point, Ms. Owens stopped using her credit card. She made no further purchases, did not take any cash advances, and resolved to pay off the debt. Over the course of 6 years, Ms. Owens made payments of $3,492 to Discover. From 1997 to May of 2003, when Discover sued Ms. Owens in court, not one penny of her payments went to reduce the principle. Instead, all of her payments went to pay penalties and interest, and her balance grew even larger. She incurred $1,518 in over-the-limit fees; $1,160 in late fees; $369.62 in credit insurance; and $6,008.66 in interest and other fees for a total of $9,056.28. In a handwritten note to the judge, Ms. Owens noted that she had no money to pay them and that she was very sorry. Luckily, the judge in this case barred Discover from collecting any more money from Ms. Owens. As this example illustrates, it is the customer who sometimes misses a payment, or sends a payment late, or simply pays the minimum due each month who generates the real profits for credit card companies. According to one estimate, interest in penalty fee revenues in 2005 added up to a staggering $79 billion. Nearly $8 out of every $10 of revenue for the credit card companies comes from customers who cannot pay off their bills in full every month. While credit card companies have every right to earn a profit, AARP is concerned that the consumers in the marketplace be treated fairly and that credit card companies not reap huge financial rewards from the very practices that sink customers into deeper and deeper debt. AARP's key concerns are as follows: (1) the incomprehensible, and in some instances meaningless, disclosure procedures; (2) allowing certain practices such as going over the limit and then assessing penalty fees for engaging in such behavior; (3) penalty interest rates that average more than 27 percent and can be as high as 32 percent even for relatively minor infractions such as being hours or just days late on a payment; (4) multiple and variable interest rates that make it difficult for consumers to know what interest rate they are paying for any particular purchase or cash advance; (5) universal default in which a card holder is penalized based on behavior with another creditor even if he or she has no blemishes on the credit card in question; and (6) mandatory arbitration for credit card disputes. Deregulation of the credit card marketplace has drastically changed the way issuers market and price credit cards to consumers of all ages. It is clear that in recent years, credit card companies have become far more aggressive in imposing questionable fees and practices. The result is that penalty interest rates, high and accumulating fees, and interest on fees can push consumers over the financial edge. AARP commends you for taking a serious look at these issues and endorses the following reforms: Improve the disclosure and conditions for credit cards; prohibit universal default (which I would note, Chairwoman Maloney has included in her principles that were published at the end of last week); limit penalty fees and interest rate hikes; and prohibit mandatory binding arbitration. I want to conclude by emphasizing that the growing debt level of this Nation's older consumers is a very real and serious concern. AARP urges Congress to prohibit the abuse of credit card practices that contribute to and exacerbate the financial concerns of this Nation's older population. Thank you very much. [The prepared statement of Mr. O'Connell can be found on page 40 of the appendix.] Chairwoman Maloney. I want to thank you, Mr. O'Connell, for your really excellent testimony. Businesses cannot raise prices retroactively without telling their customers, but credit card companies can. Your example of Ms. Owen really was a staggering example. I'm going to carry that back to Washington and maybe she'll be testifying before Washington. Her story shows a lot of what's wrong. So thank you for being here, and sharing your principles with me, and we'll take that into account when we're writing our legislation. The next witness is Ms. Katie Porter. She's an associate professor from the College of Law at the University of Iowa. She traveled a long way to be with us today, and we want to thank her very much for being here. Thank you very much for coming. STATEMENT OF KATHERINE PORTER, ASSOCIATE PROFESSOR, COLLEGE OF LAW, UNIVERSITY OF IOWA Ms. Porter. Chairwoman Maloney, Representative Gillibrand, and members of the subcommittee, credit cards are not age neutral financial products. Older Americans face particular risks from credit cards that are not addressed by current law. Recent studies have documented several troubling trends: About 70 percent of Americans age 65 or older have credit cards; of this group with cards, 3 in 10 seniors carry a credit card balance. These numbers have remained relatively steady over time. The alarming trend, however, is a sizable increase in the amount of credit card debt that older Americans carry. In 2004, households headed by people ages 55 to 64 had the highest credit card balances of any age group with the average card holding family owing nearly $6,000 in credit card debt. Between 2001 and 2004, the credit card balances increased in all three cohorts of older Americans, those aged 55 to 64, 65 to 74, and over 75. The rising amount of credit card debt carried by older Americans was in contrast to the pattern among younger Americans whose credit card balances remained the same or decreased in that same period. Older Americans' credit card debts are on the rise. Part of the explanation for the upward trend in older Americans' credit card debts may be the failure of seniors to adopt debit cards. A 2006 Federal Reserve study found that only about half of Americans have debit cards and that debit card use is much less common among older Americans. Several studies have shown that when consumers use credit cards to pay, they spend more than if they pay with cash, check, or debit card. At an aggregate level, using data from several different countries, Professor Ronald Mann has established that a societal preference to use credit cards to pay even when credit card borrowing is held constant causes total consumer debt to increase. Because seniors prefer credit cards over debit cards, spending among seniors may be racheted up by their credit card use. This important credit card effect may cause seniors to exceed their budgets and leave them with fewer leftover dollars for savings. Eliminating the preferential consumer protections for credit cards and ensuring that debit card overdraft protections are fair would help encourage debit card use by older Americans. These changes would help seniors live within their means and use credit cards responsibly. Debit card use may have another advantage for older Americans which is to help them avoid the punitive charges imposed for many credit card practices. A recent Massachusetts Institute of Technology economics paper analyzed how consumers' financial decisions vary with age. The researchers found that older consumers are more likely than middle-aged consumers to pay credit card late fees, to pay fees for exceeding the limit on their credit card, and to pay cash advance fees on credit cards. The economists term these behaviors ``credit card mistakes'' because they are very, very costly and consumers would usually avoid the transaction if they understood the full cost of the charges. The researchers also found that older Americans were more likely to make sub-optimal and expensive decisions after transferring credit card balances such as making new charges at the very high rates on the new cards and apparently not understanding that credit card issuers first apply any payments to the low interest transferred balances. The research findings indicate that older Americans may be less adept at deciphering the extremely complicated pricing and penalty schemes used by credit card issuers. This means that older Americans disproportionately boost card issuers' profits. Quite simply, credit cards are more expensive financial products in the hands of older Americans. Disclosures made right at the point of sale, at the moment when customers can choose to use a different form of payment, could be very effective at deterring and preventing costly credit card mistakes and in curbing credit card spending. These point-of-sale disclosures would be similar to the receipts and information available at ATM terminals. For example, consumers could be alerted that a transaction would exceed their limit and warned of the amount of the over-the-limit fee. Consumers should also be given the current balance on their card after each and every transaction. These simple, but frequent disclosures could help consumers better manage their credit card use. The difficulties of older Americans in managing credit cards are also evidenced in the bankruptcy system. As has already been noted, older Americans are the fastest growing age group of bankruptcy filers. The bankruptcy rate of households headed by individuals 65 or older increased 213 percent between 1991 and 2001 even after adjusting for changes in population size. The data also show a gradual, but troubling increase in the average age of bankruptcy debtors. As the Baby Boom generation ages into the next decade, the number of older Americans who file bankruptcy is poised to climb dramatically. Bankruptcy increasingly may become an older American phenomenon, rather than the middle age experience that it has been historically. Very high credit card debt is the single defining characteristic of bankruptcies by older Americans. Two studies using data from the U.S. Trustees Office found that older Americans who filed bankruptcy have extraordinary credit card debts even when compared with other families in bankruptcy. The average senior aged 70 and older in bankruptcy owed over $38,000 in bank credit card debt and approximately $3,800 in additional store retail credit card debt. Yet, at the time of their bankruptcy, the average senior had a net monthly income of only $1,500. Credit card debts had utterly overwhelmed these older families by the time they filed bankruptcy. Put in the most concrete terms, the average older American would have had to find a way to live absolutely free, incur no more debt, and magically halt all accruing interest and fees, and