[Congressional Record Volume 145, Number 157 (Tuesday, November 9, 1999)]
[Senate]
[Pages S14377-S14380]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                BANKRUPTCY REFORM ACT OF 1999--Continued

  Mr. LOTT. Mr. President, I ask unanimous consent that the next two 
votes be 10-minute votes.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                           amendment no. 2754

  The PRESIDING OFFICER. Under the previous order, there are now 4 
minutes equally divided prior to the vote on or in relation to the Dodd 
amendment No. 2754.
  Who yields time?
  Mr. KENNEDY. Mr. President, Senator Dodd and I have proposed an 
amendment to address the explosion of credit card debt offered to 
students on college campuses.
  The amendment prohibits a credit card company from giving an 
individual under the age of 21 a credit card unless the young person 
has income

[[Page S14378]]

sufficient to repay the debt or a parent, guardian, or other family 
member over the age of 21 shares liability for the credit card. Credit 
card applications and solicitations must disclose this information to 
potential consumers.
  This amendment is particularly appropriate during debate on 
bankruptcy reform legislation. We know that credit card debt may not be 
the sole factor leading to bankruptcy, but for many individuals it is a 
significant contributing factor.
  Congress should be particularly concerned that since 1991, there has 
been a 50-percent increase in bankruptcy filings by those under the age 
of 25. In many cases, these are young men and women who are just 
establishing their independence--and just starting to build a credit 
history. Poor financial decisions, especially credit card mismanagement 
can have long-term implications.
  We know the siren song of the credit card industry is loud and clear. 
In 1998, credit card issuers sent out 3.45 billion credit card 
solicitations to people of all ages, including college students and 
others who may not have the ability to repay their debts. In fact, 
First USA recently issued a credit card to 3-year old Alessandra 
Scalise. Alessandra's mother said she accurately completed and mailed 
in the preapproved credit card application as a joke. There was no 
Social Security number or income listed and Alessandra's occupation was 
listed as ``preschooler.'' Apparently, this didn't make a difference to 
First USA. Alessandra received a Platinum Visa with a $5,000 credit 
limit.
  This incident may be attributable to ``human error'' but there are 
numerous examples of irresponsible lending practices by credit card 
issuers--especially when they lend to students who don't have the 
capacity to repay their debts.
  For example, one Discover platinum card issuer's terms of 
qualification require a minimum household income of $15,000 unless you 
are a full-time student. Discover explains that an individual either 
has to have a $15,000 minimum income or needs to prove that they are a 
full-time student. Student applications are rejected only if they have 
a bad credit history--a prior bankruptcy filing, for example--or if 
their student status can not be confirmed.
  During a February 1998 Banking Subcommittee hearing, Senator Sarbanes 
asked credit card issuers how they determined student income. Bruce 
Hammonds, senior vice chairman and chief operating officer of MBNA 
Corporation responded if a student has a loan, ``that means they do not 
have to pay tuition in most cases and we are looking at that tuition 
payment. Then we would not count the tuition payment against them with 
their income and expense analysis.'' In other words, the company 
ignores the reality of tuition and views a student loan as ``free'' 
money--an income stream that can be used to repay credit care debt.
  Not surprisingly, credit card companies have unleashed a well-
organized and pervasive campaign to attract student consumers. Credit 
is available to almost any college student--no income, no credit 
history, and no parental signature required. The National Bankruptcy 
Review Commission received an advertisement for a 2-day workshop for 
creditors entitled, ``Competing in the Sub Prime Credit Card Market,'' 
including a presentation entitled, ``Targeting College Students: Real 
Life 101,'' with tips on how to ``target the money makers of 
tomorrow.''
  Students are targeted by the industry the moment they step on to a 
college campus. Applications are placed in their book bags at the 
student store, and tempting gifts and bonuses and low teaser rates are 
used to entice them to send in the application. The American Express 
Card for College Students has a teaser rate of 7.75 percent for the 
first 90 days, then it more than doubles to 15.65 percent. Perks 
include Continental Airlines travel vouchers. The Citibank College Card 
for Students initial rate is 8.9 percent for 9 months and then it 
skyrockets to 17.15 percent. The incentive? Eight American Airlines 
travel coupons.

