[Congressional Record Volume 145, Number 163 (Wednesday, November 17, 1999)]
[Senate]
[Pages S14669-S14676]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                BANKRUPTCY REFORM ACT OF 1999--Continued


                           Amendment No. 2756

    (Purpose: To discourage indiscriminate extensions of credit and 
         resulting consumer insolvency, and for other purposes)

  Mrs. FEINSTEIN. Mr. President, I ask to call up amendment No. 2756.
  Mr. GRASSLEY. Reserving the right to object, is there a unanimous 
consent agreement before the Senate?
  The PRESIDING OFFICER (Mr. Crapo). There is a unanimous consent 
agreement permitting the Senator from California to offer an amendment 
at this time.
  Mr. GRASSLEY. I withdraw my reservation.
  The PRESIDING OFFICER. The clerk will report the amendment.
  The legislative assistant read as follows:

       The Senator from California [Mrs. Feinstein], for herself 
     and Mr. Jeffords, proposes an amendment numbered 2756.

  Mrs. FEINSTEIN. I ask unanimous consent 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:

     SEC. ____. ENCOURAGING CREDITWORTHINESS.

       (a) Sense of the Congress.--It is the sense of the Congress 
     that--
       (1) certain lenders may sometimes offer credit to consumers 
     indiscriminately, without taking steps to ensure that 
     consumers

[[Page S14670]]

     are capable of repaying the resulting debt, and in a manner 
     which may encourage certain consumers to accumulate 
     additional debt; and
       (2) resulting consumer debt may increasingly be a major 
     contributing factor to consumer insolvency.
       (b) Study Required.--The Board of Governors of the Federal 
     Reserve System (hereafter in this section referred to as the 
     ``Board'') shall conduct a study of--
       (1) consumer credit industry practices of soliciting and 
     extending credit--
       (A) indiscriminately;
       (B) without taking steps to ensure that consumers are 
     capable of repaying the resulting debt; and
       (C) in a manner that encourages consumers to accumulate 
     additional debt; and
       (2) the effects of such practices on consumer debt and 
     insolvency.
       (c) Report and Regulations.--Not later than 12 months after 
     the date of enactment of this Act, the Board--
       (1) shall make public a report on its findings with respect 
     to the indiscriminate solicitation and extension of credit by 
     the credit industry;
       (2) may issue regulations that would require additional 
     disclosures to consumers; and
       (3) may take any other actions, consistent with its 
     existing statutory authority, that the Board finds necessary 
     to ensure responsible industrywide practices and to prevent 
     resulting consumer debt and insolvency.

