[Congressional Record Volume 145, Number 157 (Tuesday, November 9, 1999)]
[Senate]
[Pages S14372-S14377]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                    BANKRUPTCY REFORM ACT--Continued


                           Amendment No. 2761

   (Purpose: To improve disclosure of the annual percentage rate for 
             purchases applicable to credit card accounts)

  Mr. SCHUMER. Mr. President, as per the agreement, I call up amendment 
No. 2761, to be debated for 15 minutes and then laid aside.
  I ask unanimous consent that Mr. Santorum be added as a cosponsor.
  The PRESIDING OFFICER. Without objection, it is so ordered. The clerk 
will report the amendment.
  The legislative assistant read as follows:

       The Senator from New York [Mr. Schumer], for himself and 
     Mr. Santorum, proposes an amendment numbered 2761.

  Mr. SCHUMER. Mr. President, I ask unanimous consent that the 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.   . TRUTH IN LENDING DISCLOSURES.

       Section 122(c) of the Truth in Lending Act (15 U.S.C. 
     1632(c)) is amended--
       (1) in paragraph (1), by striking the current text and 
     inserting the following:
       ``(1) In general.--The information described in paragraphs 
     (1), (3)(B)(i)(I), (4)(A), and (4)(C)(i)(I) of section 
     1637(c) of this title and the long-term annual percentage 
     rate for purchases shall--
       ``(A) subject to paragraphs (2) and (3) of this subsection, 
     be disclosed in the form and manner which the Board shall 
     prescribe by regulations; and
       ``(B) be placed in a conspicuous and prominent location on 
     or with any written application, solicitation, or other 
     document or paper with respect to which such disclosure is 
     required.''
       For purposes of this subsection, the term ``long-term 
     annual percentage rate for purchases'' means the highest 
     nondefault annual percentage rate for purchases applicable to 
     the credit card account offered, solicited or advertised, 
     calculated at the time of mailing (in the case of an 
     application or solicitation described in paragraph (1) of 
     section 1637(c) of this title) or printing (in the case of an 
     application or solicitation described in paragraphs (3)(B) of 
     section 1637(c) of this title), except that in the case of a 
     credit card account to which an introductory or temporary 
     discounted rate applies, the term ``long-term annual 
     percentage rate for purchases'' means the highest nondefault 
     annual percentage rate for purchases applicable to the credit 
     card account offered, solicited or advertised that will apply 
     after the expiration of the introductory or temporary 
     discounted rate, calculated at the time of mailing (in the 
     case of an application or solicitation described in paragraph 
     (1) of section 1637(c) of this title) or printing (in the 
     case of an application or solicitation described in 
     paragraphs (3)(B) of section 1637(c) of this title.''
       (2) in paragraph (2), by striking the current text and 
     inserting the following:
       ``(2) Tabular formats for credit card disclosures.--
       ``(A) The long-term annual percentage rate for purchases 
     shall be disclosed on or with a written application or 
     solicitation described in paragraphs (1) or (3)(B) of section 
     1637(c) of this title in 24-point or larger type and in the 
     form of a table which--
       ``(i) shall contain a clear and concise heading set forth 
     in the same type size as the long-term annual percentage rate 
     for purchases;
       ``(ii) shall state the long-term annual percentage rate for 
     purchases clearly and concisely;
       `(iii) where the long-term annual percentage rate for 
     purchases is based on a variable rate, shall use the term 
     `currently' to describe the long-term annual percentage rate 
     for purchases;
       ``(iv) where the long-term annual percentage rate for 
     purchases is not the only annual percentage rate applicable 
     to the credit card account offered, solicited or advertised, 
     shall include an asterisk placed immediately following the 
     long-term annual percentage rate for purchases; and
       ``Iv) shall contain no other item of information.
       ``(B) The information described in paragraphs (1)(A)(ii), 
     1(A)(iii), (1)(A)(iv), 1(B) and (3)(B)(i)(I) of section 
     1637(c) of this title shall be disclosed on or with a written 
     application or solicitation described in paragraph (1) of 
     section 1637(c) of this title or a written application or 
     solicitation as large as or larger than 8.5 inches in width 
     and 11 inches in length described in paragraph (3)(B) of 
     section 1637(c) of this title in 12-point type and in the 
     form of a table which--
       ``(i) shall appear separately from and immediately beneath 
     the table described in subparagraph (A) of this paragraph;
       ``(ii) shall contain clear and concise headings set forth 
     in 12-point type;
       ``(iii) shall provide a clear and concise form for stating 
     each item of information required to be disclosed under each 
     such heading; and
       ``(iv) may list the items required to be included in this 
     table in a different order than the order set forth in 
     paragraph (1) of section 1637 of this title, subject to the 
     approval of the Board.''
       ``(C) The information described in paragraphs (1)(A)(ii), 
     (1)(A)(iii), (1)(A)(iv), (1)(B) and (3)(B)(i)(I) of section 
     1637(c) of this title shall be disclosed on or with a written 
     application or solicitation smaller than 8.5 inches in width 
     and 11 inches in length described in paragraph (3)(B) of 
     section 1637(c) of this title in 12-point type and shall--
       ``(i) be set forth separately from and immediately beneath 
     the table described in subparagraph (A) of this paragraph; 
     and
       ``(ii) not be disclosed in the form of a table.
       ``(D) Notwithstanding the inclusion of any of the 
     information described in paragraph (1)(A)(i) of section 
     1637(c) of this title in the table described in subparagraph 
     (A) of this paragraph, the information described in paragraph 
     (1)(A)(i) of section 1637(c) of this title shall be disclosed 
     on or with a written application or solicitation described in 
     paragraphs (1) or (3)(B) of section 1637(c) of this title and 
     shall--
       ``(i) be set forth in 12-point boldface type;
       ``(ii) be set forth separately from and immediately beneath 
     the table described in subparagraph (B) of this paragraph or 
     the information described in subparagraph (C) of this 
     paragraph, whichever is applicable;
       ``(iii) not be disclosed in the form of a table; and
       ``(iv) where the long-term annual percentage rate for 
     purchases is not the only annual percentage rate applicable 
     to the credit card account offered, solicited or advertised, 
     be preceded by an asterisk set forth in 12-point boldface 
     type.''
       (3) by adding at the end the following:
       ``(3) Tabular format for charge card disclosures.--
       ``(A) In the regulations prescribed under paragraph (1)(A) 
     of this subsection, the Board shall require that the 
     disclosure of the information described in paragraphs (4)(A) 
     and (4)(C)(i)(I) of section 1637(c) of this title shall, to 
     the extent the Board determines to be practicable and 
     appropriate, be in the form of a table which--
       ``(i) contains clear and concise headings for each item of 
     such information; and
       ``(ii) provides a clear and concise form for stating each 
     item of information required to be disclosed under each such 
     heading.''
       ``(B) In prescribing the form of the table under 
     subparagraph (A) of this paragraph, the Board may--
       ``(i) list the items required to be included in the table 
     in a different order than the order set forth in paragraph 
     (4)(A) of section 1637(c) of this title; and
       ``(ii) employ terminology which is different than the 
     terminology which is employed in section 1637(c) of this 
     title if such terminology conveys substantially the same 
     meaning.''
  Mr. GRASSLEY. Mr. President, will the Senator yield for a question?
  Mr. SCHUMER. I yield for a question.
  Mr. GRASSLEY. The Senator's 15 minutes are coming within the 
framework of our voting at 5 o'clock.

