[Congressional Record Volume 144, Number 124 (Thursday, September 17, 1998)]
[Senate]
[Pages S10459-S10473]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
CONSUMER BANKRUPTCY REFORM ACT OF 1998
The Senate continued with the consideration of the bill.
Amendment No. 3596
The PRESIDING OFFICER. Under the previous order, there will now be 5
minutes of debate equally divided on the Reed amendment, No. 3596. Who
yields time? The distinguished Senator from Rhode Island.
Mr. REED. Mr. President, I yield myself such time as I may consume.
The PRESIDING OFFICER. The Senator is recognized.
Mr. REED. Mr. President, this amendment is a very straightforward
one. It would prohibit credit card companies from penalizing or
terminating customers who pay their bills on time.
The core principle of this bankruptcy legislation that we are
debating today is responsible borrowing, and being responsible for your
debts. Here, we have a population of the most responsible borrowers,
those who pay their bills timely and full each and every month. But
what is happening is that there is a growing movement among credit card
companies to penalize these individuals or to terminate their credit
arrangements. I think it is wrong and I think we should do something
about it here today.
The credit card industry claims it is too expensive to maintain these
accounts. Frankly, if you look at the charges that they receive from
merchants on each transaction, the very substantial interest rate that
they charge for outstanding balances, and also the membership fees
which now seem to be ubiquitous, those claims seem to be very hollow.
Indeed, this should be an issue about not only responsibility but
fairness, and also about whether we really do believe that if people
conduct their lives appropriately, pay their bills on time, are
responsible, that they should end up being penalized.
If we are talking, today, in this legislation, about responsible
borrowing, how can we allow the most responsible borrowers in our
society, ones who pay their bills each and every month, to be punished
by these credit card companies?
I urge adoption of this amendment. I retain the remainder of my time.
Mr. GRASSLEY addressed the Chair.
The PRESIDING OFFICER (Mr. Burns). The Senator from Iowa.
Mr. GRASSLEY. Mr. President, I yield myself such time as I consume.
We have the chairman of the appropriate subcommittee willing to work
with Senator Reed to address this problem in the Banking Committee. My
opposition to this is not so much a matter of substance but of
procedure and not usurping the authority of that committee. It does
need to be studied. I can tell you that in the Grassley-Durbin
amendment, we have enhanced disclosure requirements to help consumers.
While I respect the Senator's view on price controls, my view is that
forcing a credit card company to offer credit when it has made a
business determination that it would lose money will only force
increased prices on other consumers. This is something that the Banking
Committee needs to take a very serious look at and do it before we do
something that may help some but may also hurt others.
Mr. President, I am going to ask that this amendment be tabled after
the Senator from Alabama speaks. I yield my remaining time to the
Senator from Alabama.
The PRESIDING OFFICER. The Senator from Alabama has 1 minute 58
seconds.
Mr. SESSIONS. Thank you, Mr. President.
The effect of this will be to require mandatory lending at no
possible profit for a credit card company. We have 6,000 credit card
issuers today. They are all providing different services; some charge a
fee and you have to pay monthly, others don't. It is just not right for
us, without a hearing, to even impose on a credit card company a duty
to lend money in a way in which they will never be able to make a
return.
I don't think we need to be entering into wage-and-price controls. We
have a very vigorous free market, and, for the first time, interest
rates are beginning to come down because we do have a lot of credit
card companies competing out there. I think we ought not to intervene
at this time. This is an unwise amendment. I understand the motivation
behind it. It is not appropriate, and I oppose it strongly at this
time.
The PRESIDING OFFICER. The Senator from Rhode Island.
Mr. REED. Mr. President, how much time do I have remaining?
The PRESIDING OFFICER. Forty-nine seconds.
Mr. REED. Thank you, Mr. President.
The credit card companies make a great deal of money even on those
individuals who pay their bills on time. They have membership fees,
fees from merchants when the transaction is processed, and they have
additional ways to acquire fees.
I do not think it is a question of forcing an enterprise to give
money away. What it is is a situation in which the credit card
companies have come to us and said, ``There are all these irresponsible
borrowers out there; we have to amend the bankruptcy laws so we are
protected.'' Yet, when we point out they are punishing responsible
borrowers, they rise up and say, ``That is an imposition on us.''
If we believe in responsible borrowing, we should support this
amendment.
I yield back my time.
Mr. GRASSLEY. I move to table the amendment.
The PRESIDING OFFICER. All time has expired.
Mr. GRASSLEY. I ask for the yeas and nays.
The PRESIDING OFFICER. Is there a sufficient second?
There appears to be a sufficient second.
The yeas and nays were ordered.
The PRESIDING OFFICER. The question is on agreeing to the motion to
lay on the table amendment No. 3595, offered by the Senator from Rhode
Island, Mr. Reed. The yeas and nays have been ordered. The clerk will
call the roll.
The assistant legislative clerk called the roll.
Mr. FORD. I announce that the Senator from South Carolina (Mr.
Hollings) is necessarily absent.
The PRESIDING OFFICER. Are there any other Senators in the Chamber
desiring to vote?
The result was announced--yeas 47, nays 52, as follows:
[Rollcall Vote No. 273 Leg.]
YEAS--47
Abraham
Allard
Ashcroft
Bennett
Brownback
Burns
Chafee
Coats
Cochran
Collins
Coverdell
Craig
DeWine
Domenici
Enzi
Faircloth
Frist
Gorton
Gramm
Grams
Grassley
Gregg
Hagel
Hatch
Helms
Hutchinson
Inhofe
Kempthorne
Kyl
Lott
Lugar
Mack
McCain
McConnell
Nickles
Roberts
Santorum
Sessions
Shelby
Smith (NH)
Smith (OR)
Snowe
Stevens
Thomas
Thompson
Thurmond
Warner
NAYS--52
Akaka
Baucus
Biden
Bingaman
Bond
Boxer
Breaux
Bryan
Bumpers
Byrd
Campbell
Cleland
Conrad
D'Amato
Daschle
Dodd
Dorgan
Durbin
Feingold
Feinstein
Ford
Glenn
Graham
Harkin
Hutchison
Inouye
Jeffords
Johnson
Kennedy
Kerrey
Kerry
Kohl
Landrieu
Lautenberg
Leahy
Levin
Lieberman
Mikulski
Moseley-Braun
Moynihan
Murkowski
Murray
Reed
Reid
Robb
Rockefeller
Roth
Sarbanes
Specter
Torricelli
Wellstone
Wyden
NOT VOTING--1
Hollings
The motion to lay on the table the amendment (No. 3596) was rejected.
[[Page S10460]]
Mr. REED. I ask unanimous consent to vitiate the yeas and nays on the
amendment.
The PRESIDING OFFICER. Without objection, it is so ordered.
The question is on agreeing to the amendment.
The amendment (No. 3596) was agreed to.
Mr. REED. Mr. President, I move to reconsider the vote.
Mr. GLENN. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
Mr. GRASSLEY. I ask unanimous consent we now move to the D'Amato
amendment, regarding ATMs.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. GRASSLEY. As soon as this is disposed of--which we don't think
will take very long--we will move to the Dodd amendment.
The PRESIDING OFFICER. Will the Senator restate his unanimous consent
request.
Mr. GRASSLEY. Mr. President, I ask unanimous consent that we now move
to the consideration of Senator D'Amato's amendment to the bankruptcy
bill, and immediately upon disposing of that, which we hope to do
fairly shortly, we move then to the Dodd amendment, and we would have
40 minutes on the Dodd amendment, evenly divided.
The PRESIDING OFFICER. Is there objection?
Mr. DODD. Reserving the right to object, and to inquire of the
managing Member, there would be no second-degree amendments.
Mr. GRASSLEY. That is in the agreement. We have to certify which
amendment it is.
Mr. DODD. Mr. President, I notify the managing Member that it is the
amendment on the credit card age limit.
The PRESIDING OFFICER. Is there objection?
Mr. DURBIN. Reserving the right to object, is there going to be a
time limitation on the D'Amato amendment?
Mr. GRASSLEY. We felt that Senator D'Amato would offer his amendment,
and then I will move to table.
Mr. DURBIN. Is there a time limitation?
Mr. GRASSLEY. There is not.
Mr. DURBIN. Mr. President, reserving the right to object, we are
supposed to conclude by 2 p.m. to take up another matter.
Mr. GRASSLEY. I ask unanimous consent that we have 15 minutes for the
D'Amato amendment and 5, which probably won't be used, by the
opposition prior to the motion to table.
Mr. DODD. Reserving the right to object, I would like 2 or 3 minutes
on the D'Amato amendment.
Mr. GRASSLEY. I will give the Senator my time.
Mr. D'AMATO. Mr. President, I ask unanimous consent that we have 20
minutes for the proponents. I have a number of people who would like to
speak. It is an important amendment and one we have tried to have
considered by the full body. Then if the opposition wants 5 minutes,
that is fine. That would still keep it under a half hour.
Mr. GRASSLEY. Mr. President, that is OK--with a motion to table at
the end of the time.
The PRESIDING OFFICER. Is there objection?
Without objection, it is so ordered.
The Senator from New York is recognized.
Amendment No. 3597 to Amendment No. 3559
(Purpose: To amend the Electronic Fund Transfer Act to limit fees
charged by financial institutions for the use of automatic teller
machines, and for other purposes)
Mr. D'AMATO. Mr. President, I send an amendment to the desk and ask
for its immediate consideration.
The PRESIDING OFFICER. The clerk will report.
The assistant legislative clerk read as follows:
The Senator from New York [Mr. D'Amato], for himself, Mr.
Chafee, Mr. Dodd, Mr. Bryan and Ms. Moseley-Braun, proposes
an amendment numbered 3597 to amendment No. 3559.
Mr. D'AMATO. Mr. President, I ask unanimous consent that reading of
the amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:
At the appropriate place, insert the following new section:
SEC. ____. PROHIBITION OF CERTAIN ATM FEES.
(a) Definition.--Section 903 of the Electronic Fund
Transfer Act (15 U.S.C. 1693a) is amended--
(1) in paragraph (10), by striking ``and'' at the end;
(2) in paragraph (11), by striking the period at the end
and inserting a semicolon; and
(3) by adding at the end the following new paragraphs:
``(12) the term `electronic terminal surcharge' means a
transaction fee assessed by a financial institution that is
the owner or operator of the electronic terminal; and
``(13) the term `electronic banking network' means a
communications system linking financial institutions through
electronic terminals.''.
(b) Certain Fees Prohibited.--Section 905 of the Electronic
Fund Transfer Act (12 U.S.C. 1693c) is amended by adding at
the end the following new subsection:
``(d) Limitation on Fees.--With respect to a transaction
conducted at an electronic terminal, an electronic terminal
surcharge may not be assessed against a consumer if the
transaction--
``(1) does not relate to or affect an account held by the
consumer with the financial institution that is the owner or
operator of the electronic terminal; and
``(2) is conducted through a national or regional
electronic banking network.''.
Mr. D'AMATO. Mr. President, this amendment would end the
monopolistic, anticonsumer, anticompetitive practice of ATM double
charges once and for all. It is cosponsored by Senators Chafee, Dodd,
Harkin, Bryan, and Moseley-Braun.
The amendment corresponds to my bill, S. 885, called the Fair ATM
Fees for Consumers Act, which currently has 11 cosponsors. It would
amend section 903 of the Electronic Fund Transfer Act to prohibit ATM
surcharges imposed by ATM operators directly upon noncustomers using
their machines.
The big banks would have you believe that if this amendment passes,
ATMs are going to disappear. Absolute nonsense. Hogwash. It is simply
not true. If they get rid of ATMs, then they are going to have to open
up more branches and hire more people, and it is going to cost banks
more money. Well, a transaction performed by a teller at a bank branch
does cost more money.
Let's take a look at the genesis of the ATMs. When they were
initially introduced to the consumer, great promises were made. Indeed,
the banking community, I believe, had the support of just about
everybody, including consumer groups, when they said: Look, we're
moving into the modern era and the utilization of ATMs will save
consumers money, it will reduce transactional costs.