  Mrs. FEINSTEIN. This is submitted on behalf of Senator Jeffords of 
Vermont and myself. This is the same amendment that passed the Senate 
last year by voice vote. It is an important amendment, which is why I 
wish to do it today and ask for a rollcall vote.
  Last year it was deleted in conference. I believe it will suffer the 
same fate today if it were simply accepted. I note that the managers 
have agreed to accept the amendment. I particularly want the Senator 
from Iowa to know that I am very grateful for that accommodation. 
However, I run the risk in allowing it to be accepted that it is again 
expunged in conference.
  This amendment requires the Federal Reserve Board to investigate the 
practice of issuing credit cards indiscriminately and inappropriately 
and to take necessary action to ensure that consumer credit is not 
extended recklessly or in a manner that encourages practices which 
cause consumer bankruptcies.
  One part of the amendment, a brief paragraph, is a sense of the 
Senate that finds that certain lenders may offer credit to consumers 
indiscriminately and don't take steps to ensure that consumers have the 
capacity to repay the resulting debt, possibly encouraging consumers to 
even accumulate additional debt. We all know that to be true. The 
amendment then goes on to say that the resulting consumer debt may 
increasingly be a major contributing factor to consumer bankruptcies.
  This amendment would authorize the Federal Reserve Board to conduct a 
study of industry practices of soliciting and extending credit 
indiscriminately without taking those steps that are prudent to ensure 
consumers are capable of repaying that debt. Within 1 year of 
enactment, the Federal Reserve Board would make a public report on its 
findings regarding the credit industry's indiscriminate solicitation 
and extension of credit.
  The amendment then would allow the Federal Reserve Board to issue 
regulations that would require additional disclosures to consumers and 
to take any other actions, consistent with its statutory authority, 
that the Board finds necessary to ensure responsible industry-wide 
practices and to prevent resulting consumer debt and insolvency.
  Why this amendment? Why is this amendment needed? This amendment 
directly addresses one of the major causes of personal bankruptcies: 
bad consumer credit card debt. The typical family filing for bankruptcy 
in 1998 owed more than 1\1/2\ times its annual income in short-term, 
high-interest debt. This means that the average family in bankruptcy, 
with a median income of just over $17,500, had $28,955 in credit card 
and other short-term, high-interest debt--almost double the income of 
debt.
  Studies by the Congressional Budget Office, the FDIC, and independent 
economists all link the rise in personal bankruptcies directly to the 
rise in consumer debt. As consumer debt has risen to an all-time high, 
so have consumer bankruptcies. Any meaningful bankruptcy reform I think 
must address irresponsible actions of certain segments of the credit 
card industry because, after all, this is the major problem that is 
exacerbating bankruptcy and increasing the number of filings.
  Last year, the credit card industry sent out a record 3.45 billion 
unsolicited offers. That is 30 solicitations for credit cards to every 
household in America. The number of solicitations jumped 15 percent 
from the last time I did this amendment to this time I am doing this 
amendment. So instead of slowing down irresponsible offers of credit to 
people who cannot possibly repay that credit, they have sped it up.
  There are over 1 billion credit cards in circulation, a dozen credit 
cards for every household in this country. Three-quarters of all 
households have at least one credit card. Credit card debt has doubled 
between 1993 and 1997, to $422 billion from just over $200 billion.
  During this 2-year debate on this bankruptcy bill, which I support, 
my staff has contacted numerous credit card issuers. The overwhelming 
majority of these companies do not check the income of the consumers 
being solicited. In other words, credit card issuers have no idea 
whether persons to whom they issued credit cards have the means to pay 
their bill each month.
  One of my constituents from Lakewood, CA, wrote, and this really 
describes this aptly:

       What really bugs me about this is that credit card 
     companies send out these solicitations for their plastic 
     cards, and then when they get burned, they start crying foul. 
     They want all kinds of laws passed to protect them from 
     taking hits when it's their own practices that caused the 
     problem.

  There is a real element of truth in this. This amendment will not 
affect any responsible lender. It will not affect the vast majority of 
the credit card industry who responsibly check consumer credit history 
before issuing or preapproving credit cards.

  Representatives of large credit card issuers have assured me and my 
staff that they do not provide credit cards to consumers without a 
thorough credit check. However, I note that major credit cards, such as 
Visa or MasterCard, do not require banks who issue their cards to check 
credit history. That is a bona fide area at which an investigation and 
a study should take a look. Is this a good practice, not to check the 
bank who issues your card under your auspices and see that they also 
check the creditworthiness of the individual?
  This amendment would affect lenders who fail to even inquire into the 
consumer's ability to pay or those who specifically target consumers 
who cannot repay the balances. It was news to me that there is a whole 
category of companies out there who actually go after people who are 
overcome with credit card debt and offer them more credit cards to 
repay that debt. A growing segment of the credit industry, known as 
subprime lenders, increasingly searches for risk borrowers who they 
know will make inappropriately low minimum monthly payments and carry 
large balances from month to month and have to pay extraordinarily high 
interest rates.
  This kind of lending has become the fastest growing, most profitable 
subset of consumer lending. Although losses are substantial, interest 
rates of 18 percent to 40 percent on credit card debt make this lending 
profitable. Many of these often relatively unsophisticated borrowers do 
not realize that minimum monthly payments just put them deeper in a 
hole which, in many cases, leads to bankruptcy.
  I have somebody close to me who is in that situation and has been in 
that situation from 1991 to the present day with six or eight credit 
cards, does not have the income to repay them, and all this individual 
has had is mounting interest payments and can never get to the 
principal of the debt. No matter how this individual responds within 
his or her capabilities, he or she cannot possibly pay off the debt. I 
even stepped in and made an offer to the credit card companies to repay 
the debt with a modicum of interest attached to it for this individual 
and was turned down. They said they made an offer to settle and they 
rejected the offer, they withdrew the offer of settlement.
  Industry analysts estimate that using a typical minimum monthly 
payment rate on a credit card in order to pay off a $2,500 balance--
that is a balance of just $2,500--assuming the consumer never uses the 
card to charge