[[Page S14373]]

  Mr. SCHUMER. That is correct.
  The PRESIDING OFFICER. The Senator from New York.
  Mr. SCHUMER. Mr. President, I thank the Senator from Iowa and the 
Senator from Illinois for their courtesy and the Senator from Nevada 
for his diligent work in seeing we all get some time.
  I am offering an amendment, along with the Senator from Pennsylvania, 
Mr. Santorum, to do something very basic to the bankruptcy bill, and 
that is to make credit card disclosure easier to find, easier to read, 
and easier to understand. I offer this amendment to achieve a goal I 
share with the sponsors of this bill--seeing fewer American consumers 
declare bankruptcy.
  I believe, however, that real bankruptcy reform must address one of 
the root causes of consumer indebtedness, and that is, abusive consumer 
credit industry practices. Having saturated the middle market, credit 
card companies, of course, search ever harder for new users. Their 
search for new customers leads inevitably to those who have the least 
ability to repay and are most likely to wind up mired in debt.
  The Federal Reserve reports that credit card solicitations 
skyrocketed to a shocking $3.5 billion in 1998, a 15-percent increase 
from the previous year. That represents an average of 13 solicitations 
per year--more than one a month for every man, woman, and child in the 
United States. That is 12 a year for every man, woman, and child in the 
United States.
  To reach these new customers, the credit card companies are in a race 
to the bottom oftentimes to come up with misleading marketing gimmicks 
and hidden fees.
  The whole purpose of this bill is to say that those who get deeply 
into debt should have to repay their debts, even if they are poor. I 
understand that. I do not agree with certain provisions of it, but I 
understand it. We can all agree that we ought to have full and broad 
disclosure before someone signs up for a credit card so they do not get 
mired in that debt. That is not a Democratic or Republican principle, 
it is an Adam Smith free market principle: full information.
  I am hopeful this bipartisan Schumer-Santorum amendment will meet the 
approval of this body and improve the bill.
  Let me show my colleagues what is happening. Credit card accounts 
have become more complicated than ever. Look at this credit card 
solicitation. It is blown up significantly from its actual size. Count 
the number of rates applicable to the account. There is a teaser rate, 
3.9 percent on introductory purchases and balance transfers. That is 
the only thing that jumps out at you. An unknowing consumer, someone 
not really trained in legalese, would think that is the annual rate, 
but it is not. Here are the other rates mired in this very complicated 
language: a 9.9 percent long-term rate on purchases and balance 
transfers; 19.99 percent on cash advances; 9.99 penalty rate, 19 and 22 
percent penalty rates on balances in the long run.
  My colleagues, that is not disclosure; that is an advance math 
problem on a college entrance exam. I have had a deep and abiding 
interest in credit card disclosure.
  In 1988, as a House Member, I authored the Fair Credit and Charge 
Card Disclosure Act. The act required that certain information about a 
credit card account be disclosed: the annual percentage rate, the 
annual fee, the minimum finance charge, the method of computing the 
balance for purchases.
  The act required that this amendment be disclosed in a table, the so-
called Schumer box. By putting the information in the table and 
mandating the table be prominently disclosed, the hope was consumers 
would be able to understand what the costs of credit truly were. But 
instead of clarity, they got obfuscation. Because of how the Federal 
Reserve has interpreted the table, disclosure provisions to the Fair 
Credit and Charge Card Disclosure Act, the result has not been 
disclosure, but a hide-the-rate shell game.