Those benefits, indeed, were supposed to be passed on to the
consumer. It made sense. Indeed, a network was set up--a network owned
by Cirrus and Plus, really owned by the large money center banks.
Interestingly, in order to induce others who may have started rival
networks, they said: Don't worry, use our network, use the ATMs that we
establish, because we will prohibit a double charge, a surcharge on top
of an initial fee. So, therefore, those who might go into competition,
such as the credit unions, the small community banks, and others, do
not have to go through the cost and expense of setting up your own
ATMs, because we will let your customers use our ATMs without any
additional charge.
Indeed, up until April 1, 1996, the networks prohibited double
charges. That was a self-imposition to see to it that all of the
financial services that were offered in the banking community would be
available, there would be one charge that the consumer's own bank could
impose and pass along the money to the ATM operator. The bank would be
compensated, but there would not be any additional charge for those who
used an ATM that was not their bank's.
Let me say that the Congressional Budget Office reported that there
were more than 122,000 ATMs in the United States before double charges
were permitted nationwide. So this rubric, this nonsense, this
incredible claim that, ``Oh, we are concerned about consumers and their
choices, and we're concerned that they won't have these ATMs,'' that is
just a lot of nonsense. Look at the facts--122,000 of the existing
ATMs, or 74 percent, were in place before double charges.
Now, at last count, there were 165,000 ATMs. So in the past 2 years,
you have had approximately 43,000 new machines come into use. That
means that 74 percent--three-quarters of all the ATMs in
[[Page S10461]]
the United States--were in place before they were allowed to double
charge.
Now, under the amendment, which has been cosponsored by many of my
colleagues, ATMs would still be profitable. They have been raking in
huge profits.
The banks were saving money because they saved a dollar for each
transaction performed at an ATM rather than at a bank branch--and they
made a profit on the use of the ATMs. But they weren't satisfied with
that. Oh, no. They had to say that: On top of that, we are now going to
add another charge. Guess what we are going to tell the consumer? A
little flag goes up and says you will pay $1.25 more.
What is a person who, at lunchtime, has to take out $20, $30, or $40
supposed to do? Go running around looking for an ATM that doesn't have
a double charge? No. The people are stuck. They are running late, or
maybe it is getting dark. Are you going to go searching for an ATM that
doesn't have that little flag going up? Or are they going to look for
one that doesn't exist, because their bank, under the inducement years
ago that they need not participate and open up their own ATMs, they
said, ``We will rely on the network rather than try to find that
mythical one''?
If you tried to find one in Washington, DC, you would not find one.
Ninety percent of them in this region double charge. If you don't go to
the institution where you do your banking, you are going to get
whacked. This whacking costs the American people more than $3 billion
more--$3 billion. The average family that uses another bank's ATM six
times a month is going to pay about $200 a year more.
Do you know who it hurts? It hurts the little guy. It hurts the
person who draws out that $30, $40 or $50, because the surcharge, which
averages about $1.27, is paid in addition to the initial charge.
Consumer groups have estimated the two charges average about $2.68
together.
Here is somebody trying to get out their $20 or $30 or $40--a senior
citizen, a college student--and there is a $2.68 charge. That is a lot
of money coming from the little guy. That is a heck of an interest
rate. Years ago that would be called ``usury''--usury to get your own
money. That is really incredible.
That is why we have come forth with this amendment. Some people say,
``Why are you getting into the private sector?'' I will tell you why.
What you have today is anticompetitive. Banks say consumers always have
a choice to use an ATM that does not double charge. That is a joke.
Seventy-nine percent of the ATMs are now double charging. I predict
that by the end of the year that number will be over 90 percent. This
is a situation where the consumer has little, if any, choice.
Many of my colleagues have said to me, ``What is the big deal? It is
only a couple of dollars.'' It may not be a big deal to us to pay an
extra $3 when you are taking out $100 or $200. But it is a very big
deal to senior citizens, to students and to working families who take
out $20, $30 or $40 at a time.
ATM surcharges account for more than $3 billion a year. The fees
themselves are skyrocketing out of control. The most common surcharge
has increased from $1 to $1.50. That is right, when they introduced it,
it started at $1. It is now $1.50. Forty-four percent of the ATMs
charge $1.50 or more. It is going to go higher and higher unless
Congress acts to stop it now. Keep in mind that this is a charge on top
of a fee that the consumer is already paying to his or her own bank. It
is a hidden bank fee. But they are paying.
A recent U.S. PIRG survey found that 83 percent of the banks charge
their own customers an average of $1.18 per transaction whenever they
use another ATM. When you add the most common charge to the average
fee, that is $2.68. That is about $200 a year for a family that uses an
ATM six times a month. That is outrageous.
Several States, including Connecticut--the State of my colleague,
Senator Dodd--Iowa, and Massachusetts are waging battles to ban double
charges at the State level. But there is a question as to whether these
measures would apply to federally chartered banks.
That is why Congress has to act. It has to act in order to preserve
competition--in order to see to it that this monopolistic practice does
not deprive people of real choice.
Mr. President, I hope my colleagues will look to help the little guy.
This is an opportunity to give them the protection they so desperately
need.
I yield the floor.
Mr. DODD addressed the Chair.
The PRESIDING OFFICER. The Senator from Connecticut is recognized.
Mr. DODD. Mr. President, how much time remains on the amendment of
the Senator from New York?
The PRESIDING OFFICER. Ten minutes 29 seconds.
Mr. DODD. Mr. President, I ask that I use, say, 5 minutes and be
notified when 5 minutes have transpired so that the author of the
amendment has some additional time at the end to conclude his remarks.
Mr. President, there is little question that the surcharges seem to
have become the No. 1 complaint by many consumers and consumer groups
all across the Nation. Part of the reason for the increasing complaints
in this area is the speed with which the surcharges have become
attached to the ATM machines.
Frankly, I say to the Chair, and my colleagues, I was not an early
supporter of the prohibition of these fees. When it was first proposed
by the Senator from New York, I argued that we ought to let the market
dictate how these fees would be set, convinced, as had happened with
the credit card issue, that competition within the marketplace actually
had the desired effect of creating a good level, a less decent level,
and an understandable and rational level for fees and surcharges and
grace periods, and the like, when it comes to credit cards.
It was my hope that would occur here with the ATM issue. The problem
is that it just hasn't happened at all. We have had the opposite
effect, in fact. Banks seem to have become more interested in acting
like sort of an electronic Jesse James--taking their cut when the
consumer wants to get access to their money. In fact, the Congressional
Budget Office puts this a little more seriously in their study, noting:
Paradoxically, the increase in supply of ATM machines has
not led to the kind of reduction that would generally follow
from supply and demand solutions.
This is the Congressional Budget Office testimony. My concern over
the practice of surcharging was augmented by some other developments as
well.
First was the decision by a major national bank to sue the State of
Connecticut, my home State, to overturn my State's ban on surcharges.
This demonstrated to me that the banking industry was unwilling to
allow the individual States to make their own public policy decisions
about this practice. As a result, it has become very clear that only
Federal legislation would allow my State of Connecticut to maintain the
protections for its citizens that it has chosen to enact.
In fact, the attorney general of my State, Richard Blumenthal, came
to Washington and testified strongly in favor of the D'Amato amendment.
Let me quote him. He said:
Federal legislation is vitally necessary to clarify our
State's ability [a State rights issue] to enact such a
prohibition. In addition, Federal legislation is necessary to
ensure that consumers are protected from such fees whenever
they use an ATM.
Also, let me note that despite Connecticut's ATM surcharge ban, the
largest bank in my State announced, on July 14, that it was going to
close some branches and open more ATMs around the State. The results
rebut the argument that banks won't open new ATMs if this amendment
passes. This is a living example where you have a ban, a moratorium on
any new surcharges, and, yet, they are expanding the ATMs in my State.
So, clearly this ban, this legislation that is being offered by the
Senator from New York, would not produce the results that its opponents
are claiming.
Second, community banks in my State have expressed deep concerns that
ATM surcharging could be used to give large banks with extensive
proprietary networks an unfair advantage over community banks with
fewer machines. Smaller banks are worried about this--not only
consumers, but smaller banks are. This is particularly troublesome
because of the regulatory and legislative decisions that allow banks to
use the ATMs in the first place where, based upon the concept of
universal access to the network, the
[[Page S10462]]
large banks are reneging on that commitment. That is how they got this
in the first place. This was going to be universal access. They have
basically backed off that commitment.
Lastly, I have become very concerned over changes in bank
underwriting standards for commercial loans and for credit card
companies, which I have raised before and which was the subject of a
front page Washington Post article today. It is a great concern where
you have now these normal banking fees being replaced by surcharges and
the like as a way of offsetting lowering the standards for credit. This
ought to be a great concern of all of us. And the Washington Post
article highlights this. You can lower your standard on credit card
allocation, because you can make up whatever the losses would be in
this area. I think putting this issue aside is a very dangerous road
for us to be going.
As I reviewed the materials in preparation for the Banking Committee
hearing, I couldn't help but be struck by the fact that loan standards
and credit card underwriting standards have slipped as revenues from
fees, which are almost pure profit, have escalated. I can't help but
wonder whether the profit from these fees--$3 billion in ATM fees and
$1.1 billion from fees charged their own customers when someone else
bounces a check--aren't giving bank officials a false sense of security
about their lending practices. If true, then this may be the most
corrosive effect aspect of the recent boom in consumer banking fees of
all types.
For those reasons, Mr. President, I believe the D'Amato amendment
deserves to be adopted by this body. I urge my colleagues to do so.
Ms. MOSELEY-BRAUN addressed the Chair.
The PRESIDING OFFICER. Who yields time?
Mr. D'AMATO. I yield 2 minutes to the Senator from Illinois.
Ms. MOSELEY-BRAUN. I thank the Senator from New York. I congratulate
and commend the Senator from New York for his leadership in this area.
Mr. President, I am proud to be a cosponsor of this amendment to ban
ATM surcharges. Over the past two years, the Banking Committee on which
I serve has held numerous hearings on this issue. I think it is
important to note that every time we have one of these hearings, more
studies confirm what we have said all along: the practice of
surcharging is anticompetitive, it exploits consumers and it should be
banned.
When I was in law school at the University of Chicago, I was taught
that competition in a free market is supposed to be all about lowering
prices and providing better services to your customers in order to
maintain market share. However, competition in a world of surcharging
is like Alice in Wonderland, where nothing is as it should be.
Surcharging actually encourages the abuse of a dominant position in the
marketplace, promoting predatory prices. Competition in this instance
is not about providing the best services for the best prices, rather it
is about forcing your rivals out of the marketplace by raising their
costs.
And these costs are spreading. ATM surcharges have soared since 1995,
and consumers paid between $2.5 and $3 billion in surcharges last year.
This figure is in addition to the almost $1 billion in interchange fees
already collected for these same transactions. Seventy percent of all
banks currently impose a surcharge, and the most common surcharge has
risen from $1 to $1.50 over the last year.
If current trends continue, few ATMs will remain that have no
surcharge, and consumers, despite surcharge warnings most institutions
post on the computer screen or on the machine, will truly have no
alternative but to be charged twice for the same transaction--
especially now that some institutions are surcharging their own
customers.
I am aware that there are some costs to convenience. The number of
ATM machines has more than quintupled over the last decade. Americans
used ATM machines billions of times last year, accessing their bank
accounts and other financial services 24 hours a day, seven days a
week. However the practice of surcharging has actually resulted in less
convenience for many customers. The result of surcharges is ``the
incredible shrinking ATM network,'' far less convenience, longer
searches and longer waiting lines for those who seek to avoid these
double fees. As the Federal Reserve Bank of New York concluded, ``to
avoid surcharges, many consumers are likely visiting ATMs that are less
convenient than those used previously.'' I know there are costs
associated with deploying these new machines, handling increased
transactions, and other maintenance and safety issues. However,
consumers are paying quite a bit for the marginal ``convenience'' of
these additional machines. According to David Balto of the Federal
Trade Commission, assuming that surcharging has lead to the deployment
of 40,000 new ATMs, the more than $2.5 billion in surcharges last year
means that customers paid over $60,000 for each new ATM. Furthermore,
banks do not just surcharge on new ATMs in remote locations, but on all
of their machines. Therefore, many customers who may never use one of
these new, remote ATMs pay for the ``convenience'' of having it exist.