  Brian is a student at the University of Minnesota. He said,

       They gave me a free T-shirt and a water bottle to apply for 
     their credit cards. My clever plan? To sucker them out of 
     their prizes and cut up the cards. $4,000 later . . . I 
     stopped spending . . . In my glory days, I was like King 
     Midas, pointing to things and turning them into my own . . . 
     For me, the worst temptation was food . . . While listening 
     to tunes on your new stereo and munching take out food, the 
     monthly payment seems easy to pay, especially when you can 
     get a cash advance to cover it.

  The ads are tempting, too. One ad directly targeting students reads: 
``Free from parental rule at last. Now all you need is money. Cha-
Ching! Get 3 percent cash back on everything you buy.''
  The Internet is the new frontier for credit card advertising to 
students. When a student clicks on ``www.studentcreditcard.com'' he or 
she finds a treasure trove of shopping offers and discounts, as well as 
the assurance of 3 percent cash back. Students are told that, ``It's 
totally simple. Spend $200 on an item with your card and you have an 
extra six bucks in your pocket. Spend another $400, that's $12. It adds 
up fast when you use The Associates Student Credit Card for all your 
purchases.''
  The web site includes some information on establishing a good credit 
record, but nothing compared to the bonuses and incentives for student 
consumers.
  Not surprisingly, college students respond to solicitation by credit 
card companies. A recent study by Nellie Mae found that 60 percent of 
undergraduates have credit cards and 21 percent have 4 or more cards. 
The median credit card debt among students is $1,200 and 9 percent of 
students have debt between $3,000 and $7,000. Five percent of students 
have credit card debt exceeding $7,000.
  Other studies replicate similar findings. A June 1998 national survey 
by the Education Resources Institute--``Credit Risk or Credit 
Worthy''--found that 55 percent of students obtained their first card 
during their first year of college and a significant proportion 
received their first credit card while still in high school.
  The study argues that many students use credit cards reasonably, but 
the facts and statistics are disturbing. Fifty-two percent of students 
say that one of the most important reasons to have a credit card is to 
``build a credit history'' and 45 percent say it's to use in an 
emergency, but the survey shows that 77 percent of all student credit 
card purchases were for ``routine personal expenses''--a category that 
may include a wide-range of items.
  While attending Villanova, Meghan charged $15,000 on her credit 
cards. When she and her friends first applied for the cards they 
decided to keep them for emergencies, only. But, according to Meghan, 
they would ``end up buying things . . . or taking cash advances just to 
live on.'' Meghan planned to get a job to pay off her debt, but that 
didn't happen. Instead, her mother paid-off the balance on the card--
twice.
  What's particularly troubling is that many students who use their 
credit cards when they ``run out of checks'' or are ``on Spring Break'' 
don't realize the financial implications of credit. In a September 1999 
article, Joan Bodnar, senior editor of Kiplinger's Personal Finance 
Magazine wrote, ``Kids tend to equate credit cards with free money--in 
a recent survey of college students, fewer than half of those 
interviewed knew the interest rate on their cards.''
  Similarly, a 1993 American Express/Consumer Federation of America 
study of college students revealed that college juniors and seniors 
only have a ``fair'' understanding of financial services products, and 
few appear to understand an annual percentage rate. A similar study of 
high school seniors reveals that they have a ``poor'' understanding of 
such products.
  The result? College students with no income and good intentions often 
find themselves in debt with no way out. For example, of the 20 percent 
of students who report an average balance greater than $1,000, half of 
those students have four or more credit cards and only 18 percent pay 
off their outstanding balances every month. In addition, 48 percent of 
these students have other debt and nearly one-third have charged 
tuition and fees.