  Again look at this chart. The only number that stands out is 3.9 
percent, and on the solicitation in big white letters on the front is 
3.9 percent. If you were looking at this, you would think you are 
getting a 3.9-percent credit card; 3.9 is the only number in big 
letters. If you read all the little fine print on the inside, you will 
see the rate is 10 percent, 19 percent, even 22 percent.
  We must correct this. We have seen the disclosure box can be stashed 
away in places far from prominent--the back page or accompanying scrap 
of paper. We see the disclosure box can appear in font sizes so small 
it is virtually unreadable. The disclosure box that appears on these is 
blown up significantly. In the actual solicitation, the letters are so 
small that even with my 48-year-old eyes, and getting older every 
minute, I cannot read them.
  Finally, we have seen the box disclosure rate of information has 
turned out to be a mess. The so-called Schumer box, of which I was 
proud when it first passed, has not helped the consumer as much as 
intended. The amendment that Senator Santorum and I are offering will 
restructure the existing disclosure box in the following way:
  First, it will create a large, readable, 24-point font table solely 
for the long-term annual percentage rate for purchases. This is the old 
card, where all you see is the introductory rate in big letters. This 
is the new rate, and it is easily seen, 9.99 percent, which would be 
the annual rate. If there is a teaser rate, a so-called introductory 
offer rate that is very low, that could be on the credit card, but you 
do not need a college education or calculus to see the annual rate. It 
is very important.
  Second, beneath the table disclosing the long-term annual percentage 
rate for purchases, it would mandate another table in standard 12-point 
font that discloses such items as the grace period for repayment, 
annual fees, minimum finance charges, transaction fees, and other items 
that are not required to appear in any disclosure box under current 
law--cash advance fees, late fees, and over-the-credit limit fees.
  Finally, beneath this second table there would be full disclosure on 
all rates applicable to the credit card account. The poster shows the 
difference. This one looks as if you have a 3.9-percent rate; this one, 
the annual rate. Again, we are not limiting the consumer. We are simply 
providing information. This is good old Adam Smith American 
competition, and companies will compete for people based on who has the 
best rates.
  It is fair to say consumers will be better off under my amendment, in 
terms of understanding the true costs of credit.
  Senator Santorum and I believe that disclosure is the way to go, not 
putting a cap on, not putting limits on, but simply disclosure--but 
real disclosure--so that people could understand this.
  It will fit on an 8\1/2\ by 11 sheet. We do not want the credit card 
companies to be able to say that it is difficult to put this together. 
All this information, including the large ``9.9 percent,'' is on an 
easily understandable sheet.
  It is a shame we have to resort to putting font sizes into 
legislation, but if you look at the old ``Schumer box,'' with all the 
legalese, you will know that we need it.
  Armed with better information, consumers will avoid some of the 
financial missteps that can send them into bankruptcy. That is a goal 
we all share.
  So I urge my colleagues to support this amendment proposed by the 
Senator from Pennsylvania, Mr. Santorum, and myself. I urge that we 
could come together, in a bipartisan way, on an amendment that makes 
good sense, that improves the legislation. And then if someone falls 
into bankruptcy--which we hope does not happen--at the very least it 
would mean they knew what they were getting into.
  Mr. President, how much time do I have left on the 15 minutes that 
have been yielded to me?
  The PRESIDING OFFICER. The Senator has 6 minutes remaining.
  Mr. SCHUMER. Six minutes.
  Mr. President, I reserve that 6 minutes to wait for the Senator from 
Pennsylvania to come speak and for me to conclude.
  Thank you, Mr. President.
  Mr. KENNEDY addressed the Chair.
  The PRESIDING OFFICER. The Senator from Massachusetts.
  Mr. KENNEDY. I understand that the Senator from Illinois has yielded 
4 minutes to me.


                           Amendment No. 2754

  Mr. KENNEDY. Mr. President, I add my support for the amendment that 
has been offered by the Senator from

[[Page S14374]]

Connecticut, Mr. Dodd, to address the explosion of credit card debt 
because students on college campuses are offered credit cards. The 
amendment, as has been outlined, prohibits credit card companies from 
giving an individual under the age of 21 a credit card unless the young 
person has income sufficient to repay the debt or a parent or a 
guardian, or other family member over the age of 21, to share the 
liability for the credit card.
  The point has been made, but I think it needs to be underlined, that 
when you get right behind this whole issue, what is happening is that 
the credit card companies are making these credit cards so available to 
young people who are attending college that the credit cards are 
effectively irresistible. The amount of debt that is being run up by 
these students is escalating into significant figures. What inevitably 
happens is that the parents are required, by one reason or another, to 
assume the debt obligation. That is the background, really, on why 
these efforts are being made by the credit card companies.
  What isn't so evident is the kind of turmoil, anxiety, and depression 
that surrounds this whole atmosphere of student debt. What we found, in 
the course of the hearings on the Judiciary Committee, in a number of 
the different presentations that were made while considering the 
bankruptcy legislation, is that it isn't only the financial obligations 
that were assumed, but that many of the young people, who had stellar 
academic records, who were outstanding students in all forms of 
behavior, who were actually seduced by these credit card obligations 
and responsibilities, when they found they were unable to free 
themselves from these kinds of obligations, went into severe depression 
and into adverse behavior, where the students had tensions in their 
relationships with their parents, assuming an entirely different 
chapter in their development. And this is something that is happening 
with increasing frequency across this country.