they still would have had to devote every penny of their income for more than 2 years just to pay off their credit card debt. Bankruptcy was a last option for these seniors and many expressed feelings of shame and depression that after decades of hard work, and good or perfect credit, high credit card debts led to their financial collapse in bankruptcy. Many older Americans are very troubled by the marketing practices of credit card companies. In interviews with Consumer Bankruptcy Project researchers, many seniors were shocked and angered that even after having to resort to bankruptcy to deal with unmanageable credit card debt, the card companies continued to send them dozens and dozens of solicitations. These older Americans described credit card offers ``coming out of the woodwork'' less than 1 year after filing bankruptcy, and expressed shock at being ``pre-approved more times than you can count.'' One woman told us that she ``felt like Donald Trump'' based on the way lenders would send her credit cards, and many consumers simply said they wanted the solicitations to stop. One man recounted his difficulty in getting the credit card issuers to halt the solicitations to his 81-year-old father even after he told them that his father had filed bankruptcy, had been diagnosed with dementia, and had enacted a power of attorney. Consumers are woefully unaware of the Fair Credit Reporting Act law that allows them to opt-out of receiving pre-screened credit card solicitations. Only 20 percent of all Americans have even heard of the law and only 6 percent have chosen to opt out. Consumers are deterred from opting out by fears of identity theft because the current system requires them to disclose their Social Security number to opt out. An opt-in system, in which consumers who wanted to get credit card offers could elect to do so, would eliminate this problem, and overcome the cognitive and behavioral barriers inherent in an opt-out system. Credit card debt is a serious financial risk for many older Americans. Seniors are more likely to suffer many types of credit card harms: Carrying higher card balances; having to pay late fees; over limit fees, and other penalty charges; and having such high credit card debts that they need bankruptcy relief. Compared to other age groups, older Americans are more likely to fall prey to the complex schemes that hide the real cost of credit card use, and they lack knowledge about financial alternatives to credit cards and consumer laws that can help them avoid credit card debt. Older Americans are particularly vulnerable to credit cards and the trends suggest that this problem will only worsen in the upcoming years unless Congress enacts laws to reform credit card practices. Thank you for inviting me to testify. [The prepared statement of Ms. Porter can be found on page 48 of the appendix.] Chairwoman Maloney. Thank you, and we are working on legislation to curb these abuses. Our next panelist is Ms. Barbara Whipple of the Law Firm Barbaruolo and you are from this area also. It is very nice to see you. Thank you for coming. STATEMENT OF BARBARA WHIPPLE, BARBARUOLO LAW FIRM Ms. Whipple. Chairwoman Maloney, Representative Gillibrand, and members of the subcommittee, thank you for this opportunity to speak to you today. My name is Barbara Whipple and I am an associate attorney at the Barbaruolo Law Firm where I practice, primarily in consumer debt. Prior to my going into private practice, I also was a law clerk to the Honorable Robert E. Littlefield, the United States Bankruptcy Judge for the Northern District of New York, the Albany Division. I'd like to thank you for letting me come and speak to you about what I see in practice every day. What I can add to the subcommittee's examination of these issues are my experiences day in and day out and those of my colleagues across the country. The simple truth is that older debtors comprise a growing proportion of our bankruptcy clients. In fact, what has been researched and discussed over the last several years has come to bear out. The Consumer Bankruptcy Project found that the rate at which older Americans, those 65 years of age or older, filed for bankruptcy increased 213 percent between 1991 and 2001. This trend of rising bankruptcies among older Americans is likely to continue. The steepest increase in Chapter 7 liquidation filings occurred among people older than the age of 55. Although the U.S. population as a whole is getting grayer, as the Baby Boomer generation ages, the percent of older people seeking bankruptcy protection is rising even faster. As a matter of fact, yesterday, I had an opportunity to speak to a Chapter 7 trustee. His comment to me when I said I was coming here was, ``Barb, I've noticed that there have become two different categories of bankruptcy debtors, the elderly and everyone else.'' The problem of rising debt among older Americans is exacerbated when the credit card debt is subject to exorbitant interest rates and a multitude of penalties and other fees. During the several years that Congress debated bankruptcy reforms, some of your colleagues referred to the debtors as ``deadbeats'' and ``irresponsible.'' I must say I was with Judge Littlefield when the 2005 bankruptcy law was passed and my comment was, ``If all of our legislation in this country is passed based upon sound bytes and misinformation as this Bankruptcy Reform Act, we are in a world of trouble.'' I can tell you the majority of the consumers I see in bankruptcy practice are not deadbeats. They do not irresponsibly ring up fees and a majority of my clients incur debt with every intention of paying it back. Often my clients file for bankruptcy only after paying the principle for years and years and still see no relief on the credit card debt. In 2004, a bankruptcy court in North Carolina ordered a credit card company to itemize the claims it filed in a Chapter 13 bankruptcy case. In the findings, the bankruptcy judge listed claims filed in 18 separate cases broken down as between principle, interest, and fees. On average, interest and fees consisted of more than half of the total amounts listed in the claims. In one case, the card company filed a claim in the amount of $943.58--$199 was principle, and $743.95 was interest and fees. In another case, a claim of $1,100 was filed consisting of $273 in principle, and $738.64 in fees. A bankruptcy case from Virginia tells another story of the impact of credit cards and penalties on the ability of consumers to pay back the debt. During a 2-year period before she filed bankruptcy, a consumer made only $218.16 in new charges on her Visa. After making $3,000 in payments, all of which went to pay finance charges at the rate of 29.99 percent, over limit fees, bad check fees, and phone payment fees, the balance on her account increased from $4,888 to $5,357. On her Providien Master Card for the same period, she made only $203.06 in charges, while making over $2,000 in payments. Again, all of her payments went to pay finance and other charges and her account balance increased from $2,000 to $2,607. The scope of the problem here has been well-documented over the course of your hearings. Consider the case of the witness who testified at the Senate Hearing, the Ohio resident who exceeded his credit card's $3,000 limit by $200 and triggered what ended up being $7,500 in penalties and interest. After paying an average of $1,000 a year for 6 years, the man still owed $4,400. Two local cases that I've had recently include residents in this area who ran up--both people were retired-- over $100,000 in credit card debt in an attempt to fix and pay them, they took a home equity loan out on their house. When they came to see me, their house was valued at $80,000. They owed over $125,000, and their disposable income at the end of every month was a negative $800. Last week, I met with a woman who is 70 years old and simply cannot retire. Her disposal income consists of $1,400 worth of credit card payments per month. I said to her, ``You need to retire.'' She responded, ``I absolutely cannot afford to do that. Barb, I have convinced myself I will be working until I die.'' National studies show that more households headed by retirees or those near retirement owe money and the typical debt level is increasing. According to the Employee Benefit Retirement Research Institute in 2004, 60.6 percent of families headed by someone aged 55 or older owed money. In 1992, 53 percent of similarly situated families owed money, and the average debt level rose from $29,000 in 1992, to $51,000 in 2004. Debt grew fastest among the poor, and among families headed by someone over 75 years old. My experience is that credit card debt is one of the top reasons seniors seek bankruptcy protection. The older retirees are less accustomed to credit cards and more vulnerable to falling into a cycle of credit card debt led by raising interest rates, late fees, and other penalties. Other consumers who turn to me are embarrassed, ashamed, and often do not talk to their children about their financial problems. The biggest complaint I hear is, ``I pay every month and the debt doesn't go down, even when I don't make a purchase.'' It eventually becomes evident that they may never pay off their debt due to the interest rate, penalties, and fees. Finally, in conclusion, I would just like to say that every time I have met with an elderly debtor, I have had the experience where they're absolutely heartbroken and mortified. My sermon to them in an attempt to make them feel better is, if you have worked your entire life, you are 70 years old, you are set to retire, and you cannot because of credit card debt, you have not failed; the system has failed you. And I would like for that to be noted because there's no way that these people who should be enjoying all they've done, and reaping the rewards of all they've done their entire lives, should have to be sitting across from me in an office. Thank you. [The prepared statement of Ms. Whipple can be found on page 62 of the appendix.] Chairwoman Maloney. I want to thank you for your very gripping testimony and this is very much of a bipartisan effort on credit card reform. At our last hearing, Spencer Bachus, the ranking member of the Financial Services Committee--he is a Republican; I happen to be a Democrat--said, and I'm