  The economic and emotional consequences of credit card debt can be 
devastating--even deadly--for many students. Tricia Johnson received a 
desperate call from her daughter, Mitzi, a student in her first year at 
the University of Central Oklahoma. Mitzi had lost her part-time job 
and was

[[Page S14379]]

afraid she could not pay her debts. Mrs. Johnson tried to comfort her 
distraught daughter. But, later that night, Mitzi committed suicide. 
She had accumulated $2,500 in credit card debt, but her weekly income 
rarely exceeded $65. When the police found Mitzi, credit cards were 
spread across her bed.
  Janie O'Donnell--the mother of Sean Moyer, a National Merit Scholar 
attending the University of Oklahoma--had the same devastating 
experience. In 1998, Sean told his mother he had no idea how to get out 
of his financial mess, and he did not see much of a future for himself. 
Sean had moved home to save money and pay off the $10,000 he owed Visa 
and Master Card. A week later, he committed suicide.
  A study by the University of Minnesota in 1996, suggests that credit 
card debt by students often goes hand in hand with stress and 
depression. Two-thirds of students who said they were taking medication 
for depression had more than $1,000 in credit card debt. The study also 
found that as credit card debt increased, the student's grade point 
average went down. In 1998, a University of Indiana administrator said, 
``we lose more students to credit card debt than to academic failure.''
  Tennessee legislators were disturbed by a study that revealed a large 
number of Tennessee bankruptcy filers to be surprisingly young, and 
they are taking action. Several bills were introduced, and the state 
Senate passed legislation that gives students an opportunity to remove 
their name from solicitation lists.
  It's time for Congress to take action as well. The purpose of the 
amendment before the Senate is to ensure responsible lending by credit 
card companies to students. In fact some credit card issuers are 
adhering to self-imposed restrictions that are more narrow than the 
Dodd/Kennedy amendment. For example, Dorinda Simpson, CEO of American 
Partners Federal Credit Union testified that when issuing student 
credit cards, they set a $500 credit limit and require a co-signor ``so 
parents know up front what we are loaning to that college student.''
  This amendment doesn't go that far. It requires credit card companies 
to either establish that a student has the income to repay the debt or 
have a co-signor.
  The requirements aren't overly burdensome. They won't disadvantage 
20-year-olds in the military--they have an income. They won't 
disadvantage a student with deceased parents--another person may co-
sign or the student may have income. They won't disadvantage a 19 year-
old, non-college student who is between jobs--that person may have 
unemployment compensation or another form of income.
  And, finally, this amendment is not a form of lending discrimination. 
When similarly situated individuals aren't treated equally, that's 
discrimination. When underwriting standards are based on perception 
instead of facts, that's discrimination. But, requiring credit card 
issuers to stop preying on college students they know don't have a 
means to repay debt--that is ensuring responsible behavior.
  I urge my colleagues to support this amendment.
  Mr. DODD addressed the Chair.
  The PRESIDING OFFICER. The Senator from Connecticut.
  Mr. DODD. Mr. President, very briefly, the amendment that I have 
offered, along with Senator Kennedy, does the following: It says for 
persons between the ages of 18 and 21, you must either prove you have 
the ability to pay or to have a parent, guardian or some qualified 
person cosign your credit card application. The reason for this 
provision is because there is an alarming increase.
  Mr. SARBANES. Mr. President, the Senate is not in order.
  The PRESIDING OFFICER. The Senate will please be in order. Will 
Senators having conversations please take them into the Cloakroom.
  The Senator from Connecticut.
  Mr. DODD. Thank you, Mr. President.
  There is an alarming increase in the number of young people who are 
being swamped with credit card applications where with merely their 
signature and the showing of a student ID they can receive credit of up 
to $10,000. In fact, today, the average college student, who does not 
pay their monthly balance, has a credit card obligation of $2,000. And 
one-fifth of those have credit card obligations of $10,000 or more. We 
are being told now that one of the largest reasons for disenrollment in 
higher education is because of credit card debt.
  My amendment merely says that between the ages of 18 and 21, you must 
either prove you have the ability to repay or you must have a 
cosignature by a parent, guardian, or other qualified individual with 
the means to repay. It is not outrageous to ask credit card companies 
to require this kind of information. Students are receiving, on the 
average, 50 credit card applications in their first semester of 
college.
  We set the age of 21 for legal consumption of alcohol in this 
country. The IRS has a presumption of age 23, if you are in college, in 
terms of student obligations in loans.
  By merely requesting that the credit card companies ask for this 
basic information, we can slow down this alarming increase in the 
number of young people who are incurring tremendous debts. Many of 
these kids are dropping out of school as a result of these debts.
  Mr. President, I urge adoption of this amendment to stop this 
alarming trend of too many young people, while at too young an age, 
incurring unreasonable credit card debts.
  The PRESIDING OFFICER. The time has expired.
  I must say before the Senator speaks, the Senate is not in order. 
Will the Senate please come to order.
  The Senator from Utah.
  Mr. HATCH. Mr. President, this amendment unfairly discriminates 
against young adults, and I think it should be opposed. Adults between 
the ages of 18 and 21 can defend our country in the military. Yet under 
this amendment, they will not be able to even get a credit card without 
overcoming regulatory obstacles in their way.
  Many young adults, some of whom are students and are supporting young 
families, need access to credit cards to make their lives just a little 
bit easier. So I oppose this paternalistic amendment.
  I remember what it was like to work in a low-paying job as a janitor. 
I can appreciate the benefits that being able to obtain credit will 
provide to hard-working young adults.
  Keep in mind, many in this group oppose parental consent for 
abortion, and you are going to impose parental consent on young adults 
who may be working, who may have families, who may be in the military, 
who may be as responsible as anybody else. It just plain isn't right. I 
do not think we should vote for that.
  So I move to table the amendment and ask for the yeas and nays.
  The PRESIDING OFFICER. Is there a sufficient second?
  There appears to be.
  The yeas and nays were ordered.
  The PRESIDING OFFICER. The question is on agreeing to the motion to 
table amendment No. 2754. The yeas and nays have been ordered. The 
clerk will call the roll.
  The legislative clerk 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 family.
  The result was announced--yeas 59, nays 38, as follows:

                      [Rollcall Vote No. 359 Leg.]

                                YEAS--59

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

                                NAYS--38

     Akaka
     Baucus
     Bayh
     Bingaman
     Boxer
     Breaux
     Byrd
     Campbell
     Conrad
     Daschle
     Dodd
     Dorgan

[[Page S14380]]


     Durbin
     Edwards
     Feinstein
     Graham
     Harkin
     Inouye
     Jeffords
     Kennedy
     Kerrey
     Kerry
     Landrieu
     Lautenberg
     Leahy
     Levin
     Lieberman
     Mikulski
     Moynihan
     Murray
     Reed
     Reid
     Rockefeller
     Sarbanes
     Schumer
     Stevens
     Wellstone
     Wyden

                        ANSWERED ``PRESENT''--1

       
     Fitzgerald
       

                             NOT VOTING--2

     Hollings
     McCain
       
  The motion was agreed to.
  Mr. REID. I move to reconsider that vote.
  Mr. BROWNBACK. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.
  Mr. REID. I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. BREAUX. I ask unanimous consent that the order for the quorum 
call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. BREAUX. Mr. President, I ask the attention of the managers. I 
understand there is an informal agreement to allow myself and my 
colleague, Senator Frist, to proceed for 5 minutes as in morning 
business. If that is the case, I ask unanimous consent I be allowed to 
proceed as in morning business for 5 minutes followed by my colleague 
from Tennessee with the same request.
  Mr. DODD. Reserving the right to object, is that with the 
understanding that at the conclusion of the 10 minutes I have the 
opportunity to offer my amendment?
  Mr. REID. Reserving the right to object, if the Senator will 
withhold, we are attempting to get unanimous consent agreement so we 
can move on.
  Mr. DODD. If the Senator from Tennessee and the Senator from 
Louisiana want to proceed, that is fine.
  Mr. REID. If we get unanimous consent, the Senator can interrupt.
  The PRESIDING OFFICER (Mr. Brownback). The Senator from Louisiana is 
recognized for 5 minutes.

                          ____________________