[[Page S14671]]

anything else ever again, would take 34 years to pay off the balance. 
That is the situation in which people find themselves.
  It is my belief that this is irresponsible. What we are asking is the 
Federal Reserve do a study, an investigation to see if they agree this 
is irresponsible.
  So this is the core concept.
  Oh, let me make one other point. On the situation I just indicated to 
you, that somebody who had that balance of $2,500 never used the card 
to charge anything else again, it would take 34 years to pay off that 
balance. Total payments would exceed 300 percent of the principal.
  So what I have found out is, there are people who are needy, who 
succumb to these credit cards, who engage in not just one credit card 
with $10,000, but five or six or seven or eight, and maybe have an 
income of $17,000 or $15,000 a year. They make these purchases, they 
get into trouble, and they can never pay off their debt. So, yes, 
bankruptcy looms as the only alternative.
  To tighten up their obligations to pay back the debt--which I am in 
agreement of doing--and yet not evaluate whether these policies of 
lending are as responsible as they should be is absolutely wrong.
  So for the second time in 2 years, I offer this amendment and I ask 
for the yeas and nays in the hopes that the amendment will be agreed to 
and will remain in the bill in conference.
  The PRESIDING OFFICER. Is the Senator requesting the yeas and nays at 
this time?
  Mrs. FEINSTEIN. I request 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 Senator from Iowa.


  Amendments Nos. 2655, as modified; 2764, as modified; and 2661, as 
                                modified

  Mr. GRASSLEY. Mr. President, I would like to ask unanimous consent on 
some amendments that have been agreed to.
  I ask unanimous consent that the following amendments, as modified 
where noted, be considered agreed to, en bloc, and the motions to 
reconsider be laid upon the table, en bloc. The amendments are as 
follows: No. 2655, as modified; No. 2764, as modified; and No. 2661, as 
modified. I send the modifications to the desk.
  Mr. SCHUMER addressed the Chair.
  The PRESIDING OFFICER. The Senator from New York.
  Mr. SCHUMER. Reserving the right to object.
  The PRESIDING OFFICER. The Senator is recognized.
  Mr. SCHUMER. I thank the Senator.
  The Senator from Iowa knows I reserve that right but will not 
ultimately object. But I do want to point out to my colleagues that the 
amendments to be accepted by unanimous consent, which deal with the 
``teaser'' issue, which deal with disclosure on credit cards, in my 
judgment, do not go very far and need to go much further. I suggest to 
my colleagues that the amendment Mr. Santorum of Pennsylvania and I 
have offered would go much further on what would do the job.
  Let me be very clear. I have been working on credit card disclosure 
for over 10 years. A while ago, about 7 or 8 years ago, we passed 
something we thought required the credit card companies to disclose, in 
large numerical print, how much the annual interest rate was. That is 
really the key issue when you decide what credit card to take. Many of 
the credit card companies use ``teaser'' rates. They say 2 percent or 3 
percent for a couple of months and then raise it to 10 or 11 or 15 
percent.
  So we drafted an amendment. But at the request of the industry, we 
were not very specific. They said: You don't have to specify how large 
the print should be or what should be in the box; just do it. It became 
law. The box was known as the Schumer box.
  Let me show you what it is in current law. This credit card shown on 
this chart is governed by that law. The only large print and the only 
number you see is ``3.9 percent.'' That is what is called the 
``teaser'' rate. It is only offered for a few months.
  When it is time to pay your regular annual fee--in this case, 9.9 
percent--in the box is just a lot of legal gobbledygook, and you can 
hardly see what the number is. To understand it is the 9.9 percent or 
the 19.99 percent which governs, you probably have to have a degree 
from Harvard Law School.
  What the Grassley-Torricelli amendment does is allow this kind of 
deception to continue. It makes some improvements, but it does not make 
the real improvement of disclosure. I have talked to leaders of the 
credit card industry. They say: Don't cap us. Don't limit us. We are 
not against disclosure. Then when we come up with a proposal, Mr. 
Santorum and I, that simply says they have to show the amount in 24-
point type--and here is what it says: ``Long-term annual percentage 
rate of purchases,'' and the amount--we get opposition.
  Many of those who are close to the credit card industry have told me 
the industry has told them they are against it. They say they are for 
disclosure, but they really are not.