quoting for you, on the credit card hearing, this is what he said: ``What did we do with the bankruptcy bill? We created more bankruptcies.'' And I think your final statement that it is a system that has failed the public that creates these high fees that are churning and churning and they can never seem to get out of. Thank you for your work and for your testimony. Ms. Whipple. Thank you. Chairwoman Maloney. Mr. David Billet, the director of legislation and governmental affairs for the New York State Banking Department. Thank you so much for being here. And how is our superintendent? Mr. Billet. He's fine. He is enjoying some vacation time in Cape Cod with his family. That's one reason he couldn't attend. Chairwoman Maloney. Thank you. STATEMENT OF DAVID BILLET, DIRECTOR OF LEGISLATION AND GOVERNMENT AFFAIRS, NEW YORK STATE BANKING DEPARTMENT Mr. Billet. Good afternoon, Chairwoman Maloney, Representative Gillibrand, and members of the public. I am David Billet, director of legislation and governmental affairs for the New York State Banking Department. I'm pleased to be here today to make the following comments on behalf of the Department and Superintendent Richard Neiman. I will not repeat the testimony that the superintendent presented to the subcommittee at its hearing on June 7th, but there are certain points, however, that should be stated again. First, consumer Impact. Credit cards are a major source of complaints for State and Federal law enforcement authorities and regulators. The major problem that arises for consumers having a credit card account is burdensome fees. You've heard that over and over, particularly for those consumers who do not and cannot pay their credit card bills in full each month. The amount charged in fees has skyrocketed and can cause consumers to fall deeper into debt. Early and minor mistakes in securing and using credit can lead to spiraling debt burdens, punitive fees, and possible long-term destruction of the borrower's financial well-being. The following are card issuer practices the Department considers misleading or abusive and of greatest concern: One, universal default. This practice permits credit card issuers to increase a consumer's interest rate, often to 30 percent or higher, for conduct that has no relationship to the consumer's payment history with the card issuer. Two, penalty rates and late fees. Consumers are often penalized for minor failures. A credit card payment that is only nominally late can trigger huge interest rate increases and/or over-limit fees that are often applied retroactively to existing balances. Three, billing cycle and similar practices. Many credit card issuers charge interest even for the amount of credit card debt paid on time. Four, unilateral changes in terms. Many credit card agreements are one-sided and allow the creditor to change the terms for ``any reason,'' with as little as 15 days' notice to consumers. Five, deceptive promotion of subprime credit cards. These cards target consumers in economic distress or who have troubled credit histories with deceptive solicitations and misrepresentations of the terms of credit, and impose excessive fees, especially initial fees, that push consumers quickly into debt. Six, lack of clear information abut credit card terms. The problem is not simply a proliferation of onerous credit card terms and fees. The contracts have excessive, dense, and incomprehensible text. Seven, regulation of the credit card industry. The industry is dominated by national credit card bank issuers and subject to the realities of Federal preemption. The 10 largest credit card issues hold 90 percent of the outstanding balance of credit card debt nationwide. Only two of these issuers are State-chartered institutions. All of these issuers are headquartered in States that have favorable interest rate and usury law provisions and those laws govern what banks may charge. Based on various Federal statutes and court decisions, banks headquartered in one State may export their interest rates to consumers resident in another State. Further, Federal law has also expanded what comprises such ``interest.'' It includes, among other things, numerical periodic rates, late fees, insufficient fund fees, over-the-limit fees, annual fees, cash advance fees, and membership fees. To the best of the Department's knowledge, the assets of self-issuers in New York State represent one percent or less of the total domestic banking assets for institutions headquartered in this State. This provides some sense of the extent to which cardholders in New York would be affected by New York State regulation of credit card interest rates and practices. States have essentially no authority to apply their consumer protection laws to the activities of the Nation's largest credit card issuers. In short, State regulation of credit card practices is presently not a viable option. The only option is for the Federal Government to adopt national standards to address credit card problems on a nationwide basis which then would protect all citizens in all States. Eight, problems of the elderly using credit cards. The Department has no particular expertise with respect to identifying and quantifying the problems associated with elderly use of credit card accounts. However, we believe that such problems are not significantly different from those that confront other consumers. The following, however, may be key factors for elderly consumers: Understanding the terms and conditions of credit card accounts. Presumably, a large majority of consumers acquire a credit card or open a credit card account as a result of a mail solicitation. These solicitations usually do not provide a full statement of all the terms and conditions that apply. Further, as noted, the contracts are voluminous and not easily understood. The Department doubts that the majority of consumers, not just the elderly, who have credit card accounts have fully ever read these statements. The Federal Reserve Board has undertaken a revision of Regulation Z, which implements the Truth in Lending Law, governing credit card practices. This may result in requirements making statements of the terms and conditions of credit card accounts clearer and more understandable, and provide a better basis to compare credit card offers. The Board's initiative, however, will likely only be limited to enhancing disclosure of such terms. The proposed revisions will not cap or prohibit certain fees. They will not limit the amount of interest that may be charged. They will not outlaw default rates. And finally, the implementation of these requirements will not happen shortly. The Department offers these suggestions. If consumers have a banking relationship, they should explore with the bank or credit union what credit card accounts may be available through the institution. This will at least give a consumer an individual with which to discus the terms and conditions, and it also gives the consumer a local contact if problems arise. Understand, however, that the credit card likely is issued by a subsidiary of the bank and not the bank itself, so the consumer may be referred to another contact that can be contacted only by telephone. Further, if the account is arranged through the local banking relationships, the consumer should consider establishing an automatic electronic monthly payment arrangement directly from his or her checking or savings account to cover at least a portion of any monthly balance. This will avoid the charging of penalty fees due to any oversight to make the payment in a timely fashion. Given the triggers for the application of these fees, and that terms of the agreement may be changed unilaterally by the issuer, it is a basic necessity that any consumer understand first and foremost what he or she will be obligated when using the credit card. How will the credit card be used? And this goes particularly to some of the points that Ms. Porter was making. Many consumers acquire credit cards to make it easier to purchase goods and services. Using a credit card avoids having to write a check or carry sufficient cash to make a purchase. Using a card also permits consumers to purchase large ticket items, such as a refrigerator or a TV over time when there is insufficient, periodic income to pay at the time of purchase. A credit card, however, should not be used to bridge short-falls in disposable income except in the case of purchasing necessary but costly large ticket items. A credit card should not be used to make necessary and daily expenditures, except as a convenience. When necessary and daily items are purchased, monthly disposable income should be sufficient to pay for those items, either at the time of purchase or in full when the monthly credit card statement is received. In short, use of a credit card is not intended to make up for lack of disposable income; its use is a convenience. If elderly consumers have other sources of equity, such as a fully paid for home, or even close to a fully paid home, it is better that this equity be used to pay for large ticket items or even to provide sufficient disposable income for necessary and daily expenditures. A home equity loan or a reverse mortgage will access this equity. If the equity is not needed for daily expenditures, the mortgage loan should be a line of credit rather than one that provides regular monthly distributions of equity to the consumer. These loans likely will not have as high an interest rate charge or the various fees that accompany a credit card account. Such alternatives to credit cards again make the point that the credit card should only be used as a convenience. Improvements in Federal regulation of the credit card industry. Congress should consider setting a national affordability standard that requires documentation of sufficient disposable income for all forms of consumer credit. The superintendent made reference in his testimony to the affordability standard contained in section 6-L of the New York State Banking Law, which applies to high cost home loan mortgages. The consumer must have 50 percent of his or her disposable monthly income remaining after all other debt obligations are deducted, including the required payment for principal and interest and escrow of the mortgage. What is crucial with respect to a credit card account, which is