  The kind of recommendations that the Senator from Connecticut has 
outlined in the amendment is a very modest and reasonable way of 
addressing the excesses of this particular phenomenon taking place. 
This is the place to be able to do it.
  I welcome the chance to join with Senator Dodd in urging that this 
particular amendment be adopted. It makes a great deal of sense in 
terms of the young students in this country. It makes a great deal of 
sense in terms of their parents, most of whom are hard working, decent 
parents who get caught up in these obligations, assuming the debts of 
their children. It puts an extraordinary burden on them as well.
  This is a winner for the students and for their parents and for more 
sensible and responsible bankruptcy legislation.
  I reserve the remainder of the time.
  Mr. DURBIN addressed the Chair.
  The PRESIDING OFFICER. The Senator from Illinois.


                 Amendments Nos. 2659 And 2661, En Bloc

  Mr. DURBIN. Mr. President, I ask unanimous consent to call up 
amendment No. 2659, regarding credit counseling, and amendment No. 
2661, regarding prescreening for debtors between 100 and 150 percent of 
median income, and to immediately set them aside.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The clerk will report.
  The legislative assistant read as follows:

       The Senator from Illinois [Mr. Durbin] proposes amendments 
     numbered 2659 and 2661, en bloc.

  The amendments are as follows:


                           Amendment No. 2659

   (Purpose: To modify certain provisions relating to pre-bankruptcy 
                         financial counseling)

       On page 18, line 5 insert ``(including a briefing conducted 
     by telephone or on the Internet)'' after ``briefing''.
       On page 19, line 15, strike ``petition'' and insert 
     ``petition without court approval.''
                                  ____



                           Amendment No. 2661

 (Purpose: To establish parameters for presuming that the filing of a 
    case under chapter 7 of title 11, United States Code, does not 
                  constitute an abuse of that chapter)

       On page 7, between line 14 and 15, insert the following:

     ``unless the conditions described in clause (iA) apply with 
     respect to the debtor.
       ``(iA) the product of the debtor's current monthly income 
     multiplied by 12--
       ``(I)(aa) exceeds 100 percent, but does not exceed 150 
     percent of the national or applicable State median household 
     income reported for a household of equal size, whichever is 
     greater; or
       ``(bb) in the case of a household of 1 person, exceeds 100 
     percent but does not exceed 150 percent of the national or 
     applicable State median household income reported for 1 
     earner, whichever is greater; and
       ``(II) the product of the debtor's current monthly income 
     (reduced by the amounts determined under clause (ii) (except 
     for the amount calculated under the other necessary expenses 
     standard issued by the Internal Revenue Service and clauses 
     (iii) and (iv) multiplied by 60 is less than the greater of--
       ``(aa) 25 percent of the debtor's nonpriority unsecured 
     claims in the case; or
       ``(bb) $15,000.

  The PRESIDING OFFICER. Without objection, the amendments are set 
aside.
  Mr. DURBIN. How much time is remaining on the debate?
  The PRESIDING OFFICER. Eleven minutes 30 seconds for that side; 11 
minutes for Senator Grassley.


                           Amendment No. 2521

  Mr. DURBIN. Shortly the Members of the Senate will have a chance to 
vote on an amendment to which I hope they will give consideration. It 
is an amendment which addresses a segment of the credit industry which 
represents the bottom feeders. These are the people who prey on the 
vulnerable in society. These are the people who try to ensnare 
vulnerable, frail, elderly, and sick people into literally signing over 
the only thing they own on Earth--their homes.
  You have seen the cases. You have read about them in the papers and 
seen the exposes on television. They find a widow living alone in her 
home. They come in and want to sell her some siding or a new roof or 
new furnace. The next thing you know, she has a second mortgage on her 
home. The terms of the mortgage are outrageous. She finds herself 
losing the only thing she has left on Earth--her home. These are so-
called ``equity predators.''
  I salute the Senator from Iowa, Mr. Grassley, who is the manager of 
this bill on the Republican side, because he had a hearing in March of 
1998 of the Special Committee on Aging of the Senate that was dedicated 
exclusively to this outrage in the credit industry, that these people 
would come in and prey on so many vulnerable people.
  Let me quote Senator Grassley. I do not know if I have his 
permission, but I did give him notice that I would read this from the 
hearing. He said:

       Before we begin, I want to quote a victim--a quote that in 
     my mind sums up what we are all talking about here today. She 
     said the following: ``They did what a man with a gun in a 
     dark alley could not do. They stole my house.''