  I do not have to oppose this amendment because we have a better 
alternative. The alternative is this. If you really believe in 
disclosure, the Santorum-Schumer amendment is the way to go.
  What is shown on this chart is deceptive. In all due respect to my 
good friend from Iowa, who I know cares strongly about this issue, his 
amendment will not change that one drop. They will have in big letters 
the ``teaser'' rate and in hardly intelligible language what the real 
interest rate is.
  I would normally object to this unanimous consent request. But 
because there is an alternative to make real disclosure, and because we 
have already debated, and because I know it is our right to get a vote 
on that amendment, I will not object.
  But I want my colleagues to understand one thing: We are not doing 
much, if anything, for the cause of real disclosure, for the cause of 
letting consumers see the interest rate they are paying before they buy 
the credit card, unless we pass the Schumer-Santorum amendment.
  So I withdraw my objection to this amendment. I know it is offered in 
good faith. But please let my colleagues understand that if you want 
real disclosure--no more, just disclosure, Adam Smith economics--the 
only way to get it is not by an amendment that allows the industry to 
continue deceptive practices but, rather, by the Schumer-Santorum 
amendment which says, in no uncertain terms, ``9.99 percent''--whatever 
the interest rate is--24-point type, in large letters.
  I thank the Senator from Iowa for his courtesy. I withdraw any 
objection to the unanimous consent request.
  The PRESIDING OFFICER. Is there objection?
  Mr. GRASSLEY. Before the Chair rules, I think the Senator from Nevada 
wishes to make a statement.
  Mr. REID. Mr. President, we appreciate the cooperation of all 
Members, especially the Senator from New York, who is always so 
involved in what goes on on the floor but also always so willing to 
work toward a resolution.
  It is my understanding that at this time the Senator is not intending 
to offer amendment No. 2765 which has been filed.
  Mr. SCHUMER. That is correct.
  Mr. REID. I also say to my friend, before the unanimous consent 
agreement is entered, we have a number of amendments that perhaps at 
some later time--I understand there are going to be some votes around 4 
o'clock. We can include, for example, the amendment of the Senator from 
California which is now pending. And there may be some others--for 
example, the one from the Senator from New York, No. 2761, which he 
filed and debated last week. So I would like the manager of the bill to 
take a look at those and see if we can get some definite times set.
  No objection.
  The PRESIDING OFFICER. Without objection, it is so ordered. The 
unanimous consent request is agreed to.
  The amendments (Nos. 2655, as modified; 2764, as modified; and 2661, 
as modified) were agreed to, as follows:


                    AMENDMENT NO. 2655, AS MODIFIED

 (Purpose: To provide for enhanced consumer credit protection, and for 
                            other purposes)

       At the end of the bill, add the following new title:

                   TITLE--CONSUMER CREDIT DISCLOSURE

     SEC. ____01. ENHANCED DISCLOSURES UNDER AN OPEN END CREDIT 
                   PLAN.

       (a) Minimum Payment Disclosures.--Section 127(b) of the 
     Truth in Lending Act (15

[[Page S14672]]