an open line of credit, is that an affordability standard should apply to the total available credit line. As is the case with the current subprime mortgage problems, much of this debacle is due to creditors extending credit without regard to the consumer's ability to pay total debt, fully amortized. As Congress tracks the Federal Reserve Board's rulemaking revisions of Regulation Z, it should consider going beyond any final standards that it considers inadequate. Many times initial proposals by Federal bank regulators or regulatory agencies, related to consumer interests, are narrowed or reduced under industry pressure. Limited as the Board's efforts are to expanded disclosure, nonetheless, it is likely that its initial proposals are well thought out and justified. The State Regulatory Role. When considering legislative options to reform credit card lending practices and disclosures, States can play an important role in gathering information and monitoring compliance. The Banking Department is an intake for many consumer complaints that involve federally regulated financial institutions. The Department forwards and tracks these complaints to the Federal regulator. Further, the Department has enhanced this activity by entering into a Memorandum of Understanding (MOU) with the OCC that provides for complaint referrals between the Banking Department and the OCC and reflects a commitment on behalf of both agencies to share information concerning the status and resolution of complaints. States are also in a position to provide valuable public information about credit card practices and the cost of credit. The New York State Banking Department publishes a quarterly survey of credit card interest rates that is available online and in hard copy upon request. The survey provides comparative information about rates, over the limit and late fees, and the existence of universal default and penalty provisions for each credit card. The Department also engages in extensive consumer outreach to organizations to promote financial literacy, especially in regard to the use of credit. In conclusion, as the superintendent stated, credit cards are a convenient method of payment for millions of Americans, and the availability of credit to Americans across income lines have undeniable benefits to individuals, households, and the economy. Lending practices that have the effect of destroying credit ratings and borrower's financial futures, however, destabilize the economy and ultimately fly in the face of our goal, which is to make the widest possible range of safe and sound banking services available to consumers at all levels of our society. Thank you. Chairwoman Maloney. Thank you so much. I am going to add a link on my Web site to your comparative survey on interest rates. That's very, very helpful for consumers and I wanted to note that the New York State Banking Association has a very privileged situation now. Richard Neiman, our superintendent, has been elected to be the leader of all the superintendents of banks in our Nation, so their voice has a very important voice now when it comes to consumer issues and reform. In regard to your statement on the difficulty of understanding your balance, understanding your credit card receipts and billing questions, one of the most astonishing times that I've had on the Financial Services Committee was when the head of Freddie Mac, one of our largest GSEs, testified that he and his wife sat down and spent down well over an hour trying to understand their credit card statement and they could not understand it. We had one of the heads of a major financial institution saying that he could not understand it, so you can understand why older Americans, and all citizens, are having trouble with this and why we welcome and intend to legislate Regulation Z that the Fed has come out with to make it easier to understand. I have a number of questions, but we want to get through our panelists and ask questions all together. Thank you so much for coming and all of your recommendations are very, very helpful. Our last panelist is John DeCelle, the executive vice president of the State Employees Federal Credit Union. Thank you. STATEMENT OF JOHN T. DeCELLE, EXECUTIVE VICE PRESIDENT, STATE EMPLOYEES FEDERAL CREDIT UNION Mr. DeCelle. Hi, there. I am also from the area. Chairwoman Maloney. So many wonderful participants from Saratoga. Mr. DeCelle. Great place to live, great place to work. Chairwoman Maloney. I want to come back on vacation. Mr. DeCelle. I'm thrilled to be the last person here talking. But seriously, good afternoon. As you said, my name is John DeCelle, and I am an executive vice president for SEFCU, a credit union based in Albany, New York, formerly known as the State Employees Credit Union. I'm pleased to be testifying on behalf of New York's credit unions and the New York State Credit Union League and their affiliates. Since 1934, SEFCU has been meeting the financial services needs of consumers and commercial members in upstate, central, southern tier, and western New York. Today, we have over 150,000 members, 21 offices, and over $1.4 billion in assets. Since 1917, the New York State Credit Union League has been the principal trade association of New York State and Federal credit unions. Today, NYSCUL represents over 500 credit unions and their 4.1 million members. Chairwoman Maloney, Congresswoman Gillibrand, and members of the House Financial Services Subcommittee on Financial Institutions and Consumer Credit, I thank you for the opportunity to provide comment from the credit union movement regarding credit cards and older Americans. I think you'll find our side of the story is very different than some of the examples you've heard earlier from some of the big, bad monoline banks that are out there. Throughout our existence, New York's not-for-profit credit unions have remained true to their origin and continue to focus on their mission to promote thrift and financial stability. We commend the subcommittee for calling this hearing to examine credit cards and older Americans, and I look forward to telling you about how credit unions typically operate their credit card programs and how they do so with the best interests of their members in mind. Like other credit unions in New York State, SEFCU serves the financial needs of its members, some of whom would not be able to secure financial services from other financial institutions. We're building branches where other banks are pulling out, as an example with the Albany Housing Authority Branch we're putting in next month. That will meet the needs of consumers in lower-income neighborhoods. When we design products and services, we incorporate strategies that help us serve these households so that we may live up to our mission of improving the quality of our members' lives. New York's more than 500 credit unions, member owned and not-for-profit cooperatives, strive to help their 4.1 million members create a better economic future for themselves and their families. We are also concerned about the growing problems associated with credit card abuse and older Americans. Increasingly, older Americans, those 55 or older, are caught in a financial crunch that is forcing them to rely on credit cards for survival. This really does correlate to the national savings crisis that we're currently in. Recent studies indicate that older consumers use their cards more often and with less care than adults aged 18 to 34. Reduced retirement savings due to the stock market, rising medical costs, and fixed incomes often leave seniors no choice but to rely on credit cards to survive on day-to-day expenses. Many are raising their grandchildren and have needs similar to young parents. Credit unions recognize this group and the needs that they have and we do so by offering reasonably priced financial products so that they learn to manage a successful retirement on a limited income. As you know, a September 2006 study conducted by the United States Government Accountability Office, GAO, found that some issuers of credit cards charge excessive fees and rates of interest. The study also found widespread use of weak disclosure practices by the largest credit card issuers. Many credit card agreements contain questionable terms and conditions, including universal default clauses that allow issuers to raise a borrower's interest rate based on indebtedness or late payments to other creditors that previous panel members have mentioned. What's interesting about credit unions is we're not for profit, cooperatively owned, financial institutions that return our profits to our members, either through a dividend payment or through a lower cost for services in terms of branching and other services. To participate in any activity that would take advantage of our members, who are also our owners, would be counterproductive to our structure and our philosophy. Our philosophy is supported by our volunteer board of directors, a board that is elected by the membership and has the responsibility to serve the membership and is not focused on making profits for stockholders. Credit unions seek to offer the most fair and affordable credit card programs and have taken positive steps through their voluntary efforts to educate all members, including seniors, on how to manage credit card debt. At SEFCU, we're committed to educating our members on how to manage their financial lives responsibly, and will continue to do so in an effort to reduce the instances we see each day, of members committing to credit terms and conditions that are predatory in nature. We work with our members fully to explain credit card rates and fees that they are currently paying and to show them the true cost for items purchased. In all of the examples given earlier, and from what some of the comments were that we had, financial literacy really is necessary to help improve the situation. At SEFCU, we actually offer a program called, ``It's Gonna Cost You'' that will touch on why you shouldn't be using a credit card for certain types of purchases or why rent-a- centers are not always the best thing. We encourage our consumers to establish solid saving habits for purchases and the proverbial rainy day. If you were to ask an individual what the interest rate is on one of their credit cards, you will find that more than 80 percent