Moreover, it should not be forgotten that banks moved customers to
ATMs because, compared to teller transactions, ATMs were cheaper.
According to a 1996 Mentis Corporation study, an ATM cash withdrawal
from an in-branch ATM costs an average of 22 to 28 cents, while the
cost of a teller transaction is 90 cents to $1.15. And in some cases,
banks charge customers for completing transactions with a teller if
those transactions could have been completed at an ATM.
Certainly ATMs are a convenience for customers, but the truth is that
banks have deployed more ATMs because it means lower costs to banks.
I remember when banks paid their customers for the use of their
money. Today, however, it's increasingly expensive for the average
working family to manage even a simple banking account. Americans who
make timely credit card payments, or no payments at all, face higher
fees. Americans who avoid special banking services are considered
unprofitable customers, and face higher fees.
Now, with ATM surcharges, Americans are discovering that they must
pay banks more than an additional $155 each year simply to access their
own money.
The market is out of whack. The public knows this is unfair, and
their visceral reaction is a response to market excess.
I am hopeful that the financial industry will take the necessary
steps to remedy this problem. If they do, I do not believe this
provision should become law. Banks in some states have demonstrated a
willingness to address this issue. I call on the rest of the industry
to follow their lead. Otherwise, the government has a duty to correct
the abuse of double charging people for accessing their own hard-earned
dollars. In an era of unprecedented bank profits, it is clearly a case
of greed over need. I strongly support this amendment and urge all of
my colleagues to do the same.
Mr. President, there are sound economic reasons why this proconsumer
amendment ought to be passed. Whether you care about consumer issues or
banks, you ought to support Senator D'Amato's amendment, which I am
proud to cosponsor.
I thank the Chair. I thank Senator D'Amato. I yield the floor.
The PRESIDING OFFICER. The Senator from New York.
Mr. D'AMATO. Mr. President, I do not know if there is anyone here
ready to speak in opposition.
I see the Senator from Alabama.
Mr. SESSIONS addressed the Chair.
The PRESIDING OFFICER. The Senator from Alabama.
Mr. SESSIONS. I know this is a good-sounding and popular-appearing
bill, but I am not one who enjoys going to banks and going in banks.
Over the years, I have thoroughly enjoyed the opportunity to obtain the
cash I need on a daily basis from ATM machines. In fact, it allows you
to carry less cash in your pocket, and you can find ATM machines
everywhere. They are exploding to every corner of America. Businesses
have them. Grocery stores have them. And they cost money--$30-, $40-,
$50-, $80,000 to put in one of those machines.
So it has been a remarkable, wonderful advancement for the people of
America, that they can obtain money
[[Page S10463]]
on virtually any corner of a city, at their grocery store, at their
bank, at their gas station, and so forth. This has been a wonderful
advancement.
It seems to me particularly odd that we would say that a bank which
is servicing someone who is not their customer, who does not have an
account at their bank, and yet they might have spent $50,000 to put in
this ATM machine, cannot charge a fee for it; that someone can use
their machine without being able to charge a fee. It seems to me that
would be an unreasonable thing. I think most banks don't have it free
for their own customers.
I wish to make a number of points. While this fee, I don't suggest,
would eliminate all ATM machines, I think it is quite reasonable to
suggest that it would eliminate marginal machines, and as we know when
we take money out of an ATM machine, it pops up on the screen how much
the fee is. So if you are at a grocery store and you have your own bank
machine down the street, but you would like to get your cash in the
grocery store and they are not going to service you but for $1.50, you
do have a choice. You have your choice of going to your bank or going
to a machine that may charge less.
I hope and expect that as we have an expansion of machines, we may
well find some of these fees will begin to drop rather than increase,
and that has been the pattern in free enterprise since its beginning.
So it seems to me that what we are suggesting is that on a bankruptcy
bill, where at least with regard to this committee that deals with
bankruptcy we are tacking on a credit card banking issue that was not
part of the markup on this bill, it could jeopardize the bill and not
be relevant to what we are considering.
I note that the Banking Committee on July 30 on a bipartisan 11-to-7
vote rejected this amendment. They considered it in some detail, and
that committee, after careful consideration, balancing the great
utility and advantage of having ATM machines at virtually every corner
versus the cost of it, have opted in favor of allowing the continued
expansion and convenience of more and more machines. I do not think
there is any doubt that the growth in availability of machines will end
and, in fact, it is likely that we will have a reduction in the number
of machines, therefore reducing convenience.
Many bank machines are totally dependent on access fees, and many of
these are particularly convenient to small businesses and small grocery
stores. Many new ATMs in rural and other low-volume, high-convenience
sites operated by nonbanks will be economically unfeasible. They will
be closed. They will not exist. You simply have to be able to make a
profit if you are going to provide a service. Nobody is going to invest
$30-, $40-, $50,000 if they do not have any prospect of a return. We
know that. We talk about the big banks, but it is not always big banks
that are involved.
Mr. President, I believe that on this bankruptcy bill, we ought not
to be dealing with banking issues and credit card issues. Those are
matters that ought to be held in those committees and, in fact, they
have been considering it. I urge the Members of this body to wait for
another forum, another time to deal with this issue and reject this
amendment because it is not good economics. It is not good public
policy to limit the expansion and the convenience and accessibility of
ATM machines.
I thank the Chair.
Mr. BAUCUS. Mr. President, I rise in opposition to the amendment
offered by the Senator from New York. First let me say that I have a
great deal of sympathy for the problem that the Senator is attempting
to address. When banks first began to install ATM machines, I remember
the reluctance many consumers expressed about this new technology. They
were worried about whether their deposits would be safe, whether
strangers would find it easier to get into their bank accounts and
steal their money. The banks initially sold consumers on the use of the
machines by calling them a cost-saving measure--ATMs were supposed to
help banks cut costs by allowing them to serve more people for longer
hours, without the need for high employee salaries or costly new
branches.
In those early years, it appeared that these claims were paying off.
And consumers became addicted to the convenience. No longer did you
have to spend your lunch hour at the bank's drive-in window to deposit
a paycheck--you could do it after work at the ATM instead. Consumer
demand also led to an unexpected growth of ATM machines located in
businesses other than banks. Now you can do your banking at the grocery
store, the convenience store, the airport--any other place where there
is demand.
But the economics of operating ATMs in those remote locations are not
the same as operating them in the bank building itself. It is a lot
more expensive to service the machines, collect and process deposits
every day, or to provide security. And the networking banks have
provided means more consumers are using ATM machines at banks other
than their own--again with higher operating costs.
The convenience of banking virtually any place at any time has its
cost. ATM fees allow banks to recoup at least some of those costs from
the consumers using the services.
I know that ATM fees rankle those of us who don't appreciate having
to pay a fee to have access to our own money. And I also understand the
arguments of the Senator from New York and others who claim big banks
are making large profits from their fees.
However, I also believe that ATM fees represent the purest form of
user fee. If consumers don't want to pay the fees, they don't have to
use the ATMs. But for those who are willing to pay, the fees allow
banks to provide ATMs in more locations, making it more convenient to
do our banking.
If the D'Amato amendment is approved, two things will happen.
First, banks will immediately re-evaluate the economics of all their
ATMs, and those that are the least cost-effective will simply be
removed. Rural areas, like those in my State of Montana, will be
particularly hard hit. The low volume of usage, combined with the
higher cost of maintenance because of the distances involved, will make
many rural ATMs unaffordable for the sponsoring banks.
Let me give you just one example sent to me by the 1st Bank of
Sidney, Montana. Sidney is a town representative of a lot of towns
throughout Montana and other rural parts of our country. 1st Bank has
an ATM machine at a 24-hour gas station and convenience store located
on the main street through town. Even with the current ATM fee, 1st
Bank lost almost $8,000 on that machine in 1997. Now $8,000 doesn't
sound like a lot of money, but in states like Montana, believe me it
can be.
I don't know whether 1st Bank will close this particular ATM if they
are not allowed to recoup at least part of their costs by charging a
fee. I do know that right now, hundreds of Montanans who used that
machine in 1997 had a choice--if they didn't think the convenience of
the machine was worth the $1.00 fee, they didn't have to use the
machine.
If the ATM is removed because the bank decides it isn't worth the
cost, we have legislatively taken from these consumers the ability to
make that choice. They won't be able to decide on their own whether the
convenience is worth the cost. We will force them to find other ways to
do their banking.
Approval of the D'Amato amendment will also have a second
consequence, that I believe we need to consider. Right now, those who
use ATMs pay for the convenience. In places where the fees don't cover
the costs of operating the machines, those of us who don't use ATMs, or
don't use them frequently, help subsidize those who do. Eliminating the
ability to charge those who benefit from the convenience of an ATM
simply makes it that much more difficult for the rest of us to avoid
these charges.
The old adage ``there is no free lunch'' is very applicable here.
Someone has to pay the cost of operating an ATM. If we prohibit banks
from charging those who use ATMs, it simply means everybody else will
end up picking up the tab. And it won't matter whether we discipline
ourselves to do our banking inside the bank, through the drive-in
window, or electronically in order to avoid the fees. Every transaction
will carry part of the cost of operating that ATM, because it will be
built into the banks' operating costs.
Mr. President, I don't think those of us here in Washington, DC,
should be
[[Page S10464]]
dictating to consumers how to do their banking. I believe consumers
should be allowed to continue deciding for themselves whether the
convenience of an ATM is worth the cost. If enough consumers decide the
answer is no, the marketplace will correct itself. Banks will be forced
to reduce fees and cull out less profitable locations.
But this will happen in response to consumer demand, not legislative
fiat. I believe this it the right answer.
I urge my colleagues to vote against the D'Amato amendment.
Mr. FEINGOLD. Mr. President, I am pleased to support the amendment
offered by the Senator from New York (Mr. D'Amato).
This amendment is about simple fairness.
Mr. President, banks, credit unions, and the other owners of
automatic teller machines are entitled to be compensated for the
service they offer.
But consumers are also entitled to be treated fairly.
The D'Amato amendment strikes that balance.
This amendment does not fix prices.
It does not limit what ATM owners may charge for using their
machines.
It simply prohibits charging consumers twice for the same service.
Mr. President, consumers become subject to ATM charges when they
obtain an ATM card through their bank or credit union.
While the consumer's bank or credit union often has its own ATM
machines at which account holders can bank, increasingly, banks and
credit unions join a network of ATMs to give their account holders
greater access.
Mr. President, when your bank or credit union joins an ATM network,
it pays what is called an interchange fee to the network, and your bank
or credit union may pass the cost of that interchange fee directly to
you, or it may just add it into their overall cost of doing business--a
cost that account holders help to bear.
But, Mr. President, consumers are now being forced to pay an
additional fee, a surcharge, for using a network ATM.
When that happens, the consumer is being billed twice for the same
transaction--once by their own bank, and once by the ATM owner.
Mr. President, consumers who are already charged by their own banks
or credit unions for using an ATM feel that once is more than enough.
When consumers are charged twice for the privilege of accessing our
own hard-earned money through an ATM, it's time for this body to take
some action.
Mr. President, not only are consumers now being asked to pay twice
for the privilege of accessing their own money, the second fee, or
surcharge, often represents a big portion of the cash they want to
withdraw.
The Senator from New York noted consumers may be hit with a surcharge
of $3 or more just to take $20 out of their account.
This is especially a problem for consumers in under-served areas.
Because they lack ready access to their bank or credit union, those
consumers are much more dependent on ATMs for every day financial
services.
Mr. President, let me note here that not all ATM networks subject
consumers to this double billing.
I understand there have been efforts, especially by community banks,
to form networks that explicitly do not charge consumers twice.
While I applaud those efforts, they may not be enough.
Mr. President, in addition to the fundamental unfairness of these
double charges to consumers, I am troubled that this fee structure may
also put smaller banks and credit unions at a competitive disadvantage.