     U.S.C. 1637(b)) is amended by adding at the end the 
     following:
       ``(11)(A) In the case of an open end credit plan that 
     requires a minimum monthly payment of not more than 4 percent 
     of the balance on which finance charges are accruing, the 
     following statement, located on the front of the billing 
     statement, disclosed clearly and conspicuously, in typeface 
     no smaller than the largest typeface used to make other clear 
     and conspicuous disclosures required under this subsection: 
     `Minimum Payment Warning: Making only the minimum payment 
     will increase the interest you pay and the time it takes to 
     repay your balance. For example, making only the typical 2% 
     minimum monthly payment on a balance of $1,000 at an interest 
     rate of 17% would take 88 months to repay the balance in 
     full. For an estimate of the time it would take to repay your 
     balance, making only minimum payments, call this toll-free 
     number: ____________.'.
       ``(B) In the case of an open end credit plan that requires 
     a minimum monthly payment of more than 4 percent of the 
     balance on which finance charges are accruing, the following 
     statement, in a prominent location on the front of the 
     billing statement, disclosed clearly and conspicuously, in 
     typeface no smaller than the largest typeface used to make 
     other clear and conspicuous disclosures required under this 
     subsection: `Minimum Payment Warning: Making only the 
     required minimum payment will increase the interest you pay 
     and the time it takes to repay your balance. Making a typical 
     5% minimum monthly payment on a balance of $300 at an 
     interest rate of 17% would take 24 months to repay the 
     balance in full. For an estimate of the time it would take to 
     repay your balance, making only minimum monthly payments, 
     call this toll-free number: ____________.'.
       ``(C) Notwithstanding subparagraphs (A) and (B), in the 
     case of a creditor with respect to which compliance with this 
     title is enforced by the Federal Trade Commission, the 
     following statement, in a prominent location on the front of 
     the billing statement, disclosed clearly and conspicuously, 
     in typeface no smaller than the largest typeface used to make 
     other clear and conspicuous disclosures under this 
     subsection: `Minimum Payment Warning: Making only the 
     required minimum payment will increase the interest you pay 
     and the time it takes to repay your balance. For example, 
     making only the typical 5% minimum monthly payment on a 
     balance of $300 at an interest rate of 17% would take 24 
     months to repay the balance in full. For an estimate of the 
     time it would take to repay your balance, making only minimum 
     monthly payments, call the Federal Trade Commission at this 
     toll-free number: ____________.' A creditor who is subject to 
     this subparagraph shall not be subject to subparagraph (A) or 
     (B).
       ``(D) Notwithstanding subparagraphs (A), (B), or (C), in 
     complying with any such subparagraph, a creditor may 
     substitute an example based on an interest rate that is 
     greater than 17 percent. Any creditor who is subject to 
     subparagraph (B) may elect to provide the disclosure required 
     under subparagraph (A) in lieu of the disclosure required 
     under subparagraph (B).
       ``(E) The Board shall, by rule, periodically recalculate, 
     as necessary, the interest rate and repayment period under 
     subparagraphs (A), (B), and (C).
       ``(F) The toll-free telephone number disclosed by a 
     creditor or the Federal Trade Commission under subparagraph 
     (A), (B), or (G), as appropriate, may be a toll-free 
     telephone number established and maintained by the creditor 
     or the Federal Trade Commission, as appropriate, or may be a 
     toll-free telephone number established and maintained by a 
     third party for use by the creditor or multiple creditors or 
     the Federal Trade Commission, as appropriate. The toll-free 
     telephone number may connect consumers to an automated device 
     through which consumers may obtain information described in 
     subparagraph (A), (B), or (C), by inputting information using 
     a touch-tone telephone or similar device, if consumers whose 
     telephones are not equipped to use such automated device are 
     provided the opportunity to be connected to an individual 
     from whom the information described in subparagraph (A), (B), 
     or (C), as applicable, may be obtained. A person that 
     receives a request for information described in subparagraph 
     (A), (B), or (C) from an obligor through the toll-free 
     telephone number disclosed under subparagraph (A), (B), or 
     (C), as applicable, shall disclose in response to such 
     request only the information set forth in the table 
     promulgated by the Board under subparagraph (H)(i).
       ``(G) The Federal Trade Commission shall establish and 
     maintain a toll-free number for the purpose of providing to 
     consumers the information required to be disclosed under 
     subparagraph (C).
       ``(H) The Board shall--
       ``(i) establish a detailed table illustrating the 
     approximate number of months that it would take to repay an 
     outstanding balance if the consumer pays only the required 
     minimum monthly payments and if no other advances are made, 
     which table shall clearly present standardized information to 
     be used to disclose the information required to be disclosed 
     under subparagraph (A), (B), or (C), as applicable;
       ``(ii) establish the table required under clause (i) by 
     assuming--
       ``(I) a significant number of different annual percentage 
     rates;
       ``(II) a significant number of different account balances;
       ``(III) a significant number of different minimum payment 
     amounts; and
       ``(IV) that only minimum monthly payments are made and no 
     additional extensions of credit are obtained; and
       ``(iii) promulgate regulations that provide instructional 
     guidance regarding the manner in which the information 
     contained in the table established under clause (i) should be 
     used in responding to the request of an obligor for any 
     information required to be disclosed under subparagraph (A), 
     (B), or (C).
       ``(I) The disclosure requirements of this paragraph do not 
     apply to any charge card account, the primary purpose of 
     which is to require payment of charges in full each month.
       ``(J) A creditor that maintains a toll-free telephone 
     number for the purpose of providing customers with the actual 
     number of months that it will take to repay the consumer's 
     outstanding balance is not subject to the requirements of 
     subparagraphs (A) and (B).
       (b) Regulatory Implementation.--The Board of Governors of 
     the Federal Reserve System (hereafter in this Act referred to 
     as the ``Board'') shall promulgate regulations implementing 
     the requirements of section 127(b)(11) of the Truth in 
     Lending Act, as added by subsection (a) of this section. 
     Section 127(b)(11) of the Truth in Lending Act, as added by 
     subsection (a) of this section, and the regulations issued 
     under this subsection shall not take effect until the later 
     of 18 months after the date of enactment of this Act or 12 
     months after the publication of such regulations by the 
     Board.
       (c) Study of Financial Disclosures.--
       (1) In general.--The Board may conduct a study to determine 
     whether consumers have adequate information about borrowing 
     activities that may result in financial problems.
       (2) Factors for consideration.--In conducting a study under 
     paragraph (1), the Board should, in consultation with the 
     other Federal banking agencies (as defined in section 3 of 
     the Federal Deposit Insurance Act), the National Credit Union 
     Administration, and the Federal Trade Commission, consider 
     the extent to which--
       (A) consumers, in establishing new credit arrangements, are 
     aware of their existing payment obligations, the need to 
     consider those obligations in deciding to take on new credit, 
     and how taking on excessive credit can result in financial 
     difficulty;
       (B) minimum periodic payment features offered in connection 
     with open end credit plans impact consumer default rates;
       (C) consumers make only the minimum payment under open end 
     credit plans;
       (D) consumers are aware that making only minimum payments 
     will increase the cost and repayment period of an open end 
     credit obligation; and
       (E) the availability of low minimum payment options is a 
     cause of consumers experiencing financial difficulty.
       (3) Report to congress.--Findings of the Board in 
     connection with any study conducted under this subsection 
     shall be submitted to Congress. Such report shall also 
     include recommendations for legislative initiatives, if any, 
     of the Board, based on its findings.