of the time they cannot answer that question. But if you ask them how many miles they earned last month for their airline card, they could probably tell you that. According to research conducted by the Credit Union National Association, the average fixed-interest rate on credit union credit cards is three percentage points lower than the rate on cards issued by banks. The difference translates into an annual savings of $240 on the average American household credit card with an outstanding balance of $8,000. Additionally, according to Bankrate.com, credit unions average more than one percentage point less on interest for a variable- rate credit card compared to that of banks. According to the latest Credit Union vs. Bank Datatrac Ratedex, in comparing credit card rates, it shows that credit unions charge an average credit card rate of 12.25 percent, compared to the average rate of 15.04 percent. The GAO report found that credit card issuers typically apply multiple interest rates to the same card, depending on the circumstances. For example, the credit card industry typically uses one interest rate for cash advances, another for regular purchases, a third for balance transfers and account checks, etc. That gets very, very confusing. When a consumer pays off a portion, or even the majority of a monthly balance, the credit card industry charges interest on the entire amount previously owed, including the portion that was paid before the due date. In the best interest of its members, credit unions don't follow this type of practice which results in a much higher--those practices result in a higher cost to card holders. At SEFCU, we offer card programs that provide low interest rates, no hidden fees, and other benefits that meet the needs of our members. Like other credit union credit card programs, we have designed ours to be understandable, and to add value to membership. This differs from the industry norm as it relates to grace period policies. Although many consumers think that all credit cards provide them with a grace period before the interest is charged, the fact is that most credit card issuers do not provide a grace period to cardholders unless they pay their credit card balances each month in full. If a consumer has any balance owing on a card from the prior month, there is no grace period on new purchases. Every purchase racks up the interest from day one. Nine out of ten credit unions nationally offer their members a grace period on purchases with 23 days being the average, even if there is an outstanding balance on the members' card, very different from the industry norm. Credit unions also recognize that fees associated with credit card programs are a major component of the credit card problem among Americans. Credit union card programs typically allow a member an average of 14 days to pay after the due date without penalty, and if the credit union charges a late fee, it's usually around $19, much lower than the industry average. Credit union card programs do not include fees such as balance transfers, new account, or telephone payment fees, again, setting them apart from the for-profit card issuers. In addition to structuring a card program's financial parameters with the best interest of members in mind, credit unions also provide a high quality member service for their members who carry a credit union credit card. As we heard earlier, a lot of times with larger credit card companies, you're forced to have a P.O. Box or a toll-free number to deal with a representative. At a credit union, you simply walk into a branch and you can talk to any representative and they can help you. It's that one-to-one service that makes a difference. Credit unions are also well aware of the problems that senior citizens face as credit card offers continue to be dangled in front of them at a time in their lives when many have very limited income. Many credit unions continue to work with these members, educating them not only about what they need to get their current finances in order, but also providing them with the tools necessary to make good life-long financial decisions. At SEFCU, we offer our members the ability to work with certified debt counselors, and they're available to assist people in understanding how to manage their debt and household budgets in a better way. Credit unions believe working one-on- one with adult members is an effective way to teach them the skills necessary to improve their financial position. Credit unions in New York agree that to truly change the level of financial literacy of their memberships they had to take education to a new level. The New York Credit Union Foundation also works with the National Endowment for Financial Education to bring education materials to credit unions and community centers for uses of financial literacy. At SEFCU, our Member Education Department logs hundreds of hours each year, working with over 2,000 individuals annually, helping them through education efforts to make better and more well-informed financial decisions. We offer these programs to our members, at community outreach centers for their clients. We work with local schools and we also work with the local Department of Social Services, striving to help people go from welfare to workfare. Many have proposed that additional oversight is necessary to address abuse within the credit card industry. As you gather information and deliberate such an approach, we ask that you consider the following: First, the New York Credit Union League and I believe the industry is sufficiently regulated by disclosure requirements. If additional Federal disclosure mandates are enacted, it will cause further confusion at the consumer level. As credit card issuers seek to comply with various State and Federal laws, the content, the length of complexity of disclosures and agreements, it will be counterproductive to the intended goals. Sometimes when you add more, it makes it more difficult to understand. Also, credit unions are only able to offer credit card programs to their membership by contracting with smaller unions--excuse me, are only able to offer credit card programs to the membership by contracting with outside processors. We ask that you are mindful of new laws that would likely increase expenses to these processors, which will translate into adding cost for credit unions to run their programs. Currently, credit unions are addressing increases in insurance premiums, insurance coverage limitation, and increased security requirements on credit card programs due to the increased amount of credit card fraud. Adding to these costs are challenges and also adding with the additional disclosure requirements, will definitely move us to the question, ``Can we afford to continue to offer a credit program to our members?'' If we have to answer that question with a ``no,'' that really limits where consumers can go to get a credit card that meets their needs and provides lower rates and fees. There has never been a need for credit unions to engage in any of the abusive credit card practices discussed here today that could prove to be detrimental to their members, their owner's financial well-being. Credit unions, because of their not-for-profit structure, have no shareholders to pay at the end of the month. Any profits made from credit union credit card portfolios are either returned back to its members in the form of lower interest rates or low or no fees, or reinvested back into the credit union to allow it to provide better services to card holders. We urge the committee to look towards further enforcement of current regulation and financial literacy education as a means of tackling this growing concern, perhaps using the credit union program as a model. Members of the House Financial Services Subcommittee on Financial Institutions and Consumer Credit: I, along with the New York State credit unions and their credit union league, and their 4.1 million member-owners, applaud you for your leadership and thank you again for calling this hearing. [The prepared statement of Mr. DeCelle can be found on page 32 of the appendix.] Chairwoman Maloney. Thank you, and thank you for your insightful testimony. We'll certainly be considering it when we draft legislation. I would like to note that without objection, all of your written testimony will be made part of the record. You may add other supportive documents if you so wish. I would like to ask the first question. Actually, what I think we ought to do is switch. I think that they should come up here and we should move there, because they're going to be passing the microphone back and forth and answering jointly. [Pause] I would like to begin. I don't know where Kirsten is. She's coming right back? Okay. I would like to begin by asking Mr. O'Connell and Ms. Porter, and then anyone else who would like to add to it, what is behind this spike in credit card debt? Why is it jumping so much for the elderly now? We saw the AARP report that showed the tremendous spike. To what extent have credit card practices contributed to this problem and what, in particular, practices are contributing to this spike in credit card debt? I would also like a clarification from Ms. Porter. You were saying that if you moved to a debit card, it would be better for the seniors, but we have received some reports that debit cards are not as safe as credit cards in terms of identity theft, that there are a lot of identity theft efforts against elder Americans, and that debit cards are not as secure. Now we have put forward, in our hearings, the concept that at the point of sale, you get the information that you're overdrawing your account or what your account is, similar to what we have proposed for the ATMs. We are being told by the industry that they do not have the technology to make that happen, and if any of you have any information or comments on that, that it's too costly and that the technology is not there for the point-of-sale information to anyone, not just the elderly, but anyone, I open it up to all panelists. Ms. Porter. I'd like to start with responding to the point- of-sale disclosure. There's no doubt that the industry doesn't want to do this because they are the people who have conducted the studies that show that when you spend with a credit card, you spend more, and part of that spending effect