Customers seeking to avoid these double charges may move their
accounts to larger banks that own these broad-based ATM networks, and
as we've seen recently, these big banks are now merging with each
other, which will only make matters worse for their smaller
competitors.
Indeed, Mr. President, in this regard there have been some troubling
developments in the past few weeks.
In particular, I was disturbed to hear reports that the Department of
Justice is investigating whether or not some of the large ATM networks
are engaging in illegal restraint of trade by seeking to prevent
smaller banks from forming those very alliances that promise not to
double charge consumers.
Mr. President, this amendment will end double-billing at ATMs.
It will ensure fairness for consumers, and it will put a stop to
efforts that undermine the ability of our smaller community financial
institutions to retain their customer base.
Mr. President, it's time to demand fairness for ATM users.
Paying additional fees at the ATM is something consumers can afford
to live without.
Mr. KENNEDY. Mr. President, I rise in support of Senator D'Amato's
amendment to ban ATM surcharge fees.
This is good policy, and we all ought to vote in favor of it.
These fees, which in some instances have reached exorbitant levels
like $5 or $10 per transaction, are charged against consumers to access
their own money.
The large bank networks, which typically operate the automatic teller
machines, already charge a transaction fee to smaller banks for the use
of their network.
These surcharges are a second charge, directly to the consumer, for
the privilege of using the machine.
Some have argued that consumer behavior has changed, so that
consumers can learn how to minimize surcharges. They can do this by
getting cash back on debit card purchases, or by taking more money out
at one time.
But these are the savvy consumers, or those who are able to take out
a large amount of money at one time. The consumers who end up paying
these fees are those who have the fewest options: their money is
tighter, or they are in an emergency situation, or they don't
understand the system enough to avoid these fees. Do we want to protect
the rights of the banks to take advantage of those consumers?
The banks now charge the consumer at every turn. They first said that
tellers were too expensive and encouraged us to use machines. Now they
charge both the consumer, and the consumer's bank, for the privilege of
using the ATM machine.
This gouging of the consumer has to stop!
Some have argued that we should allow banks to police themselves on
this issue. In my home state of Massachusetts, for example, the
Massachusetts Bankers Association has worked to organize fee free
alliances between big and small banks so that consumers can use
machines statewide and avoid surcharges. This is a terrific program,
and I compliment the MBA for developing it.
Truly progressive organizations, like Fleet Bank which operates
throughout New England, have agreed not to charge fees for ATM use in
low and moderate income communities. This is progressive corporate
policy, and I salute them for it.
These financial institutions can be a model for the nation.
Unfortunately, there are not enough banks like those in my home
state.
And so we must pass this amendment. We have heard from consumers, and
they have had enough.
I know banks have heard from their customers in response to these
charges. They have complained about it, loud and clear.
If banks had been proactive and responded by policing themselves, we
would not be compelled to pursue an amendment such as this.
These exorbitant charges are an outrage! The Senate must act to
protect the consumer from excessive charges.
In a time in which we are debating bankruptcy legislation, which has
been supported strongly by banks and credit card companies, we also
need to enact some provisions which will help the working men and women
of this country.
We must end the gouging of the American consumer! I urge my
colleagues to join with me in supporting Senator D'Amato's amendment.
Mr. SPECTER. Mr. President, the D'Amato amendment to limit fees
charged by financial institutions for the use of automatic teller
machines is a very close question, in my opinion, because it pits the
consumer's interest in avoiding potentially excessive bank charges
against existing market forces where ATM machines provide significant
convenience for the depositor's access to cash.
On this state of the record, I do not believe that there has been a
showing
[[Page S10465]]
of excessive charges on the part of the banks. This issue might well be
revisited in the Banking Committee with hearings, as opposed to being a
floor amendment on this bill where the Judiciary Committee, on which I
serve, did not have the benefit of an evidentiary record on the issue
of excessive charges.
On the other hand, I do believe that there is substantial benefit and
convenience to the consumer who has access to a cash withdrawal, far
from home, at unusual hours and under circumstances where it is a
significant convenience to be able to get the cash.
I know that when I go to a convenience store, for example, to buy
milk, and pay a higher price, I dislike it; but I am mindful of the
fact that it is late at night or I don't have to stand in a long line
in a supermarket or it is on my way home. So, I grin and bear the
somewhat higher charge.
In addition, there may be substantial merit to the contention that if
the Congress acts to affect the market on this issue that the ATM
machines will not be available or may be very few in number to reduce
this convenience.
Accordingly, on this state of the record, on a very close question, I
am voting against the D'Amato amendment.
Mr. DORGAN. Mr. President, I rise to discuss briefly my thoughts
about the automated teller machine (ATM) fee ban amendment offered
today by Senator D'Amato to the bankruptcy reform bill.
I share the concerns that Senator D'Amato and others have about the
rapid, and seemingly unchecked, increases in ATM fees across this
country over the past few years. There is compelling evidence that some
banks are charging exorbitant ATM charges that impose an unnecessary
and unfair financial burden on bank customers. For many consumers, this
happens every time they use an ATM that's not owned by their bank. And
there appears to be no end in sight to this explosion in ATM fees. I do
applaud the work of Senator D'Amato and others for bringing attention
to this growing problem.
But regrettably, I was forced to vote against Senator D'Amato's
amendment, as drafted, because it failed to recognize that many of our
rural communities have significantly higher costs for providing many
kinds of services. I'm afraid that adopting Senator D'Amato's approach
may actually be harmful for people living in these higher-cost areas.
In my judgment, this amendment might have forced some of our banks to
shut down existing ATMs in more sparsely populated areas in our state
or made it too costly for them to install new ones in places where they
are needed.
Let me be clear on this point. I would have liked to support a
proposal to stop those ATM owners who are charging excessive and, in
some cases, outrageous fees. And I'm willing to consider other
approaches to help put the brakes on ATM price gouging. Unfortunately,
the amendment that Senator D'Amato offered today is one that I could
not support because it may inadvertently hurt rural America.
Mr. GRASSLEY addressed the Chair.
The PRESIDING OFFICER. The Senator from Iowa.
Mr. GRASSLEY. I ask unanimous consent that at the conclusion of the
debate, the pending D'Amato amendment be temporarily laid aside and the
Senate proceed to the debate on the Dodd amendment. I further ask that
at 2 p.m. the Senate proceed to a vote in relationship to the Dodd
amendment, to be followed immediately by a vote on or in relationship
to the D'Amato amendment, with no intervening action and 2 minutes of
debate between each vote. I further ask that the partial-birth abortion
debate begin immediately following the vote in relationship to the Dodd
amendment under the 4 hours outlined in the previous consent agreement.
The PRESIDING OFFICER. Is there objection?
Mr. DODD. Reserving the right to object, I think the Senator means
the D'Amato amendment, at the conclusion of the vote on the D'Amato
amendment.
Mr. GRASSLEY. Yes.
Mr. DODD. I think the Senator said the Dodd amendment. I think he
means the D'Amato amendment. Is that correct?
Mr. GRASSLEY. Yes.
The PRESIDING OFFICER. Is there objection? The Chair hears none, and
it is so ordered.
Mr. D'AMATO addressed the Chair.
The PRESIDING OFFICER. The Senator from New York.
Mr. D'AMATO. Might I inquire how much time I have remaining.
The PRESIDING OFFICER. The Senator has 2 minutes 53 seconds.
Mr. D'AMATO. Mr. President, I ask unanimous consent, because I do not
believe it will impede on the time allocated for consideration of the
Dodd amendment--we will not go past 2 o'clock--that we have an
additional 5 minutes for the proponents because I have some Members
here who would like to speak to this.
The PRESIDING OFFICER. Is there objection?
Mr. SESSIONS. Mr. President, reserving the right to object, there are
a number of amendments on this bill, and we have to finish this bill by
2 o'clock. I just think that there has always been an advantage on
floor time for the proponents and not opponents. I know Senator
Grassley has no time. I reluctantly object.
Mr. GRASSLEY. I suggest we amend it by giving 5 minutes to Senator
Sessions.
Mr. D'AMATO. Sure. If he would like, 5 minutes each. I would ask that
we have----
Mr. SESSIONS. I would certainly go along with Senator Grassley. I am
not sure I will use any time. If Senator Grassley is comfortable with
it, I withdraw my objection.
Mr. D'AMATO. I thank the Senator.
I yield 3 minutes to Senator Bryan.
Mr. BRYAN. Mr. President, I thank the distinguished chairman of the
subcommittee for his leadership on this issue. The banking industry is
enjoying its sixth straight year of record profits, which topped $60
billion last year. That is good news. But unfortunately, as part of a
growing trend, these record profits are coming from an increasing
proliferation of fees on bank customers. The number of these separate
bank fees has grown from 90 to 250 over the last 5 years.
Last year, banks made more than $3 billion alone on ATM surcharges.
That is the new cash cow. And this is in addition to the $1 billion
banks are paid as part of the interchange fee, which covers their cost
of ATM transactions. So, that is where the surcharge comes in. The
banks are already compensated through an interchange system. They are
imposing an additional fee, a surcharge, which Senator D'Amato and I
and others object to, which, in effect, imposes a charge twice on the
customer.
Mr. President, $1.50 or $2 for every ATM withdrawal may not seem like
a lot, but over the course of a full year it adds up to several hundred
dollars. Many banks for years prohibited these ATMs. In fact, three out
of every four ATMs that are in place today were built before surcharges
were prohibited, so the argument that somehow prohibiting the surcharge
would limit the availability of ATMs is simply a specious argument. Two
States that come to mind immediately, Connecticut and Iowa, prohibit
ATM surcharges, and there is no evidence to suggest that customers in
those two States are deprived of the option to use ATMs.
So, people, in effect, kind of feel entrapped. Initially the banks
offered ATMs because they reduced the costs of their transactions. They
are much less expensive than the teller transactions. Customers
responded because of the convenience. A win-win proposition. Once
customers got induced to use ATMs, then they got hooked, and now they
are being reeled in by the bankers with these new charges, because the
average ATM transaction cost is about 27 cents while a transaction
involving a teller costs the bank roughly $2.93.
ATM charges are unfair, because the consumer is charged twice for the
same transaction. Additionally, ATM surcharges have the anticompetitive
effect of pressuring people to leave small banks--which may be their
choice--for their larger banks, to avoid this double charge or the
surcharge. I urge my colleagues to support the able and distinguished
chairman and to support this.
Let me just tell you, both in Nevada and around the world, this is
how the public views the ATM surcharge. You
[[Page S10466]]
will note from the chart there, the ATM reaches out with a loaded
pistol and the customer is held hostage. That is what these ATM
surcharges are all about.
I urge support for my colleague's thoughtful legislation, I yield the
floor, and thank the Senator for extending the privilege of the floor
to me.
The PRESIDING OFFICER. The Senator from New York.
Mr. D'AMATO. Mr. President, I commend both my colleague from
Connecticut and Senator Bryan from Nevada for their thoughtful
presentations.
I tell you, when I look at the ATM cartoon over there, that Senator
Bryan has put up, it is interesting because that is exactly what is
taking place, particularly to so many young people who don't have a
choice, to the student who is at his college campus and there are only
one or two of those ATMs around and everyone of them is double
charging. It is excessive--to think they are paying $2.68 to take out
their own money. If you are taking out $30 or $40 at a time, as many of
the young people are, and many of our senior citizens, that is usurious
by any standard.
The argument that somehow this is going to hurt competition is rather
pathetic. This has really hurt the small banks, the credit unions,
because they were deceived into not getting into competition while a
huge network was built; 122,000 out of the 165,000 machines were
installed well before the double charges.
Let's take a look and see. Since the double charges, in the past 2
years, have been imposed--17 percent double charged going into 1996.
The next year, it jumped to 59 percent. And the following year, 79--79
percent of all of the ATMs are now double charging. They came into
existence and were making a profit before the surcharges. This is just
a way of really doing what Senator Bryan's description, the chart,
showed so eloquently. You are really holding up the consumer, because
it is anticompetitive, antichoice. This number, 79 percent--that is
temporary. We have seen them grow. You will top out at over 90 percent
by the end of next year, there is no doubt.