     SEC. ____02. ENHANCED DISCLOSURE FOR CREDIT EXTENSIONS 
                   SECURED BY A DWELLING.

       (a) Open End Credit Extensions.--
       (1) Credit applications.--Section 127A(a)(13) of the Truth 
     in Lending Act (15 U.S.C. 1637a(a)(13)) is amended--
       (A) by striking ``consultation of tax advisor.--A statement 
     that the'' and inserting the following: ``tax 
     deductibility.--A statement that--
       ``(A) the''; and
       (B) by striking the period at the end and inserting the 
     following: ``; and
       ``(B) in any case in which the extension of credit exceeds 
     the fair market value (as defined under the Federal Internal 
     Revenue Code) of the dwelling, the interest on the portion of 
     the credit extension that is greater than the fair market 
     value of the dwelling is not tax deductible for Federal 
     income tax purposes.''.
       (2) Credit advertisements.--Section 147(b) of the Truth in 
     Lending Act (15   U.S.C. 1665b(b)) is amended--
       (A) by striking ``If any'' and inserting the following:
       ``(1) In general.--If any''; and
       (B) by adding at the end the following:
       ``(2) Credit in excess of fair market value.--Each 
     advertisement described in subsection (a) that relates to an 
     extension of credit that may exceed the fair market value of 
     the dwelling, and which advertisement is disseminated in 
     paper form to the public or through the Internet, as opposed 
     to by radio or television, shall include a clear and 
     conspicuous statement that--
       ``(A) the interest on the portion of the credit extension 
     that is greater than the fair market value of the dwelling is 
     not tax deductible for Federal income tax purposes; and
       ``(B) the consumer should consult a tax advisor for further 
     information regarding the deductibility of interest and 
     charges.''.
       (b) Non-Open End Credit Extensions.--
       (1) Credit applications.--Section 128 of the Truth in 
     Lending Act (15 U.S.C. 1638) is amended--
       (A) in subsection (a), by adding at the end the following:

[[Page S14673]]

       ``(15) In the case of a consumer credit transaction that is 
     secured by the principal dwelling of the consumer, in which 
     the extension of credit may exceed the fair market value of 
     the dwelling, a clear and conspicuous statement that--
       ``(A) the interest on the portion of the credit extension 
     that is greater than the fair market value of the dwelling is 
     not tax deductible for Federal income tax purposes; and
       ``(B) the consumer should consult a tax advisor for further 
     information regarding the deductibility of interest and 
     charges.''; and
       (B) in subsection (b), by adding at the end the following:
       ``(3) In the case of a credit transaction described in 
     paragraph (15) of subsection (a), disclosures required by 
     that paragraph shall be made to the consumer at the time of 
     application for such extension of credit.''.
       (2) Credit advertisements.--Section 144 of the Truth in 
     Lending Act (15 U.S.C. 1664) is amended by adding at the end 
     the following:
       ``(e) Each advertisement to which this section applies that 
     relates to a consumer credit transaction that is secured by 
     the principal dwelling of a consumer in which the extension 
     of credit may exceed the fair market value of the dwelling, 
     and which advertisement is disseminated in paper form to the 
     public or through the Internet, as opposed to by radio or 
     television, shall clearly and conspicuously state that--
       ``(1) the interest on the portion of the credit extension 
     that is greater than the fair market value of the dwelling is 
     not tax deductible for Federal income tax purposes; and
       ``(2) the consumer should consult a tax advisor for further 
     information regarding the deductibility of interest and 
     charges.''.
       (c) Regulatory Implementation.--The Board of Governors of 
     the Federal Reserve System (hereafter in this Act referred to 
     as the ``Board'') shall promulgate regulations implementing 
     the requirements of subsectons (a) and (b) of this section. 
     Such regulations shall not take effect until the later of 12 
     months after the date of enactment of this Act or 12 months 
     after the publication of such regulations by the Board.

     SEC. ____03. DISCLOSURES RELATED TO ``INTRODUCTORY RATES''.

       (a) Section 127(c) of the Truth in Lending Act (15 U.S.C. 
     1637(c)) is amended by adding at the end the following:
       ``(6) Additional notice concerning `introductory rates'.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     an application or solicitation to open a credit card account 
     and all promotional materials accompanying such application 
     or solicitation, for which a disclosure is required under 
     paragraph (1), and that offers a temporary annual percentage 
     rate of interest, shall--
       ``(i) use the term `introductory' in immediate proximity to 
     each listing of the temporary annual percentage rate 
     applicable to such account, which term shall appear clearly 
     and conspicuously;
       ``(ii) if the annual percentage rate of interest that will 
     apply after the end of the temporary rate period will be a 
     fixed rate, state the following in a clear and conspicuous 
     manner in a prominent location closely proximate to the first 
     listing of the temporary annual percentage rate (other than a 
     listing of the temporary annual percentage rate in the 
     tabular format described in section 122(c)) or, if the first 
     listing is not the most prominent listing, then closely 
     proximate to the most prominent listing of the temporary 
     annual percentage rate, in each document and in no smaller 
     type size than the smaller of the type size in which the 
     proximate temporary annual percentage rate appears or a 12-
     point type size, the time period in which the introductory 
     period will end and the annual percentage rate that will 
     apply after the end of the introductory period; and
       ``(iii) if the annual percentage rate that will apply after 
     the end of the temporary rate period will vary in accordance 
     with an index, state the following in a clear and conspicuous 
     manner in a prominent location closely proximate to the first 
     listing of the temporary annual percentage rate (other than a 
     listing in the tabular format prescribed by section 122(c)) 
     or, if the first listing is not the most prominent listing, 
     then closely proximate to the most prominent listing of the 
     temporary annual percentage rate, in each document and in no 
     smaller type size than the smaller of the type size in which 
     the proximate temporary annual percentage rate appears or a 
     12-point type size, the time period in which the introductory 
     period will end and the rate that will apply after that, 
     based on an annual percentage rate that was in effect within 
     60 days before the date of mailing the application or 
     solicitation.
       ``(B) Exception.--Clauses (ii) and (iii) of subparagraph 
     (A) do not apply with respect to any listing of a temporary 
     annual percentage rate on an envelope or other enclosure in 
     which an application or solicitation to open a credit card 
     account is mailed.
       ``(C) Conditions for introductory rates.--An application or 
     solicitation to open a credit card account for which a 
     disclosure is required under paragraph (1), and that offers a 
     temporary annual percentage rate of interest shall, if that 
     rate of interest is revocable under any circumstance or upon 
     any event, clearly and conspicuously disclose, in a prominent 
     manner on or with such application or solicitation--
       ``(i) a general description of the circumstances that may 
     result in the revocation of the temporary annual percentage 
     rate; and
       ``(ii) if the annual percentage rate that will apply upon 
     the revocation of the temporary annual percentage rate--