goes to the fact that with a debit card, people are much more aware that the money is coming out today. I would suggest that if there are concerns about implementing point-of-sale disclosures, there could be simply a 1- to 2-year phase-in period. I believe something like 95 percent of credit card transactions are already processed simultaneously online with immediate communication. There could be a waiver for that 5 percent of transactions that are still done with the old fashioned paper system, but a phase-in would address that. Regarding the debit cards and identity theft, I am not aware that debit cards lead to more instances of identity theft than credit cards. I do think credit card issuers have been very aggressive in promoting among consumers the idea that they will do more to help you in the case of identity theft than banks, but I have not seen any evidence to show that actually is true. I would suspect that the credit union representative here would say that they do a lot at the local bank level in any way to help. There are some concerns about debit card overdraft practices, and I know that the subcommittee has already held a hearing addressing those, so I would encourage you to implement those simultaneously to make sure that consumers get the same protection in the case of fraud whether they use a credit card or a debit card to pay because the very best academic research that exists today shows that when you spend with credit cards-- even if you're a convenience user--you spend more. That is a real problem with seniors trying to adjust to retirement income and live on fixed incomes. Chairwoman Maloney. Any statement on why are we seeing such a spike in debt for elder Americans? Everyone is reporting on it. Why is it jumping up so much now? Mr. DeCelle. I think primarily because the cost of living is increasing. Seniors are on fixed incomes and they're relying on credit cards, as I stated earlier, to help supplement their income. Again, I think that goes back to the true need for financial literacy because there are other alternatives out there other than simply using your credit card to float a 36-, 60-, or 90-day loan and with regard to the previous question on debit card use, I think what's happening in terms of most Americans associate their debit card with their checking account, so if their identity is lost, they don't want their checking account to be impacted. Again, that goes back to the need for financial literacy education and through cooperative efforts, SEFCU and the New York State Credit Union League in the fall of this year are--will be delivering a whole series on how to protect yourself identity theft should that happen. Again, it goes back to the more knowledge we can give to consumers, the more powerful they'll be in making their own decisions. Chairwoman Maloney. Mr. O'Connell, since it was your report from AARP, I'd love to hear your comments on that. Mr. O'Connell. I mean, it's everything we were just hearing about, obviously, the cost of living and I think there's a myth in this country that older persons are well off. The Baby Boom generation is about to become aged, but the reality is that more than 60 percent of older Americans still rely on Social Security as their primary income and Social Security income is less than $11,000 a year, on average. You combine that limited income, the cost of living increases, and now the availability, the marketing that we're seeing by the credit card companies, and people just would tend to look to credit as a solution and then they get caught in that spiraling increasing cost. Ms. Gillibrand. Thank you, members of the panel. I appreciate it. I really want to talk about some of the policies that we, as Members of Congress, can put in place to make a difference. I appreciated, Mr. O'Connell, that you gave four suggestions. You wanted to improve disclosure of terms and conditions of credit card, prohibit universal default, a limit on penalty fees and interest rate hikes and prohibit mandatory binding arbitration. I would like to go through each of those suggestions and get your comments on it, specifically about how to implement it. So if we can start with the first one, improve disclosure of terms and conditions of the credit card. How would you like to do this, what recommendations specifically do you want made? Mr. O'Connell. I'll turn to my colleagues. I can talk more about the kinds of improvements that would be needed in disclosure. Ms. Porter. I think we all would say that the Federal Reserve Board has taken an important step in actually consulting with consumers to ask them, why are these disclosures so confusing, and so we can look forward to, I hope, improved disclosure at the time that you take out a card and in your periodic statement, but I would just say that all of the academic research suggests that for a variety of reasons, nobody takes out a credit card intending to get hit with lots of fees. So we don't look at the fees, because we don't plan on being hit with exorbitant fees, and so we're not processing those disclosures no matter how big you make the font. If you simply think they won't ever apply to you, you don't read them, and that's why a point-of-sale disclosure, a warning, that you're about to exceed the limit and a notification of what that's going to cost you, a reminder printed on every credit card receipt on when the payment will be due for that transaction is important. The point-of-sale technology, if banks can do it, and the banks way, way lag the credit card issuers on the technology front, but if the banks can implement things like that at point-of-sale disclosure at ATMs and debit card users, there's no reason that credit card issuers, at least over a phase-in period of 1 to 2 years, wouldn't be able to make some more point-of-sale disclosures. I am all for improving the initial disclosures and the periodic statement disclosures, but I don't think they will have the same effect on consumer behavior. Ms. Gillibrand. Any other specific suggestions on that one? Mr. O'Connell. I don't know specifically, but I certainly know that my colleagues in Washington, we can address that and get something in writing to you in terms of the specifics. Ms. Gillibrand. Okay. Chairwoman Maloney. I just want to say that at the panel we had last week with the issuers, two of the issuers came out voluntarily saying that they will no longer do universal default, and that they would do a 2-year fixed rate, which I think is an extraordinary accomplishment even before legislation, that they are willing to set that standard, and hopefully others will repeat it. I think one of the problems that you hit on, Ms. Porter, is that we are accustomed to buying things in a certain way, and when we buy a garment, or a car, or whatever, they don't jack up the prices overnight and add all these other fees that you don't anticipate. Yet, the credit card industry does that. They can jack up prices and add all these fees and people don't expect it and they don't see it coming. And I think that's one of the reasons that it gets run up so quickly. Ms. Gillibrand. The third recommendation was limits on penalty fees and interest rate hikes. What would you specifically like to see if you could make a recommendation? Mr. Billet. The key, at least in my opinion, and I think the opinion of a lot of my colleagues in the Banking Department, goes to the issue, although I'm not sure whether Congress in this day and age could successfully address it. It goes to the ability of these credit card companies to export their rates. If you, as a banking institution, in order to do business in this State were subject to New York State law, and the State could also define what constitutes interest for that purpose, then you would have effective controls in this State over what would happen at least to the residents in this State. But the fundamental problem with the fees issue is, in my mind, that under regulatory interpretation which has subsequently been upheld and abetted by the Federal judiciary and the Supreme Court, is that fees also constitutes interest and that's why that can be sent out as part of the credit card charges. So when you address that issue, you have to keep that in mind. It's the same as the interest rate charge, so when you address that, however you intend to do it, somehow you have to address that problem. Ms. Porter. I would concur. There is a real unfair advantage that is given to the national banks because of, to be frank, very weak enforcement activity by the Office of the Comptroller of the Currency, which is a Federal agency that very few people, including most of the people in this room, have ever heard of, but it is the agency that is supposed to be protecting and monitoring and regulating Federal banks. And so I think our State banks and the credit unions face a real disadvantage in trying to provide the best possible services for their customer when they compete with national banks. And the State banks, when they try to charge a fee, they have to deal with Mr. Billet. When the national banks up their late fee to $39 or $49, they effectively know they can do so with no oversight and no regulatory fear. So I really applaud the efforts of the subcommittee in the last year to bring some scrutiny to the credit card industry. And I think the reason you're seeing issuers stand up and say we'd be happy to eliminate universal default is because I think they are afraid that the subcommittee is actually getting a handle on how serious this problem really is. So you just see credit card issuers, I think, are really worried that America and its representatives have finally had enough of some of these practices. Mr. Billet. I just would add, just to try to make this point as clear as possible, that the reason State law applies to these institutions, and it depends on where they're headquartered, which is usually in States that have favorable usury and interest rate laws, is because there is no Federal law that regulates interest or these fees essentially. So whatever State you're in, if you're a New York bank and you sell to somebody or give a loan to somebody in Ohio, New York law applies with respect to the fees and the interest rate charge. Ms. Gillibrand. The last issue is to prohibit mandatory binding arbitration. Why is that affecting the issue