So there is little choice. There is no reason. It is anticompetitive,
antipeople, and we should have the courage to say enough is enough. Let
our States determine whether or not this should be permitted. When the
State of Iowa and the State of Connecticut have attempted to ban double
charges, surcharges, they have not seen a diminution. But now, even
their law will be threatened, and is in court, as it relates to those
States that want to protect consumers. So we are whipsawing them both
ways, and there is only the Federal Government that can make a
difference.
I hope my colleagues will join with me in voting to give people a
real choice without that additional burden being placed on them.
Mr. President, I yield the floor. I thank my colleagues for
permitting us the additional time to make known our thoughts and our
views.
The PRESIDING OFFICER. The Senator's time has expired.
Mr. D'AMATO. Mr. President, may I inquire of the manager, does he
intend to make a motion to table now? And then we will lay that aside
and we can ask for the yeas and nays now? Would that save time?
Mr. GRASSLEY. I move to table the D'Amato amendment.
Mr. D'AMATO. Mr. President, I ask for the yeas and nays.
The PRESIDING OFFICER. Is there a sufficient second?
There is a sufficient second.
The yeas and nays were ordered.
Mr. GRASSLEY. I move the D'Amato amendment be set aside.
The PRESIDING OFFICER. By a previous order, the Senator from
Connecticut is recognized.
Amendment No. 3598 to Amendment No. 3559
(Purpose: To amend the Truth in Lending Act with respect to extensions
of credit to consumers under the age of 21)
Mr. DODD. Mr. President, I send an amendment to the desk and ask for
its immediate consideration.
The PRESIDING OFFICER. The clerk will report.
The bill clerk read as follows:
The Senator from Connecticut [Mr. Dodd] proposes an
amendment numbered 3598 to amendment numbered 3559.
Mr. DODD. Mr. President, I ask unanimous consent that reading of the
amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:
At the appropriate place, insert the following new section:
SEC. ____. EXTENSIONS OF CREDIT TO UNDERAGE CONSUMERS.
(a) In General.--Section 127(c) of the Truth in Lending Act
(15 U.S.C. 1637(c)) is amended--
(1) by redesignating paragraph (5) as paragraph (6); and
(2) by inserting after paragraph (4) the following:
``(5) Applications from underage consumers.--
``(A) Prohibition on issuance.--No credit card may be
issued to, or open end credit plan established on behalf of,
a consumer who has not reached the age of 21 unless the
consumer has submitted a written application to the card
issuer that meets the requirements of subparagraph (B).
``(B) Application requirements.--An application to open a
credit card account by an individual who has not reached the
age of 21 as of the date of submission of the application
shall require--
``(i) the signature of the parent or guardian of the
consumer indicating joint liability for debts incurred by the
consumer in connection with the account before the consumer
has reached the age of 21; or
``(ii) submission by the consumer of financial information
indicating an independent means of repaying any obligation
arising from the proposed extension of credit in connection
with the account.''.
(b) Regulatory Authority.--The Board of Governors of the
Federal Reserve System may issue such rules or publish such
model forms as it considers necessary to carry out section
127(c)(5) of the Truth in Lending Act, as amended by this
section.
The PRESIDING OFFICER. The Chair might say, under the previous order,
there is 40 minutes equally divided.
Mr. DODD. Mr. President, one of the most troubling developments in
the hotly contested battle among the credit card issuers to sign up new
customers has been the aggressive way in which they have targeted
people under the age of 21, particularly college students. We are
engaged, obviously, in a debate about the bankruptcy bill here. The
authors of this bill, and I commend them for it, recognize there has
been an explosion of people who are taking advantage of the Bankruptcy
Act to avoid their financial obligations.
It seems appropriate in the context of this bill that we also
recognize that there has been an explosion of efforts to sign up
younger people, particularly on college campuses, to credit cards,
recognizing that, as many have pointed out, these students are ill
prepared to meet their own financial obligations. Inevitably, they
either incur debt and end up in tremendous difficulty or their parents
assume the responsibilities, which can occur with upper-income people
who can afford it.
Just this past August, to make the point, a fellow by the name of
John Simpson, who is an administrator at the University of Indiana,
said:
This is a terrible thing. We lose more students to credit
card debt than academic failure, at the University of
Indiana.
What I am trying to lay out here is a proposal that is not
outrageous. Basically, what it says is if you are between the ages of
18 and 21--no contract is valid for someone under 18, so a credit card
obligation for someone under 18 would be voided anyway. But between 18
and 21, either show that individual has independent economic means--a
job or whatever--or parental permission. If you can do that, fine, then
you can market and issue a credit card to those individuals. We set up
separate standards on drinking in this country for those 21 and under,
and for tax purposes. It seems to me this little window in here could
save an awful lot of students, an awful lot of families, the kind of
hardship.
Let me lay out the case for you here on a factual basis.
Solicitations to this age group have become more intense for a variety
of reasons. First, it is one of the few market segments in which there
are always new faces to go after. It is also an age group in which
brand loyalty can be established. In the words of one major credit card
issuer, we are in the relationship business and we want to build
relationships early on. Recent press stories have reported that people
hold on to their first credit card for up to 15 years.
In fact, people under the age of 21 are such a hot target for credit
card marketers that the upcoming card marketing conference this year--
this is the
[[Page S10467]]
card marketing conference 1998, which is going to be held in Las Vegas.
They have a seminar beginning at 12 noon on the day of this conference
that is entitled ``Targeting Teens: You Never Forget Your First Card,''
to give you an idea of how much a part of this the credit card
companies have in mind. As I say, this is indicating their deep
interest in this constituency.
Credit card issuers are also enticing colleges and universities to
help promote their products. Professor Robert Manning at Georgetown
University here in Washington told my staff that some colleges receive
tens of thousands of dollars per year for exclusive marketing
agreements. Other colleges receive as much as 1 percent of all student
charges from credit card issuers in return for marketing or affinity
agreements.
Even those colleges who don't enter into such agreements are making
money. Robert Bugai, president of College Marketing Intelligence, told
the American Banker that colleges charge up to $400 per day for each
credit card company that sets up a table on campus. That can run into
the tens of thousands of dollars by the end of just one semester.
Last February, I went to the main campus of the University of
Connecticut to meet with student leaders about this issue. Quite
honestly, I was surprised by the amount of solicitations going on in
the student union, and I was also surprised the degree to which the
students themselves were concerned about the constant barrage of offers
they were receiving.
The offers seemed very attractive, Mr. President. One student intern
in my office this summer received four solicitations in just 2 weeks.
One promised ``get eight cheap flights now while you still have 18
weeks of vacation.'' That is the solicitation, part of it geared to
this young woman in my employment.
Another promised a platinum card with what appeared to be a low
interest rate, until you read, of course, the fine print that it
applied only to balance transfers, not to the account overall.
Only one of the four, Discover card, offered a brochure about credit
terms, but in doing so, often offered a spring break sweepstakes in
order to attract these students. In fact, the Chicago Tribune reported
just last month that the average college freshman will receive 50
solicitations during their first few months at college. The Tribune
further reported that college students get green-lighted for a line of
credit that can reach more than $10,000 just on the strength of a
signature and a student identification card.
Mr. President, there is a serious public policy question about
whether people in that age bracket can be presumed to be able to make
the sensible financial choices that are being forced on them from this
barrage of marketing. While it is very difficult to get reliable
information from the credit card issuers about their marketing
practices to people under the age of 21, those statistics that are
available are deeply, deeply troubling.
The American Banker newspaper reported that Visa found that 8.7
percent of bankruptcy filers were under the age of 25. A Chicago
Tribune article from August 16 of this year cited that bankruptcies
``among those under 25 have doubled over the last 5 years from 250,000
to 500,000.''
The bankruptcy legislation, the underlying bill, is going to make it
harder to take the bankruptcy act. I understand that. I am not opposed
to that idea. But if simultaneously you are going out and aggressively
sending eight solicitations to an 18-year-old in my office promising
them free vacation breaks or flights, I think there is something wrong
here.
I don't mind getting tougher on the bankruptcy laws, but I think we
have to get a little tougher to say the 18-, 19- and 20-years-olds who
have no independent financial means and without parental permission are
getting signed up merely on a student ID card and signature, incurring
$10,000 worth of debt.
The same survey found that 27 percent of undergraduate student
applicants had four or more credit cards--27 percent, four or more
credit cards--and found that 14 percent had credit card balances
between $3,000 and $7,000, while 10 percent had credit card balances
greater than $7,000. This figure of 24 percent with credit card debts
in excess of $3,000 is more than double the number from last year.
Moreover, while there is evidence that student debt is skyrocketing,
some surveys by credit card issuers themselves show that this same
group of consumers is woefully uninformed about the basic credit card
terms and issues. A 1993 American Express/Consumer Federation of
America study found that only 22 percent of more than 2,000 college
students surveyed knew that the annual percentage rate is the best
indicator of the true cost of a loan. Only 30 percent of those surveyed
knew that each bank set the interest rate on their credit card, so that
it is possible to shop around for the best rate. Only 30 percent knew
that interest was charged on new purchases if you carry a balance over
from the previous month.
Some college administrators, bucking the trend to use credit card
issuers as a source of income, have become so concerned that they have
banned credit card companies from their campuses and have even gone so
far as to ban credit card advertisements from the campus bookstores.
Roger Witherspoon, Vice President of Student Development at John Jay
College of Criminal Justice in New York, banned card solicitors saying
indebtedness was causing students to drop out:
Middle-class parents can bail out their kids when this
happens, but lower-income parents can't--
Mr. Witherspoon said in an interview.
Kids only find out later how much it messes up their lives.
That is a quotation from the American Banker.
The amendment I am proposing today does not take any such Draconian
action against the credit card companies. Let me state, by the way--and
I should have said this at the outset--many credit card companies do
require parental notice or approval or evidence of independent means.
There are many who do this, but there are some who do not at all. As
most laws, it is not targeted to those who show good judgment and good
sense, but to the few who do not. Unfortunately, here we have a few who
do not at all.
This amendment does not go so far as to ban credit cards or ban
advertising. It merely says, look, between the ages of 18 and 21,
either show you have the independent means to meet the obligations or
get a signature from a parent that they understand that their child is
about to take out a credit card.
I agree with those who argue, as I said, there are millions of people
under the age of 21 who hold full-time jobs who are as deserving of
credit as anyone over the age of 21. I agree with that. I also believe
students should continue to have access to credit, and we should not
prohibit the market from making that available.
I also recognize the period of time from 18 to 21 is an age of
transition from adolescence to adulthood, and as we do many places in
Federal law, extra care is needed to make sure mistakes made from
youthful inexperience does not haunt these people for the rest of their
lives or a good part of it.
All my amendment does is require a credit card issuer, prior to
granting credit, to obtain one of two things from the applicant under
21: Either they get the signature of a parent or guardian, or they
obtain information that demonstrates the existence of an independent
means of paying off the amount of credit offered.
Federal law already says people under age 21 shouldn't drink alcohol.
Our Tax Code makes the presumption if someone is a full-time student
under the age of 23 that they are financially dependent on their
parents or their guardians.
Is it so much really to ask that credit card issuers, in the midst of
a bankruptcy bill that will make it tougher for people to take this
act, is it so much to ask that we try to find out if someone under the
age of 21 is financially capable of paying back their debt or that
their parents are willing to assume the financial responsibility?
Mr. President, it is my understanding that most, as I said,
responsible credit card issuers already require this information in one
form or another. Is it too much to ask the entire credit card industry
to strive to meet their own best practices when it comes to our
children?
Mr. President, I do not believe this amendment is either unduly
burdensome on the credit card industry nor is
[[Page S10468]]
it unfair to the people under the age of 21. The fact of the matter is
that these abusive solicitations assume that if the young adult is
unable to pay, they will be bailed out by their parents. Many times
this means that parents must sacrifice other things in order to make
sure their child does not start out their adult life in a financial
hold with an ugly black mark on their credit history.
By adopting this amendment, Mr. President, the Senate will send a
clear message to those aggressive credit card companies that we will no
longer countenance this abusive behavior. This amendment corrects that
behavior by making those overly aggressive companies, credit companies,
exercise their best judgment--instead of their most craven instincts--
when it comes to people obtaining their own credit cards for the very
first time.