  That is what is happening, time and again, when these unscrupulous 
creditors and lenders prey on the elderly and people who are less 
educated and end up taking something away from them that they have 
saved for their entire lives.
  What does my amendment do? My amendment says that if this plays out, 
if they end up ensnaring some poor person into their trap, so that they 
stand to lose their home, and ultimately that person has to go bankrupt 
because of this unscrupulous lender, when they go to bankruptcy court, 
that same equity creditor cannot take away their home. If that person 
did not follow the law that requires full disclosure and fair treatment 
of people who are loaned money, they cannot come to bankruptcy court 
and end up with the deed to the home of an elderly widow. I think that 
is simple justice. It was a question before this Senate today as to 
whether or not, when we talk about abuses by those filing for 
bankruptcy, we will be equally outraged by abuses by creditors such as 
these predatory lenders who use our legal system and our bankruptcy 
court to literally push through processes that take away from people 
things they have saved for their entire life. They are serial credit 
predators. They prey on the elderly, the less educated, the frail, and 
the vulnerable. They are the bottom feeders in the credit industry. My 
amendment will give my colleagues in the Senate a chance to tell them 
once and for all, stop this devious conspiracy to go after the elderly 
in America.

  How many people are affected by this? So many that in the State of 
California they have set up a special

[[Page S14375]]

fraud unit to go after these predatory lenders.
  I am sad to report that as I stand here today, many reputable lenders 
are opposing my amendment. What does that say about them? If they are 
opposing my amendment to go after the bad guys, how does that reflect 
on the good guys in this business? I don't think it tells a very good 
story.
  The groups supporting my amendment include the Consumer Federation of 
America, the Consumers Union, National Consumer Law Center, the U.S. 
Public Interest Research Group, the UAW, and others who have decided, 
as I have, that we should put an end to this once and for all, as is 
stated in their letter in support of my amendment: As consumers who 
receive these loans are commonly forced into bankruptcy, it is 
essential to create a bankruptcy remedy that protects debtors and other 
honest creditors from the predators who seek to enforce these loans.
  Let me give a couple examples of these loans. Lillie Coleman is a 
resident of New City in Illinois, 68 years old, living on a pension. In 
comes a person who says: I'll tell you what I will do, Ms. Coleman. I 
know you own a house. I will consolidate all your debts, and I will 
lend you $5,000 for home improvement. The next thing you know, she has 
signed a $65,000 mortgage on the home she owned and had worked for for 
a lifetime. The next thing you know, they are holding these closings 
without inviting her. They are not giving her the papers to sign. They 
have broker's fees that were never disclosed to her. They find out that 
checks that were supposed to go to her creditors aren't going to 
creditors. They are finding out basically that there is money missing.
  There sits Ms. Coleman with a second mortgage on her home and the 
prospect of losing her home in her retirement at the age of 68. Those 
are the people we are talking about. Those are the folks knocking on 
the doors, ringing the telephone off the hook night and day, sending 
all these luring mailings to people saying: You can just sign the back 
of this little check, and the next thing you know, there will be money 
in your hand.
  The next thing you know, there is a new mortgage on your home. And if 
you miss a payment or if you don't understand the terms, you could lose 
it.
  It didn't just happen in Illinois. It happens all over the place. In 
fact, it has happened in Utah, two or three cases of balloon payments. 
Do you know what a balloon payment is? You make the regular monthly 
payments; everything is going along fine. There is a small clause in 
the contract that says: At one point in time you had better come up 
with $49,000 or you lose your home. That is a balloon payment. Many 
borrowers don't know the details, particularly if they are folks who 
are elderly. They don't see well. They may not hear well. They think 
they are doing the right thing. They, of course, have the legal 
capacity to sign a contract. The next thing you know, they end up with 
their home on the line. They may end up in bankruptcy court.

  What I am saying with this amendment is, we are not going to give 
them a chance to use the bankruptcy courts of America as a fishing 
expedition for the well-earned assets of American families.
  This amendment was part of the bankruptcy bill we passed last year 
97-1. If there is anybody sitting on the floor saying this idea is way 
too radical, they voted for it last year. They voted for it last year 
97-1. It is something that should be part of this bill.
  If you are outraged by the lawyers who are ripping off the system, as 
I see my friend, the Senator from Alabama, on the floor, who brings 
this up regularly, if you are outraged by those who go to bankruptcy 
court who shouldn't be there, share your outrage when it comes to these 
predatory lenders. Join me in passing an amendment that tells them once 
and for all, you can't use our legal system to continue this deceptive 
scheme.
  We have found in the course of researching this matter that there are 
several different approaches these predatory lenders use. They engage 
in practices where they lend somebody money far beyond their ability to 
repay. They know going in, with a borrower of limited savings and 
equity in a home, that they can put that borrower on the spot where, in 
a short period of time, they are going to default.
  We know as well that they try to make an arrangement saying: I will 
tell you what, we will put the siding on the home. We will make the 
direct payments to the home contractor, and don't you worry about it. 
The next thing you know, they have signed the mortgage, the home 
contractor is not paid, and the poor widow finds herself being 
assaulted in every direction by those who expect to be paid and finds 
herself in bankruptcy court.
  They impose illegal fees, such as prepayment penalties or increased 
interest rates at default. They impose balloon payments due in less 
than 5 years. We have a group of people who are gaming the system at 
the expense of the most vulnerable people in America.
  This amendment does not add any additional requirements to current 
law. It says that those who want to lend money have to themselves obey 
the law. If you want to stand for law and order when it comes to 
somebody coming into bankruptcy court, a debtor who can no longer pay 
their debts, if you want to establish new and higher standards for them 
so that they don't rip off the system, for goodness' sake, show some 
heart when it comes to those who are in bankruptcy court through no 
fault of their own. They are elderly people who signed onto the 
contract, and the next thing you know the only thing they own on Earth 
is at risk.
  I have considered this amendment. I have read the transcripts of 
hearings, particularly the one from Senator Grassley's Committee on 
Aging. I have read some testimony there that I think says it all. But 
Senator Grassley's own words really put this in context. In March of 
1988, he said as follows:

       What exactly are we talking about when we say that equity 
     predators target folks who are equity-rich and cash-poor? 
     These folks are our mothers and our fathers, our aunts and 
     our uncles, and all people who live on fixed incomes. These 
     are people who oftentimes exist from check to check and 
     dollar to dollar, and who have put their blood, sweat and 
     tears into buying a piece of the American dream, and that 
     is their own home.

  Senator Collins of Maine at the same hearing noted, I think 
accurately, that we need higher legal standards for those who provide 
financial services to senior citizens. Let me remind the Senate, I 
don't impose a higher legal standard here. I only say that those who 
want to take advantage of the bankruptcy court have to come in with 
clean hands. If they have been guilty of misuse of the law, dereliction 
of duty, or violation of the law, they should not be allowed to 
recover.
  Senator Larry Craig, a Republican of Idaho, said at the same hearing: 
There are many loopholes found in existing protection laws which can 
and are easily exploited by these creditors. Statements by Senator Enzi 
and so many of my colleagues attest to the fact that they know that in 
every State in the Union these smoothies are at work.
  The question today before the Senate is what we will do about it. 
These low-life lenders who give the Merchant of Venice credit standards 
a good name are the people who will be protected if the Durbin 
amendment is defeated.
  I hope if we are going to hold to a high standard those seeking 
relief in bankruptcy court, that we start with those who have been 
shown time and time again to have taken advantage of the system.
  I reserve the remainder of my time.
  The PRESIDING OFFICER. All time on the Democratic side has expired.
  Mr. GRASSLEY. Mr. President, I yield 5 minutes to the Senator from 
Texas.
  The PRESIDING OFFICER. The Senator from Texas is recognized.
  Mr. GRAMM. Mr. President, what we have before us this afternoon is a 
perfect example of what can happen when a bankruptcy bill is on the 
floor, and Members are offering amendments that have nothing to do with 
bankruptcy law but everything to do with banking.
  We have two amendments before us, and I have a short period of time, 
so I'll make my points briefly.
  The amendment offered by Senator Durbin basically attempts to enforce 
the truth-in-lending law--which has many remedies under current banking 
law, including damages, including class action suits--through a new 
mechanism, the bankruptcy courts.

[[Page S14376]]