and why do you recommend that as a change? Mr. O'Connell. I can only reference the example we gave of Ms. Owens. When she got to a court, the court settled it, as opposed to if she was in a situation where she had to go to a mandatory arbitration, in an arbitration venue that was set up by the credit card industry, and she would obviously be at a great disadvantage. Ms. Porter. I am actually conducting some research about this practice because increasingly what we see is not just credit card issuers using arbitration to resolve an actual dispute, that is a true disagreement about an asserted violation. But instead what we're seeing is widespread use by credit card companies of a few arbitrators in particular to simply collect debts. So rather than using the existing court process of filing a small claims judgment, obtaining a judgment, and having the judge make sure it's all fair and correct, they are sending people through an arbitration process as a way to shortcut the traditional collection process and the protections that exist at State law. Mr. DeCelle. I guess I'd like to just go back to something that Mr. O'Connell referenced in his statement and that is, that there is not that one-to-one contact that's taken place with the larger card issuers with their card holders as they're going down that very slippery slope of going into debt and I think if you take a look at what the credit union movement is doing we have debt counselors that work with our members so that they don't get to that point of needing to go to arbitration. Again, I see some people are kind of shaking their head. We're not the end-all, be-all, but what we are is a great solution to be able to work with consumers so that they are able to make better and well-informed financial decisions. And again, not to sound like a broken record, we need to do more in terms of financial literacy and financial education from the elementary school right into buildings like this, a senior citizens' center. We need to do a better job of getting the message out on why taking a zero percent credit card offer for 12 months is not the best solution to be able to roll some debt so that you have some alleviation of interest rate. We take a look at the savings rate crisis that we're in. We as a country are not savers, so to think you're going to be able to roll a 12-month debt at a zero rate on a card and have it paid off in 12 months, if you're not already a good saver, that's not going to happen, and that's where we need to do a better job and as credit unions do, working with members, working with community resource groups, working in the schools, and working with senior citizens on how to develop good habits in terms of financial decisionmaking. Ms. Gillibrand. What is your opinion about whether this issue is going to get better or worse? Is the next generation ready for this or is it something that you think is going to increase because of the Baby Boomer generation? And related, who is the worst hit by this? Is it something that is affecting all retirees or is there a specific group who are being affected more? Ms. Porter. I would just say that I anticipate, at least for the foreseeable future, that it is going to get worse. The Baby Boom generation has an appetite for credit cards that is not really paralleled by other generations. Young people, because they became aware of credit cards much earlier, many young people do not use credit cards. The credit card rate among young people is actually on the decline. But the Baby Boom generation continues to escalate their credit card use, exactly at the time that they've saved less than prior generations and are heading into retirement. So I think we're likely to see, at least for the next 10 to 20 years, a worsening of these problems. Mr. Billet. I will tell you from my own personal experience, I agree with that assessment by Ms. Porter. My children are recently out of college and they had credit cards and started to learn how to use a credit card and had some rough roads and they also obtained debit cards at the same time and fundamentally they're using the debit card for their daily expenditure purposes and are using the credit cards for what they are intended--to hit that big ticket item when you don't have sufficient income at the time of payment. Ms. Whipple. I do agree with the panelists. I just have a little bit different take on this. I certainly think the elderly are going to be extremely hard hit. I think it has to do with not only the fixed income, going back to your question, Madam Chairwoman, there are a variety of factors that have converged. The lack of medical and health insurance is one of the most disturbing and distressing reasons why people are coming into my office. We've gotten to the point where I have people literally sitting in front of me saying, ``I can't take my medicine, I can't afford it.'' So that's a huge one I think that affects the elderly more just as we grow a generation. I also do some credit abuse resistance education for high school and colleges and our theory was that you go into high schools and colleges to prepare the college students for the day, the first day they walk on a campus, and they're going to have Capital One sitting there, and Capital One is going to say, here's your free frisbee, here's your great t-shirt, here you go. All you have to do is sign here and guess what, it's free money. By the time these kids get out of school, if they're not educated, and I think a lot has to do with education, I think the statistics are that that between 19 and 24-year-olds, they are increasing in bankruptcy as well as the elderly. I think the Baby Boomers are in a position right now where they're robbing Peter to pay Paul. I don't think they recognize the debt that they find themselves in and I think the elderly are a little bit more wise and will be able, when they finally hit a point they say okay, I am in trouble now. They may be a little bit quicker. You play the game right, you can use credit cards to move money around for years and years. I have seen people do it, and at the end of the day, you are still going to end up in my office. So I think that even though the Baby Boomers might be moving the money around, our older generation and our younger generation are where we should probably be focusing so that we can teach the Baby Boomers where they're going and they can, in fact, teach our children. We're the first generation to have credit cards. My parents didn't have a credit card. So you give somebody a credit card, and say, here you go, pay your money, and everything is fine and dandy. I don't think it's on luxury goods and I certainly don't think that it's a situation where people are saying, let me go out and use a credit card to buy this, that, or the other thing. People are using credit cards now to survive and that is where the problem lies. Because if you have to rely on a credit card to survive, you will never be able to pay that credit card off. Mr. DeCelle. Let's pass the microphone. I absolutely agree with you that people are using credit cards as a means of survival. However, I think what we need to do as an industry is we need to continue to work with our consumers, our members, our customers, however you want to refer to the segment and educate them on all the other alternatives that are out there other than living day-to-day on a credit card. I do disagree that I don't think this is an issue that's relative just to seniors and to the younger generation. I actually think the younger generation--I never thought I'd say that, the younger generation--I actually think younger Americans are more comfortable using a debit card because they're not fearful of that transaction hitting their checking account versus older Americans who sometimes feel like they don't want those transactions just hitting their checking accounts. They're used to once a week sitting down and settling their bills. So I think that's where education plays a key role. Again, I think it goes straight across the board and I also think some of the difficulties we're having tie directly back to the fact that as a Nation we have the lowest savings rate since the Great Depression. My parents were savers. They didn't buy a house, buy a car, whatever, unless they had the money where they go and go with a cashier's check and make that payment. We're not savers and that's part of what the problem is nowadays. We're not saving enough for that proverbial rainy day and when the clouds open up, what do you do and who do you go to and who can help you? Chairwoman Maloney. Thank you. I would like to ask the audience a question. I'd like to know how many of you have a credit card? Can you raise your hands? Okay. And how many of you use a credit card? How many of you have a debit card? Much fewer. How many of you use the debit card? So how many of you have a credit card or debit card story to tell us that we could hear? Quite a few. Okay. I want to ask one question that refers to the bill that we're working on, and then I would like to listen to the audience, asking a question. And I'd like to start with Mr. Billet because I know we're running out of time here so I want to get your responses to this idea and see whether or not you think this would help solve the problem. We're talking about disclosure. We're talking about choice. What if you had a requirement that you had to disclose to consumers exactly what everything was going to be and if you change that, if you change that with an increased fee or any increased interest rate you had to notify the consumer, we are increasing your fees. We are increasing your interest rate, it's going to be this much more and then you gave the consumer 45 days to make a choice. They could freeze their account and leave it as it is at the agreed amount and let them pay it off over a year or they could decide to opt-in, yes, I agree to pay that 18 percent interest increase. In other words, informing them. As we were talking, Kirsten and I, about how many solicitations we get from credit cards, they fight very hard to get that customer. I would think that if they had that they would be very cautious about raising fees and interest rates because they could lose that customer to a competitor who is offering a much lower fee. Do you think that would curb the challenge that we