Mr. President, I note as well in an interview on an NPR program just
a few days ago on this very issue, Nancy Lloyd, who is the editor-at-
large for Kiplinger's Personal Finance magazine, had this to say about
this practice. She said:
. . . that the real reason that credit-card companies are
going after college students is that they know that after a
parent has spent several tens of thousands of dollars to
educate their student, that if they fall behind on their
bills that the parent will bail them out, even though legally
they don't really have to [if they are younger than 18].
Mr. President, I do not think this is a radical proposal here. It is
again a huge problem. NBC, I think last evening, ran a special report
on the ``Fleecing of America'' where they talked about this problem. I
think there have been a number of other reports on this.
We began this issue last December in raising the question when I went
to my own campuses in Connecticut, as I mentioned a moment ago, to find
out how widespread this was. And, again, the information we have been
able to gather indicates, I think based on the data we have, limited as
it is, that this is a growing problem. The debt has doubled now in the
last year. It is going to get worse.
If we adopt the underlying bill, which I hope we do, then obviously
the ability to use the Bankruptcy Act to excuse obligations are going
to get tougher. So it seems to me if we are going to do a favor to the
banks by making it tougher for people to avoid their financial
responsibilities, which we should, we should also send a message that
we do not believe you ought to be dumping, as we did last year in this
country, 3 billion credit card solicitations but particularly dumping
these where there is a student ID and a signature from a 19-year-old,
without independent means or parental approval, to assume $3,000,
$4,000, $5,000, $6,000, $7,000, $8,000, $9,000, $10,000 worth of
financial debt. I think that is wrong. I think we ought to try to stop
it. I think this amendment brings us in the right direction, and I urge
its adoption.
Mr. HATCH addressed the Chair.
The PRESIDING OFFICER. The Senator from Utah.
Mr. HATCH. Mr. President, I know this amendment is well intentioned,
but, look, I was a building tradesman as a young 16-year-old. I made a
pretty good living as a building tradesman. I could have wound up as a
building tradesman, which I was very proud to be. In fact, I have had
some colleagues say I should have stuck with it. In fact, one of them,
when they found out I was a janitor at one time putting myself through
college, said I should have stuck with it. Maybe so.
But I would hate like heck to have some artificial rule or some
regulatory rule by some regulatory agency of Government say that I, as
a hard-working carpenter, would not be able to get a credit card and
get credit that I might need for my family to make our lives a little
easier because of artificial rulings like what happens as a result of
this well-intentioned amendment.
This is a slap in the face of every 18-, 19-, 20-year-old--and 17-
year-old, 16-year-old even--people who can work; 16-, 17-, 18-, 19-
year-olds who work hard, who are supporting their families. They may
not be college graduates, they may not look like they quite have the
future of some who have gone to college and done the things that they
have done--might look like--but they are not going to be able to get
credit cards under this without going through some big rigmarole
decided by Government.
This amendment would unfairly discriminate against young adults. I
think it has to be opposed. I hope our colleagues will think about
this. The amendment would require parental consent for extensions of
open-ended credit to young adults under the age of 21--think of that--a
lot of young adults who are supporting their families and doing what is
right but have not been to college, or even those who have been to
college or who are working well in college, as I had to do, unless they
could demonstrate ``an independent means of repaying'' the obligation.
While it is not entirely clear what would constitute an ``independent
means of repaying'' a debt, one thing is clear: This amendment would
have the bizarre effect of requiring an emancipated but temporarily
unemployed 20-year-old mother to obtain her parent's consent before
receiving a credit card, or an unemployed 20-year-old carpenter who,
because of seasonal layoffs, might not have a job for a couple of
weeks, or maybe 3 weeks or maybe a month or two. I understand that
life; I understand how difficult it is.
The same would be true with respect to a 20-year-old plumber or a
construction worker, like I have mentioned, who is between jobs, in
between jobs, and with respect to a 20-year-old recently discharged
from the U.S. military and looking for civilian employment--somebody
who is honorable and decent, would pay back any debt no matter what
happened but could not get a credit card because of these artificial
restraints.
Moreover, the amendment makes no provision whatsoever for a young
adult whose parents or guardians may be deceased. It is also not clear
what responsibility, if any, the amendment would impose on a lender to
verify that the signature of a parent or a guardian was authentic.
In short, discriminating against individuals between the ages of 18
and 21 when it comes to obtaining credit simply cannot be justified
just because we know it is pretty easy to get a credit card out there
and it is abused from time to time. But this amendment furthers the
abuse only in the opposite direction. Also, it is important to note
that individuals under 18 cannot enter into binding contracts and,
therefore, any credit inadvertently extended to them is unenforceable.
I encourage my colleagues to join me in opposing this amendment,
notwithstanding some of the arguments on the other side of the aisle.
It is important to note that not all 18-, 19- or 20-year-old kids are
college students or unemployed or irresponsible or bums, if you want to
say it. Some have families, some serve in the military and are asked to
defend our country. It puts their ability to gain credit in doubt. Or
should we just call it the way it is? In the hands of Federal
regulators.
You know, there is a limit to everything. Yes, there are some abuses
here. Yes, some of these credit card companies get some of these young
people hooked on credit cards just thinking they can live with that
credit card. But in the interest of solving that problem, do you abuse
all the other honest, hard-working, decent young people between the
ages of 18 and 21? Do you discriminate against them so that they cannot
get a credit card that might make their lives maybe a little bit better
or a little more livable or a little more sustainable?
My attitude is that this amendment ought to be defeated because it is
a one-sided amendment that, in my opinion, has not been well thought
through. That is not a knock at my colleague because I know he is
sincere. I know he has good intentions here. I know there are some
values that he is trying to defend. But I think the overwhelming weight
of maturity is on the side of young people in that age group who
deserve to have a credit card, who would pay back their credit card,
who are responsible citizens, and who do not need the Federal
Government to tell them what they can or cannot do in this area. The
fact that we have a few credit card companies that abuse the system
does not mean we should pass this type of an amendment.
I am happy to yield 5 minutes to the distinguished Senator from
Alabama.
The PRESIDING OFFICER. The Senator from Alabama is recognized.
Mr. SESSIONS. Mr. President, I thank the Senator from Utah for his
[[Page S10469]]
excellent remarks in pointing out a lot of people age 18 to 21 are not
in college. I just had two children graduate from college, and I still
have one in college. I believe a credit card is a good thing for them
to have. Almost every college student is going to have a credit card.
The fact that we have some competition in the credit card industry--
they are offering lower rates and less charges if you will use their
credit card--that is good. We have needed that.
In my opinion, the biggest complaint about credit cards is they
charge too much interest. Those rates have been driven down because of
competition. There are 6,000 credit card companies, and they are
sending out mailings, and they are encouraging people to use their
credit cards. What is bad about that?
What troubles me is we are saying if you want a young person to have
a credit card, they may have to get their parents to sign as a cosigner
and be financially responsible for their debt. That doesn't seem to me
to be fair or correct. Maybe a parent says if you want to get a credit
card you can, but it is your debt to pay, not mine. The requirement we
are debating now would prohibit them from getting a credit card under
those circumstances.
What about young persons whose parents are deceased?
The Federal Government should not be stepping in and telling a credit
card company you can't take a chance on a young person, or that you
have to get the parent to cosign before giving a young adult a credit
card. This seems unhealthy to me. I am sure it is true that credit card
companies like to get young people accustomed to using their cards and
hope they will use them throughout their career. I don't know that
there is anything wrong with that.
Mr. President, a 20-year-old who may be temporarily unemployed may
find a credit card to be very valuable. Suppose you have to drive to a
job interview and the guy down at the car inspection place says your
vehicle emits too much pollution and you have to spend $400 to fix it;
or your tire blows out and you have to have $75 to get the car towed
and another $50 to put a tire on it. A person may not have that cash in
their pocket at times such as these, when they really need it. That is
why credit cards are a good thing.
Credit cards have been helpful in many ways for citizens in America.
The problem is with people who abuse them and who don't show personal
discipline. We all know that is a problem. We need to encourage
personal discipline, not have the Federal Government telling a young
person they can't have a credit card unless their parent agrees to pay
their debt.
Mr. DODD. Mr. President, we have no intervening business between now
and 2 o'clock. Several of our colleagues want to speak on this
amendment. I ask unanimous consent we take the time between now and 2
o'clock and equally divide it between opponents and proponents of this
amendment.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. DODD. Mr. President, I yield to my colleague from North Dakota.
Mr. DORGAN. Mr. President, I rise in support of the amendment. I have
listened to the debate; it is an interesting debate, but I think all of
us know what is happening in this country with respect to credit cards.
I noticed an article this morning in the Washington Post on the front
page:
Banks Risk New Wave of Bad Debt: Report Cites Easing of
Credit Standards.
They are talking about commercial loans in response to competition;
even though the risks will rise, they are easing standards, lowering
lending standards.
What are the standards of lending for credit cards? Go to a college
campus and look in the mailboxes and see the solicitations for these
kids that have no jobs, no income, no independent means of paying. They
get solicitations from companies halfway around the country.
The solicitation says we have something to offer you. You don't have
money? We have money. We will give you a piece of plastic, and you get
a preapproved range of credit. Sign this, send it in, and it is all
yours.
It is Byzantine to me to see what is happening with the
``blizzarding'' of these credit cards all around the country, even to
people without money.
Yesterday in our mail, my son got a solicitation from the Diners
Club. My son, Brendon, is a great young guy. In fact, do you know what
Brendon told me he wanted to do when he gets big? Brendon told me he
wants to be like his grandpa.
Now, I know that doesn t sound surprising. But do you know why? It s
because he wants to be retired, just like his grandpa.
You see, Brendon went to Arizona to see his grandpa, and Brendon
watched his granddaddy and thought, that's what I want to do--sleep
late, get up and golf a little bit, come home, have some lunch, take a
nap, then watch television.
Brendon says, ``I like what grandpa has. I want to be retired.''
Brendon is only 11.
The Diners Club wrote to Brendon. Doreen Edelman, Senior vice
president at Diners Club, wrote:
Dear Brendon, Whether you travel for business or pleasure,
wouldn't you like a Card that rewards your spending with
something you could really use--frequent flyer miles on the
major airline of your choice?
It says get our Diners card. You can go to lounges, you can go to
fancy restaurants, you can rent cars, you can pay for your airline
ticket.
I didn't show Brendon this last night because the fact that Brendon
would like to be retired might persuade him that he would like a Diners
Club card, too, but he is only 11. He doesn't have a job. He doesn't
have any money. He isn't going to have a Diners Club card.
I don't know whether Doreen Edelman, senior vice president of the
Diners Club, listens to this debate. In fact, it looks like she is from
Sioux Falls, SD. Holy cow, I didn't think anybody from either of the
Dakotas would think this way--that an 11-year-old boy ought to get a
Diners Club card.
I know why he got this. They don't know him from a head of lettuce.
They don't know Brendon Patrick Dorgan. They gathered the name
someplace and sent him a little letter that says they would like him to
get a Diners Club card.
It would serve them right to have all these 11-year-olds send this
in, get the Diners Club card and go spend some money.
I come from a town of 300 people. If someone in business on the main
street of my hometown said, Do you know what I want to do? I want to
send some 11-year-old an invitation to have credit with us. That person
would have to be drunk or just dumb. What are they thinking? That is
what is happening.
I know this debate is a little more serious than that. It is about
the explosion of credit cards to college kids and so on. I understand
that. But this is a wonderful example of how ridiculous it has become,
isn't it? It is just indiscriminate. Are you alive? Do you breathe? Do
you have a name? Are you on a list? Congratulations, we would like to
offer you some preapproved credit.
What kind of standard is that? What kind of business behavior is
that?
I happen to support the underlying bill. I believe the pendulum has
swung too far on bankruptcy. I think it ought to swing back some. I am
prepared to support the underlying bill. I also believe those in this
country who run these businesses and send solicitations to 11-year-old
boys and solicit every college student in the country with credit cards
with preapproved limits, I think they have some responsibility, as
well. That is what the Senator from Connecticut is saying today with
his amendment. They have some responsibility, too.