  What is the practical import of all this, and why is this opposed by 
virtually everybody who is involved in mortgage lending?
  Basically, it is a violation of truth in lending to lend money to 
someone who is not capable of paying it back. So, if we change the 
law--if we change permanent banking law as part of this bankruptcy 
bill--to say that if a borrower can prove that someone violated the 
Truth in Lending Act, then he doesn't have to pay back his mortgage 
loan when he's in bankruptcy, what is going to happen?
  What is going to happen is that everybody in bankruptcy who has a 
mortgage loan is going to file a lawsuit claiming, Well, obviously, I 
am bankrupt, so the lender should have known I could not pay this loan 
back; therefore, under the Durbin amendment, I should not have to pay 
it back.
  This is an absurd amendment that would undercut truth in lending, 
which has more enforcement powers than most other lending laws in 
America, by literally creating a situation where every deadbeat would 
file a lawsuit saying: I have gone bankrupt because I have spent my 
money. I have not paid my bills, and because I have gone bankrupt, it 
is the bank's fault; therefore, I should be able to default on my 
mortgage. Which would mean that every honest person in America who pays 
their bills, who sacrifices and saves their money and pays off their 
mortgage, will end up paying a higher rate of interest.
  So I hope our colleagues will roundly defeat this amendment. It has 
absolutely nothing to do with bankruptcy law, and everything to do with 
banking law, and it should not even be considered.
  The second amendment I want to mention is paternalism at its worst, 
and that is the amendment of my dear friend, Senator Dodd, which would 
require students between the ages of 18 and 21 to get parental consent 
in order to be issued a credit card.
  I want to remind my colleagues that college students who are 18 and 
older are adults under Federal law for purposes of credit. This 
amendment would therefore be a violation of the Federal Equal Credit 
Opportunity Act, which prohibits the use of age on a discriminatory 
basis against anyone over 18 years of age.
  The second point I want to make is that this concern about the danger 
of students having credit cards is based on a myth. Fifty-nine percent 
of all college students in America pay their balance in full at the end 
of the month. But only 40 percent of the general population pays their 
balance in full. Eighty-six percent of students pay their credit cards 
with their own money, not with their parents' money. The plain truth is 
that college students are better credit card risks than the general 
population. It is obvious that if you are dealing with people who are 
highly motivated, highly disciplined, successful college students, you 
want them to become your customer because they are going to go out and 
make a lot of money and become very profitable customers. The idea that 
we would be engaged in this sort of paternalism, which would require 
every student in America, even though it is against the law for the 
bank to discriminate against them if they are over 18--
  The PRESIDING OFFICER. The time of the Senator has expired.
  Mr. GRASSLEY. Mr. President, I will yield the Senator 1 more minute, 
the Senator from Pennsylvania 2 minutes, and the Senator from Alabama 3 
minutes. That will be the remainder of our time.
  The PRESIDING OFFICER. The Senator from Texas may continue for 
another minute.
  Mr. GRAMM. Mr. President, the idea that we in the U.S. Congress are 
going to pass a law that takes adults, under our Federal credit 
statutes, and force them to go back to their parents in order to get a 
credit card, when the credit behavior of students is superior to the 
general population, is simply an outrage. Our Democrat colleagues 
cannot get it right. When we debated the banking bill, they were 
concerned that banks wouldn't lend money to people who are needy. But 
when we are debating the bankruptcy bill, it is the bank's fault for 
lending too much money to people who are needy. They can't quite get it 
straight. I guess it varies depending on which bill are considering. 
Both of these amendments should be roundly defeated.
  The PRESIDING OFFICER. The Senator from Pennsylvania is recognized.
  Mr. SANTORUM. Mr. President, I thank the Senator from New York for 
his amendment dealing with disclosure--as the Senator from New York 
talked about in his remarks--on credit card solicitations, as to what 
the real interest rate is that is going to be involved and all the 
other information that is necessary for consumers to make intelligent 
decisions as to whether to contract with a credit card company.
  All of us get solicitations--I do every day--in the mail offering 
outrageously low rates of interest. I have looked through them and it 
is very difficult, even for somebody who is somewhat sophisticated in 
looking at this information, to find what the true interest rate is and 
the true terms of the credit card for which you may be signing up.
  What the amendment of the Senator from New York does is put it in an 
obvious place, in clear and bold type, in a box, in a format that 
people are used to using, as a result of his legislation from a few 
years ago with respect to credit card statements. This would make it 
applicable to applications and to solicitations. I think it is a 
constructive amendment, a disclosure-oriented amendment. It is not 
something I think is unduly burdensome and it can be helpful to 
everybody, not just seniors and the others who may have difficulty 
reading the small print and understanding very complex legal documents 
but also the average consumer who wants to be able to make intelligent 
decisions. And what we are looking at in this bill is the failures as a 
result of credit card overpayments, as a result of decreased savings 
rates. This is the kind of commonsense type of thing we ought to be 
supporting.
  The PRESIDING OFFICER. The Senator from Alabama is recognized.
  Mr. SESSIONS. Mr. President, I know some young people get in trouble 
by overspending their credit cards. A lot of adults get in trouble for 
that. The fact is, I don't believe we, as part of an effort to reform 
the bankruptcy court, need to be, at this moment, offering amendments; 
that ought to be done in the Banking Committee. There have been 
complaints about the fact that credit card solicitations are mailed out 
to people. Let me say this: We have had a banking bill in which Members 
have been outraged that banks won't loan to high-risk people, and they 
are complaining about not making enough loans. It is odd, striking, and 
shocking to me that poor people are being told they ought not to be 
even offered credit cards. Some say they are being mailed credit cards. 
Not so. It is a Federal law, a crime, and it is prohibited to mail 
credit cards unrequested to somebody. What they are receiving is offers 
of credit cards. They have to fill out forms and show their income and 
all that, and they may or may not get it once they fill it out. But to 
say you can't even offer a person below the poverty level a credit card 
is amazing to me. Credit cards are good for poor people.
  If somebody has a credit card and his tire blows up and he needs a 
set of tires for his car and doesn't have $200 cash, what is he going 
to do, park it until he can save up the money? With a credit card, he 
can do that and pay it off as he can. Credit cards are valuable things 
for poor people, for heaven's sake.
  For young people, we have this vision that an 18-year-old at college 
who is being funded by mama runs up a big debt on his credit card. The 
truth is, a lot of people are not doing that. A lot of people who are 
18, 19, and 20 years old will be affected by this legislation, and they 
may be married, out on their own, going to college during the night, 
and working during the day. They have to get mama and daddy to sign on 
before they can even get the credit card they may need to help them 
through the unexpected expenses that may occur for them.

  The suggestion that somehow poor people are being oppressed by being 
offered credit cards is beyond my comprehension. In fact, one of the 
good things that is occurring is that we are seeing some competition 
now. Rates are coming down. People have alternatives. They can cancel a 
card and get a better card.
  The PRESIDING OFFICER. All time has expired. The question is on the 
Durbin amendment No. 2521.

[[Page S14377]]

  Mr. GRASSLEY addressed the Chair.
  The PRESIDING OFFICER. The Senator from Iowa.
  Mr. GRASSLEY. Is the Durbin amendment the first vote?
  The PRESIDING OFFICER. Yes.
  Mr. REID. Mr. President, under the unanimous consent agreement, 
Senator Durbin and whoever wants to close on that side have 2 minutes, 
correct?
  The PRESIDING OFFICER. There is no unanimous consent agreement to 
that effect.
  Mr. REID. Based on what we have done in the past, Senators have been 
expecting that. I ask unanimous consent that on this amendment and the 
other, there be 4 minutes evenly divided.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The Senator from Illinois is recognized for 2 minutes.
  Mr. DODD. Reserving the right to object, does that also apply to the 
Dodd amendment?
  The PRESIDING OFFICER. There was also an agreement on the Dodd 
amendment.
  The Senator from Illinois, Mr. Durbin, is recognized.