have now? Allowing them to know exactly what's happening and allowing them to freeze their account at that amount so that they could pay it off, go to another card, or just--your response? Mr. Billet. I think that would address the issue where the fees and the late penalties and what have you essentially constitute so much of the debt that you can't pay off the principle which are the stories you heard today. That also means that, in effect, the credit card will not be able to be used again. So that's the other side of the story. Chairwoman Maloney. You could go to another credit card that has no fee. Competition between the credit cards are immense. Mr. Billet. That's true, but I would say those kinds of changes will have a ripple effect than with respect to the availability of credit. So what you see now is uncontrolled solicitation may, in fact, dry up or be significantly reduced. Now that may be a good outcome in that sense, but that--it's one of the things you have to think about with respect to what is called default rates or penalty rates. You have to understand--the thing you have to realize about credit cards, it is an open line of credit, so our banker friend from the credit union will tell you that if that person's debt increases, that person becomes a greater risk. And normally, under all rules of banking, that person should pay the higher rate of interest for any further use of the debt that they have. So that's what you're going to hear from the industry. I can guarantee it. Ms. Porter. I think it's important, I think you might want to consider that many consumers already have this option to stop using the card when they get notification of a fee hike. Now it may well be that the notifications are not clear enough and so consumers don't take advantage of that option. But I would also suggest that there are real problems with suggesting that if you don't like what card issuer ``A'' does, keep that balance, and go get card ``B.'' It sort of facilitates the growing number of cards which can have a detrimental effect on people's credit scores and sort of shifting among cards is not necessarily the ideal financial practice. I also think it's important that you consider at one point you said in describing the proposal that consumers would have to opt-in to the higher rate and my guess is that the industry is conceiving of this as a very different proposal which would require the consumer to affirmatively notify the industry that they want to take the free option. So I think it will make a difference of how it's framed, whether the assumption is you don't want to be charged the higher rate and you want to stop or the assumption is that you do. It will make a different on how effective it is. Chairwoman Maloney. Ms. Whipple? Ms. Whipple. I am a proponent of all and as much disclosure as you can possibly give. My one concern would be if there was a way for it to be a one paragraph disclosure as clear and concise because if you get one of--the daily disclosures we get now which are a form this thick that are in a font of .2 inches, then it's probably not going to make a difference not to be a pessimist. I think disclosure is a wonderful thing and I think if it's clear enough so that individuals can take advantage of what you propose to do, I think it's a great idea. I also just want to note one other thing to follow up what Ms. Porter had said before. Previously, you had said that credit card companies say that they are not--they financially can't do certain things. We used to hear that a lot in the court--we can't do this, we can't do that, and then the judge orders it, and lo and behold, they can do it. So I take with a grain of salt anyone telling me well, as a credit card industry we can't do it, because if Congress legislates it, they can do it. It's just a matter of somebody has to tell them to do it. Mr. DeCelle. As somebody from a credit union who is responsible for marketing, if you can get a disclosure into one paragraph, I would be thrilled. [Laughter] Because how many people have within the last 6 months to a year opened up a new account or done anything with a credit card or even just a deposit account? You get a stack of disclosures because of the required mandates that we have from the legislature. The only thing I would say with all due respect is through the scenario that you had stated earlier, Madam Chairwoman, that really will increase the technological expense that will take place and what's going to happen eventually is more and more smaller issuers are going to drop out of the market, making less and less choices for consumers to be able to go where there is a lower rate, lower fees, and all of those things. And so that's the one thing that you should take a look at some of the best practices that are out there. Are there some banks that all they do are credit cards, taking advantage? Absolutely. However, there are some very good organizations that are out there, SEFCU being one of them, that do not take advantage of our members. We work diligently to make sure that our members understand what they're getting into, how the product works, so that they are better off down the road. From our point of view, the more success they have financially, the better we are because that's going to make them a happier member. Yes, there are certain things courts can mandate, and we need to jump through hoops, but what you need to understand is the more and more technological and legislative guidelines you put on our shoulders, that means we have to make that decision. As I said earlier, we have to look at that question and say, can we afford to offer credit cards to our members? And if it becomes too costly, then it's a negative impact on our members, so we have to say no, we can't, and then that reduces where people can go to get a product that will truly meet their needs. Chairwoman Maloney. Mr. O'Connell, if you have a comment? Mr. O'Connell. Apparently now, there must be a 30-day requirement. I got one in the mail yesterday on a change. I don't think 45 days necessarily would be the answer. I think it has to get back to controlling the actual fees somehow. But they did get it into a simple statement here. Chairwoman Maloney. Thank you and I'll call upon--you can take my seat. You had a story you wanted to tell us. Here, take my seat. Sit down so you can talk to the mic. Mr. Oceans. My name is Len Oceans and my wife just told me that a couple of years ago, she paid a bill in full to one of the credit card holders. And we got a letter back saying that we are dropping you and we're canceling your card. Why? Because you paid it in full. If you want to take it out again, they're going to charge us a fee of $30. So we said ``Sayonara, we don't need you. You need us.'' I have a question about identity theft. Is it true that Congress passed a law that when you go into a store on a credit card it should only be the last four numbers on your receipt? Ms. Porter. Yes. Mr. Oceans. Because my wife always looks at it and she sees the whole digit, she crosses it out and only leaves the last four numbers. Ms. Porter. There was a phase-in period for that. The issuers said they couldn't do that technologically. They just didn't know how they'd ever succeed. So they were given a couple of year period, but that period has elapsed, so your wife could actually sue for those violations. Mr. Oceans. Oh, and then we'll be millionaires. [Laughter] Just one more question. Why are the lobbyists so powerful and strong to keep those rates up so high? Mr. Billet. It's not a function of the lobbyists. It's the function of the industry that's behind the lobbyists, so you know, the banking industry is one of the strongest industries in the United States, if not the strongest industry out there as far as putting forward their point of view on issues. And you know, I guess it just goes to what they're about. They have the capital. People want the capital. They say you're not going to get the capital. People respond to that. Ms. Gillibrand. Would any other audience members like to ask a question of the panel? We're just about done anyway. We plan to hold this hearing until 3 o'clock. I want to thank you all for coming. I want to thank each of our panelists for being here and for testifying on something the Financial Services Committee hopes to write legislation on this year. I also want to recognize some of our local elected officials. Mindy Warmoth, are you still here? Hello, Mindy, how are you? She's our supervisor for this town. And Regina Parker, she's our councilwoman. Is she here? Thank you, Regina, for being here as well. Thank you for being our elected leaders and coming to this forum. It's such an important part of what we do in Congress to take testimony from experts to help us write legislation. And thank you all for participating. It's extremely valuable that you're here and I just want to commend Congresswoman Maloney. If you'd like to say a few words, Congresswoman? Thank you for your leadership. Thank you for coming to our District and listening to the views of many upstate New Yorkers on these very difficult, but important issues. Thank you, Congresswoman. Chairwoman Maloney. Thank you for inviting me. I certainly learned a great deal and will be back in touch with our panelists, and with you, Kirsten, on items that came up today. I wanted to note that for 5 days, you will be able to put into the record any comments, additional questions, or any other item that you would like to be part of the official Federal record. We are moving forward with legislation. All of you have helped clarify where we need to go and what we need to do. We know that credit cards are a part of our life, a great convenience. They allow us to have access to credit immediately, but it needs to be fully disclosed and in a fair way. I've had a wonderful time here today learning more about this issue, but also seeing an absolutely beautiful city. I would love to come back and have a vacation here some time. You're very fortunate to live here and it's wonderful to be here and thank you for hosting it, particularly the Halfmoon Senior Center for having us and our wonderful panelists. And the meeting is adjourned. [Whereupon, at 3:10 p.m., the hearing was concluded.] A P P E N D I X August 7, 2007 [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]