I am pleased, on behalf of Brendon, to support the amendment by the
Senator from Connecticut. Perhaps we will make some progress in saying
to those who extend credit in this country, yes, we believe bankruptcy
laws ought to be adjusted some; you are right about that. We also
believe you have some responsibility, which you have been ignoring with
the solicitations you are making indiscriminately around this country.
I yield the floor.
Mr. DODD. Mr. President, I thank my colleague for his eloquent, and
if it weren't so sad, quite humorous story.
Unfortunately, Brendon is not alone. This wasn't just a mistake.
Unfortunately, parents can tell you all across the country that this
happens with regularity.
Let me address, if I can, the argument of my good friend and
colleague
[[Page S10470]]
from Utah and why he is opposed to this bill. The great irony is the
20-year-old who is out working and not in college is disadvantaged.
That individual has to prove that they have independent economic means.
Listen to this recent report:
All the rules have been suspended when it comes to college
students. They get a green light, a line of credit that can
reach more than $10,000 just on the strength of a signature
and a student ID. Almost comically, [the report says], low
standards become much different after graduation and bona
fide adulthood.
So the individual who is out working, who is not in school, who may
have a real need for a credit card, has to go through far many more
hoops than the students between the ages of 18 and 21 who can get these
solicitations.
This wasn't Brendon. This was a 19-year-old--get eight cheap flights
now while you still have 18 weeks of vacation. How about a platinum
card to a 19-year-old without any indication of whether or not she can
meet her payments?
I don't think it is outrageous to say, look, just show your
independent economic means. You have a job, fine. Or get a parental
signature. That is not asking too much. Just listen to the
administrators at these universities. A terrible thing. We lose more
students to credit card debt than academic failure now. The numbers
have doubled. It is not overreaching to say to an 18- or 19-year-old
that we are going to insist that you prove an independent economic
ability to pay--the same as an 18- or 19-year-old would have to do were
they not in college--or have a parental signature. Everybody knows that
if you are under 18, you can't enter into a contract and have it
binding. People have said, ``Why not just make it 18?'' Well, those
contracts don't hold up and the bankruptcy laws would not cover it.
So between 18 and 21, we are just trying to cover those areas here,
statistically. I talked about this study that was done and I failed to
identify who did it. Nellie Mae, a major student loan provider in New
England, conducted a survey of students who had applied for student
loans. ``The results of the credit card examination is alarming.''
Those are their words, not mine. They found that 27 percent of the
undergraduate student applicants had four or more credit cards, and 14
percent of the credit card balances, debt, between $3,000 and $7,000,
and 10 percent in excess of $7,000. That is before they graduated from
college, in addition to student loans.
So our efforts here--while the credit card companies see this,
apparently, as draconian--will provide relief in the underlying bill.
Requiring a little higher standard for college students before they get
credit cards is not asking too much. I know the ranking member on the
committee wanted to be heard on this, and I see my colleague from Utah.
Mr. HATCH addressed the Chair.
The PRESIDING OFFICER (Mr. Santorum). The Senator from Utah is
recognized.
Mr. HATCH. Mr. President, I find it somewhat ironic and, frankly,
indefensible that some of my colleagues on the other side of the aisle
who are now arguing for parental consent here in order to obtain a
credit card, would also argue against requiring parental consent for
children who want to get an abortion. I have spent 22 years listening
to that.
Now, Mr. President, they are arguing for parental consent for young
adults between the ages of 18 and 21. Look, if they are willing to
amend the amendment--every State in this Union, to my knowledge,
refuses to give credit or allow credit to be granted to young people
less than 18 years of age. So I think Senator Dorgan's son already fits
within that category. We are talking about 18-, 19- and 20-year-olds
who work, who are in the service, are capable of doing this, who should
not have to get parental consent, should not have to justify it. I am
talking against discrimination against young people of that age.
My friends on the other side argue for parental consent for young
adults between 18 and 21. These are not even minor children. How can
anybody argue, on the one hand, that if you are between 18 and 21 and
you want a credit card, you have to get your parents' consent, and on
the other hand you should not have to get parental consent if a minor
wants to get an abortion? I don't know about you, Mr. President, but to
me that sounds a little bit inconsistent--maybe a smidgen.
Every State in the Union, to my knowledge, refuses to give the right
to grant credit to young people below 18 years of age. At least that is
my understanding. So that is not even an issue. Despite all of the
enjoyment we had from the remarks of the Senator from North Dakota,
that isn't an issue. Are we going to discriminate against hard-working
young people who are 18, 19 and 20 years of age, who should have a
right to credit, just because we have some excesses in our society that
really are not justified?
Mr. President, one of the arguments that I hear again and again is
that the bankruptcy crisis in this country is the fault of credit card
companies because they offer credit too freely to low- and moderate-
income Americans. Opponent of reform have, during the hearing process,
shown us piles of credit card solicitations to make their point. They
want us to believe that the nation's bankruptcy crisis is the fault of
easy access to credit, and not of the individual who abuses the
bankruptcy system with all of its present loopholes.
First, I would like to say a few words about taking personal
responsibility for our actions. In a free world, each of us is
confronted with a variety of offers on a daily basis, some of which we
should accept, and some of which we should not. It is the
responsibility of the individual to decide whether or not to take on
debt and it is the responsibility of the individual to live with the
consequences of that decision. Before we can begin to make meaningful
reform to the bankruptcy laws, we simple must stop the finger pointing
and accept personal responsibility for our spending and borrowing
practices. That said, if we look at the objective facts, it is apparent
that credit card debt is only a small fraction--about 16 percent--of
the debt of a typical bankruptcy filer.
The reason I have this chart up is because the yellow part of that,
the higher part of it, shows the total consumer debtload. You will
notice that between 1980 and 1997 the consumer debtload has remained
about the same. But look at the red part, increase in consumer
bankruptcy filings, which this bill would help to resolve. The increase
in consumer bankruptcy filings has continued to go up off the charts.
So the debtload doesn't appear to be the major problem. What is the
major problem is the abuse of the bankruptcy system, which this bill
would correct.
Surprisingly, as Americans continue to use consumer credit at about
the same level as they have historically over the last few years,
bankruptcy filings have more than quadrupled. In other words, as this
chart demonstrates, the debt load that individuals carry has not
changed very much. What has changed is the attitude of Americans toward
bankruptcy. People turning to bankruptcy today are not in significantly
more difficult debt that those in the past. But rather than taking
responsibility and working their way out of debt, too many people are
choosing bankruptcy as a first resort.
As I have said before, excessive bankruptcy filings hurt all of us.
When someone who could pay their debts instead opts for bankruptcy, the
rest of us effectively pay their unpaid bills for them. Bigger
businesses and creditors raise prices and interest rates to offset
their losses, and small businesses may actually be forced into
bankruptcy themselves.
But his issue is not just about the impact of bankruptcy on the rest
of us. It is about personal integrity and personal responsibility. When
you borrow money from someone else, you make an implicit promise to do
whatever you can to pay that money back. Our present bankruptcy laws
undermine this basic principle. This bill will help solve that. They
allow people who can repay their debts to avoid doing so because they
find their debts ``inconvenient'' or because repaying their debts would
require them to change their lifestyle.
Ironically, many of the people who say that we do not need to reform
the bankruptcy code because easy access to credit is to blame, are the
very same people who argue that poor and moderate income individuals
desperately need, and should not be denied, credit. These are the same
groups who, fifteen
[[Page S10471]]
years ago, complained that the credit industry granted credit only to
the elite and wealthy, and deprived lower-income Americans of the
important opportunity to use credit. And, these are the same people who
vociferously argued just a few weeks ago in favor of the Community
Reinvestment Act or CRA, which requires banks to extend loans and
credit to low and moderate income Americans who live in low income
areas.
Rather than reform the bankruptcy code, some have suggested imposing
burdensome credit qualification standards on the credit card companies.
Let me be clear: amending this bill to require onerous credit
qualification standards will result in an immediate reduction in the
availability of credit to lower-income individuals. And, imposing
burdensome requirements on credit card companies that do nothing to
help consumers--and that in fact hurt consumers by adding to the cost
of being a credit card holder--is nothing more than an obvious attempt
to derail bankruptcy reform. On the other hand, I remain open to
measures that will help people become fully aware of the implications
of debt before they incur it.
Mr. President, the explosion in bankruptcy filings has less to do
with causes and more to do with motivations. The stigma of bankruptcy
is all but gone. Bankruptcy has become a routine financial planning
device used to unload inconvenient debts, rather than a last resort for
people who truly need it. The rest of us end up footing the bill for
abuses in the bankruptcy system in many forms, including higher prices
and higher interest rates. What this legislation will accomplish is
straightforward: If a person is able to repay some of what they owe,
they will be required to do so. We must restore personal accountability
to the bankruptcy system. If we do not, every family in America, many
of whom struggle to make ends meet but manage to live within their
means, will continue to shoulder the financial burden of those who
abuse the system.
Mr. President, I do not mean to suggest that the bankruptcy system
has failed us altogether. It provides a way for individuals who have
experienced a a financially devastating event to get back on their
feet. The problem we face is that current law does not simply allow
bankruptcy filers to get back on their feet * * * it allows abusers of
the system to get ahead of Americans who make good on their debts. S.
1301 is a common-sense bill that will provide a much needed adjustment
to the bankruptcy system.
Again, I will end with what I started with. If my colleagues on the
other side want to exclude those below 18 years of age, as the States
basically do, so that credit card companies cannot solicit them, I
would be more than happy to do that. I would be more than happy to
grant that right now, right here on the floor. But if they are going to
discriminate against 18-, 19-, and 20-year-old people who are hard-
working, decent kids, some of them working at trades in society as I
did, some of them working in the military, some of them who may be
temporarily out of work but are good, honest people, then I have to say
we have to fight against this amendment.
Last but not least, I will say that I find it ironic that they would
require parental consent to get credit card credit while at the same
time not requiring parental consent with regard to getting an abortion.
I reserve the remainder of my time.
Mr. DODD. Mr. President, how much time remains on our side?
The PRESIDING OFFICER. Two minutes, 40 seconds.
Mr. DODD. How much time remains on the other side?
The PRESIDING OFFICER. Four minutes, 30 seconds.
Mr. HATCH. Mr. President, I would be happy to yield our remaining
time to the distinguished Senator from North Carolina.
The PRESIDING OFFICER. The Senator from North Carolina is recognized
for 4 minutes.
Mr. FAIRCLOTH. I thank Senator Hatch.
Mr. President, I agree with Senator Dodd. I, too, have been concerned
about the problem that we see as a mounting one. We ought not to be
putting college students in debt, particularly at such an early stage
of their life. But my concern is that this law has to be carefully
crafted. I do not feel that it has been. My concern is that this has to
be put together in such a way that we do not deny credit to students
who might need it while they are away from home. But further, I don't
want to stop or impede credit to non-college students under the age of
21.
We have not had hearings on this. And we have not attempted to curb
the credit cards through any private methods. Senator Dodd is on the
Banking Committee. So am I. I would prefer to defer this, and hold
hearings, and move legislation independently out of the Banking
Committee, where it should begin, and then to the floor.
I think the Senator from Connecticut has certainly identified a real
and continuing problem. But I have struggled with how to legally cut
off credit to college students for some time. I have noticed card
solicitations at college bookstores and the marketing efforts that have
been put forth that are aimed solely at young people. But why do we
tell someone in the U.S. Army, who is under the age of 21, whom we
without any hesitation send into harm's way to be killed, or whatever,
that they can't get a credit card? This will diminish the chances of
getting one, very likely.
That is why I think we should take more time and care in crafting
this proposal so that we do it right. It needs to be done, but it needs
to be done right. What do you do with the people who lie on their
application? These are some of the things that are going to be
difficult to legislate unless we take time and do it right.
You have to remember that while there may be only really a few credit
card brands, they are offered by literally thousands and tens of
thousands of institutions. All of the burden of administering this
requirement is going to be absorbed by them. Those costs are going to
be passed along to you know who. And that is all of us who do business
with banks or use credit cards.