                           Amendment No. 2521

  Mr. DURBIN. Mr. President, this amendment was enacted by the Senate 
as part of the bankruptcy bill last year. The bill received a vote of 
97-1. It imposes no new legal duties on creditors or lenders but says 
they must follow the law if they want to take advantage of the law.
  We are talking about equity creditors, lenders who prey on people who 
are disabled, elderly, vulnerable, and less educated. Folks on a fixed 
income with a home end up with a new mortgage because they wanted 
siding on their home or a new roof and several months or years later 
find out they are about to lose the last thing they have on Earth--
their home--because of unscrupulous practices by these creditors.
  The bottom line is this: If we are going to have rules in this 
society for borrowers, we should also have rules for creditors. The 
rules are called the law. If they do not follow the law, they can be 
thrown out of bankruptcy court if they are a borrower. If they do not 
follow the law and the Durbin amendment passes, they will be thrown out 
of the court because they have been guilty of unscrupulous credit 
practices, taking advantage of the elderly.
  All the Senators on the floor who have lamented the scandalous 
behavior of these creditors in the past have a chance now to vote for 
an amendment to tell them once and for all that their low-life tactics 
are unacceptable in America.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Texas.
  Mr. GRAMM. Mr. President, we have a truth-in-lending law. It is 
vigorously enforced with many remedies, including damages in class 
action lawsuits.
  Senator Durbin's amendment would make bankruptcy courts, which have 
no jurisdiction over truth in lending whatsoever, an enforcement 
mechanism of the truth-in-lending law. This produces an absurd 
situation. Under truth in lending, the lender has an obligation to make 
some assessment about the borrower's ability to pay. Under this 
amendment, everyone who is in default or in bankruptcy will be able to 
argue that the bank should have known that the lender could not pay the 
loan back and therefore the mortgage should be forgiven.
  The net result is that hard-working, frugal people who save money and 
pay their debts would end up paying hundreds of millions of dollars, 
billions of dollars, in additional interest costs to cover people who 
would file lawsuits claiming, ``Well, I went broke and it's the bank's 
fault, and therefore I shouldn't have to pay my mortgage.''
  This amendment should be defeated. Giving one court, which has no 
jurisdiction over the pertinent law, the ability to enforce that law, 
which rightly belongs in another court, is, I think, a gross violation 
of logic and the basic structure of the legal system. This is a bad 
amendment that will produce an even worse situation where honest people 
who pay their debts will end up paying higher interest rates for people 
who don't pay their debts.
  I move to table the Durbin amendment.
  Mr. GRASSLEY. 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.
  The PRESIDING OFFICER. The question is on agreeing to the motion to 
table amendment No. 2521. The yeas and nays have been ordered. The 
clerk will call the roll.
  The legislative assistant called the roll.
  Mr. FITZGERALD (when his name was called). Present.
  Mr. NICKLES. I announce that the Senator from Arizona (Mr. McCain) is 
necessarily absent.
  Mr. REID. I announce that the Senator from South Carolina (Mr. 
Hollings) is absent because of a death in the family.
  The result was announced--yeas 51, nays 46, as follows:

                      [Rollcall Vote No. 358 Leg.]

                                YEAS--51

     Abraham
     Allard
     Ashcroft
     Bennett
     Bond
     Brownback
     Bunning
     Burns
     Campbell
     Chafee, L.
     Cochran
     Collins
     Coverdell
     Craig
     Crapo
     DeWine
     Domenici
     Enzi
     Frist
     Gorton
     Gramm
     Grams
     Gregg
     Hagel
     Hatch
     Helms
     Hutchinson
     Hutchison
     Inhofe
     Johnson
     Kyl
     Lott
     Lugar
     Mack
     McConnell
     Murkowski
     Nickles
     Roberts
     Roth
     Santorum
     Sessions
     Shelby
     Smith (NH)
     Smith (OR)
     Snowe
     Stevens
     Thomas
     Thompson
     Thurmond
     Voinovich
     Warner

                                NAYS--46

     Akaka
     Baucus
     Bayh
     Biden
     Bingaman
     Boxer
     Breaux
     Bryan
     Byrd
     Cleland
     Conrad
     Daschle
     Dodd
     Dorgan
     Durbin
     Edwards
     Feingold
     Feinstein
     Graham
     Grassley
     Harkin
     Inouye
     Jeffords
     Kennedy
     Kerrey
     Kerry
     Kohl
     Landrieu
     Lautenberg
     Leahy
     Levin
     Lieberman
     Lincoln
     Mikulski
     Moynihan
     Murray
     Reed
     Reid
     Robb
     Rockefeller
     Sarbanes
     Schumer
     Specter
     Torricelli
     Wellstone
     Wyden

                        ANSWERED ``PRESENT''--1

       
     Fitzgerald
       

                             NOT VOTING--2

     Hollings
     McCain
       
  The motion was agreed to.
  Mr. LOTT. I move to reconsider the vote.
  Mr. COVERDELL. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.
  The PRESIDING OFFICER (Mr. Smith of Oregon). The majority leader.

                          ____________________