Again I say, let's carefully consider this before we legislate. Let's
bring it to the Banking Committee. Let's have hearings on it and at
that point craft a bill that would serve the purposes and go in the
direction that Senator Dodd is trying to go. I would be happy in the
subcommittee that I chair to hold hearings on it just as soon as
possible. It really is a problem. But we need to take our time and
correct it.
Thank you, Mr. President.
Mr. DODD addressed the Chair.
The PRESIDING OFFICER. The Senator from Connecticut is recognized.
Mr. DODD. Mr. President, I yield 3 minutes to the distinguished
Senator from Illinois.
The PRESIDING OFFICER. The Senator from Illinois is recognized.
Mr. DURBIN. Mr. President, I thank the distinguished Senator from
Connecticut.
I would like to ask several brief questions to clear up this debate.
It has been said on the floor of the Senate that because of the
amendment of the Senator from Connecticut, that someone serving in the
U.S. military under the age of 21 could not get a credit card. Is that
true or false?
Mr. DODD. That is absolutely false. That person has independent
economic means, being a paid member of the military.
Mr. DURBIN. It has also been said that someone with a job with low
income under the age of 21 would be unable to get a credit card under
the Dodd amendment. Is that true or false?
Mr. DODD. That is false. A person who is unemployed might have
unemployment compensation and independent means, and would certainly
qualify.
Mr. DURBIN. I thank the Senator from Connecticut, because I think
there have been some things said on the floor which mischaracterize his
amendment.
This debate has had a lot of reference to personal responsibility. We
ought to keep a board up here to check off every time someone says
``personal responsibility.'' We are talking about bankruptcy, and I
think people who go into bankruptcy court should be personally
responsible. I agree. Most Democrats agree. Most Republicans agree.
There are some people abusing the bankruptcy system. We ought to change
it.
The purpose of this bill is to tighten it up so that the abusers
cannot take
[[Page S10472]]
advantage of bankruptcy to the disadvantage of everybody else in
America.
But in addition to personal responsibility, can't we discuss
corporate responsibility here? Don't the credit card companies have
some responsibility to make certain that they don't offer risky credit,
luring children and people who are unwitting into credit situations,
and then watching it topple over them? Those same credit card companies
which come to us and say, once these people have fallen deep in debt,
once they have all this credit card debt that they can't get out of,
and go to bankruptcy court, be strict and tough with them--I agree with
that, but shouldn't we also have a standard which says these companies
should be responsible in dealing with American consumers?
Senator Dodd offers an amendment which is timely. Listen to this.
Bankruptcies among those under the age of 25 have doubled in the last 5
years. It is estimated that a college student in the first few months
on campus will receive 50 solicitations for credit cards. A student
without virtually any income is going to be that target customer. As
Senator Dodd has said over and over again, too many kids who are lured
into easy credit before they have an income or the maturity to handle
it end up deeply in debt, and many of them jeopardize their education
as a result of it.
The Senator from Alabama said he wanted his children to have a credit
card at college. I wanted mine to have one as well. He would have
gladly signed for that. I would have as well. That is exactly what the
Dodd amendment says. If a parent will put a signature on the line, the
credit card is there for the college student.
But I salute the Senator from Connecticut. I support his amendment. I
think we are talking about corporate responsibility and personal
responsibility.
Mr. DODD. Mr. President, how much time remains?
The PRESIDING OFFICER. The Senator from Connecticut has 1 minute.
Mr. DODD. Mr. President, I thank my colleague from Illinois.
Just to make the case once again, we have watched consumer debt
double to $455 billion in the last couple of years. It has tripled and
quadrupled. It seems to me that to listen to what university people are
saying, we have more people dropping out of school--as the official at
the University of Indiana said, ``We lose more students to credit card
debt than academic failure''--we have some indication of what is going
on here. To say between the ages of 18 and 21 just to get a parental
signature, or an indication of independent economic means, as you would
if you were not a student, is not asking too much. It seems to me that
is the bare minimum standard of what we ought to be asking of the
credit card companies. It is my understanding that most responsible
credit card issuers already require them.
Is it asking too much that the credit card companies strive to meet
their own best practices in order to do something to protect our
children? If you are under 18, the law already protects you. It is that
window between 18 and 21.
Mr. President, I hope that our colleagues will recognize that it is
really not fair for middle-income families to get saddled with a
$10,000 debt because of solicitations that were made to a student in
school. This is a license for us to do something about it.
The PRESIDING OFFICER. The Senator's time has expired.
Mr. DODD. I urge adoption of the amendment.
Mr. GRASSLEY. Mr. President, I move to table the Dodd amendment and
ask for the yeas and nays.
The PRESIDING OFFICER. Is there a sufficient second?
There appears to be a sufficient second.
The yeas and nays were ordered.
The PRESIDING OFFICER. The question is on agreeing to the motion to
table the Dodd amendment. The yeas and nays have been ordered. The
clerk will call the roll.
The legislative clerk called the roll.
Mr. NICKLES. I announce that the Senator from Georgia [Mr. Coverdell]
is necessarily absent.
Mr. FORD. I announce that the Senator from South Carolina [Mr.
Hollings] is necessarily absent.
The result was announced--yeas 58, nays 40, as follows:
[Rollcall Vote No. 274 Leg.]
YEAS--58
Abraham
Allard
Ashcroft
Bennett
Biden
Bond
Brownback
Burns
Campbell
Chafee
Cochran
Collins
Craig
DeWine
Domenici
Enzi
Faircloth
Feingold
Frist
Glenn
Gorton
Gramm
Grams
Grassley
Gregg
Hagel
Hatch
Helms
Hutchinson
Hutchison
Inhofe
Jeffords
Johnson
Kempthorne
Kohl
Kyl
Lott
Lugar
Mack
McCain
McConnell
Murkowski
Nickles
Reid
Robb
Roberts
Roth
Santorum
Sessions
Shelby
Smith (NH)
Snowe
Specter
Stevens
Thomas
Thompson
Thurmond
Warner
NAYS--40
Akaka
Baucus
Bingaman
Boxer
Breaux
Bryan
Bumpers
Byrd
Cleland
Coats
Conrad
D'Amato
Daschle
Dodd
Dorgan
Durbin
Feinstein
Ford
Graham
Harkin
Inouye
Kennedy
Kerrey
Kerry
Landrieu
Lautenberg
Leahy
Levin
Lieberman
Mikulski
Moseley-Braun
Moynihan
Murray
Reed
Rockefeller
Sarbanes
Smith (OR)
Torricelli
Wellstone
Wyden
NOT VOTING--2
Coverdell
Hollings
The motion to lay on the table the amendment (No. 3598) was agreed
to.
Mr. GRASSLEY. Mr. President, I move to reconsider the vote by which
the motion was agreed to.
Mr. STEVENS. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
Amendment No. 3597
The PRESIDING OFFICER. The Senate will now consider amendment No.
3597, the D'Amato amendment, with 2 minutes equally divided.
Mr. GRASSLEY. Mr. President, I ask unanimous consent that the next
vote in this series be limited to 10 minutes.
The PRESIDING OFFICER. Without objection, it is so ordered.
Who yields time?
Mr. D'AMATO addressed the Chair.
The PRESIDING OFFICER. The Senator from New York.
The Senate will come to order. The Senator from New York is
recognized. The Senate will please come to order. The Senate will
please come to order for 1 minute of debate on each side before we
vote.
The Senator from New York.
Mr. D'AMATO. Mr. President, my amendment would stop one of the most
predatory, outrageous practices that consumers throughout America are
facing, double charging at ATMs. There are fewer opportunities to avoid
that. Since the ban has been lifted, we have gone from 17 percent of
the ATMs double charging to 79 percent in 2 years. There is no consumer
choice. At the end of next year, it will be over 90 percent, and it
will cost the average consumer $2.68 for that transaction.
For people who say, ``Oh, we'll lose the ATMs if we do not have these
double charges,'' 74 percent of the ATMs that are in existence today
existed prior to the double charges.
If you want to help the little guy, here is an opportunity. Vote for
the ATM ban; vote for the consumer. Give that little guy a choice and
give people an opportunity to vote. I am urging people to vote no
against the motion to table.
The PRESIDING OFFICER. The Senator's time has expired. Who yields
time?
Mr. GRASSLEY. I yield back our time.
The PRESIDING OFFICER. The yeas and nays have been ordered on the
motion to table the D'Amato amendment.
Mr. LOTT. Parliamentary inquiry.
The PRESIDING OFFICER. The majority leader.
Mr. LOTT. I did want to move to table and ask for the yeas and nays.
Have the yeas and nays been ordered?
The PRESIDING OFFICER. That motion has been made.
The question is on agreeing to the motion to lay on the table the
D'Amato amendment, No. 3597. The yeas and nays have been ordered. The
clerk will call the roll.
The legislative clerk called the roll.
Mr. NICKLES. I announce that the Senator from Georgia (Mr. Coverdell)
is necessarily absent.
Mr. FORD. I announce that the Senator from South Carolina (Mr.
Hollings) is necessarily absent.
[[Page S10473]]
The PRESIDING OFFICER (Mr. Grams). Are there any other Senators in
the Chamber desiring to vote?
The result was announced--yeas 72, nays 26, as follows:
[Rollcall Vote No. 275 Leg.]
YEAS--72
Abraham
Akaka
Allard
Ashcroft
Baucus
Bennett
Biden
Bond
Breaux
Brownback
Burns
Byrd
Campbell
Cleland
Coats
Cochran
Collins
Conrad
Craig
Daschle
DeWine
Domenici
Dorgan
Enzi
Faircloth
Ford
Frist
Gorton
Graham
Gramm
Grams
Grassley
Gregg
Hagel
Hatch
Helms
Hutchinson
Hutchison
Inhofe
Inouye
Jeffords
Johnson
Kempthorne
Kerrey
Kyl
Landrieu
Leahy
Lott
Lugar
Mack
McConnell
Murkowski
Nickles
Reed
Reid
Robb
Roberts
Rockefeller
Roth
Santorum
Sessions
Shelby
Smith (NH)
Smith (OR)
Snowe
Specter
Stevens
Thomas
Thompson
Thurmond
Warner
Wyden
NAYS--26
Bingaman
Boxer
Bryan
Bumpers
Chafee
D'Amato
Dodd
Durbin
Feingold
Feinstein
Glenn
Harkin
Kennedy
Kerry
Kohl
Lautenberg
Levin
Lieberman
McCain
Mikulski
Moseley-Braun
Moynihan
Murray
Sarbanes
Torricelli
Wellstone
NOT VOTING--2
Coverdell
Hollings
The motion to lay on the table the amendment (No. 3597) was agreed
to.
Mr. D'AMATO. Mr. President, I ask unanimous consent for 3 minutes to
make some comments with regard to this vote.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. D'AMATO. Mr. President, first let me thank my colleagues who have
given me the opportunity to at least bring this to a vote. Needless to
say, the great power and the great number of dollars involved were
felt. It is a lot of money that a lot of little people are paying that
they shouldn't be paying.
Indeed, some Members have indicated to me that notwithstanding their
opposition to intruding generally into the private sector, they would
reconsider their votes in the future if they continue to see the
predatory price-gouging practices that are anticonsumer and
monopolistic; if they continue to see not only the number of ATMs that
are double charging continue, but lack of consumer choice; and
escalating fees.
Indeed, the Senate majority leader told me, and he is on the floor
now, that he has indicated to those in the banking community that they
had better look carefully at what they are doing. If they continue to
impose these fees on the little people, he may not be nearly as
supportive.
This is a close issue as it relates to when should government become
involved in the private sector. I believe that time has come.
Having said that, this is a battle, but it is not the end. I lost
this battle, but I am prepared to continue this battle and win the war
until and unless we see a rollback in what is taking place now--and
that is taking advantage of the consumer, the little guy, the working
families of America.
Again, I thank my colleagues who have yielded me this time to make
this observation. We lost the battle, but not the war.
Mr. LOTT addressed the Chair.
The PRESIDING OFFICER. The majority leader.
____________________