       ``(I) will be a fixed rate, the annual percentage rate that 
     will apply upon the revocation of the temporary annual 
     percentage rate; or
       ``(II) will vary in accordance with an index, the rate that 
     will apply after the temporary rate, based on an annual 
     percentage rate that was in effect within 60 days before the 
     date of mailing the application or solicitation.

       ``(D) Definitions.--In this paragraph--
       ``(i) the terms `temporary annual percentage rate of 
     interest' and `temporary annual percentage rate' mean any 
     rate of interest applicable to a credit card account for an 
     introductory period of less than 1 year, if that rate is less 
     than an annual percentage rate that was in effect within 60 
     days before the date of mailing the application or 
     solicitation; and
       ``(ii) the term `introductory period' means the maximum 
     time period for which the temporary annual percentage rate 
     may be applicable.
       ``(E) Relation to other disclosure requirements.--Nothing 
     in this paragraph may be construed to supersede subsection 
     (a) of section 122, or any disclosure required by paragraph 
     (1) or any other provision of this subsection.''.
       (b) Regulatory Implementation.--The Board of Governors of 
     the Federal Reserve System (hereafter in this Act referred to 
     as the ``Board'') shall promulgate regulations implementing 
     the requirements of section 127 of the Truth in Lending Act, 
     as amended by subsection (a) of this section. Any provision 
     set forth in subsection (a) and such regulations shall not 
     take effect until the later of 12 months after the date of 
     enactment of this Act or 12 months after the publication of 
     such regulations by the Board.

     SEC. ____04. INTERNET-BASED CREDIT CARD SOLICITATIONS.

       (a) Section 127(c) of the Truth in Lending Act (15 U.S.C. 
     1637(c)) is amended by adding at the end the following:
       ``(7) Internet-based applications and solicitations.--
       ``(A) In general.--In any solicitation to open a credit 
     card account for any person under an open end consumer credit 
     plan using the Internet or other interactive computer 
     service, the person making the solicitation shall clearly and 
     conspicuously disclose--
       ``(i) the information described in subparagraphs (A) and 
     (B) of paragraph (1); and
       ``(ii) the disclosures described in paragraph (6).
       ``(B) Form of disclosure.--The disclosures required by 
     subparagraph (A) shall be--
       ``(i) readily accessible to consumers in close proximity to 
     the solicitation to open a credit card account; and
       ``(ii) updated regularly to reflect the current policies, 
     terms, and fee amounts applicable to the credit card account.
       ``(C) Definitions.--For purposes of this paragraph--
       ``(i) the term `Internet' means the international computer 
     network of both Federal and non-Federal interoperable packet 
     switched data networks; and
       ``(ii) the term `interactive computer service' means any 
     information service, system, or access software provider that 
     provides or enables computer access by multiple users to a 
     computer server, including specifically a service or system 
     that provides access to the Internet and such systems 
     operated or services offered by libraries or educational 
     institutions.''.
       (b) Regulatory Implementation.--The Board of Governors of 
     the Federal Reserve System (hereafter in this Act referred to 
     as the ``Board'') shall promulgate regulations implementing 
     the requirements of section 127 of the Truth in Lending Act, 
     as amended by subsection (a) of this section. Any provision 
     set forth in subsection (a) and such regulations shall not 
     take effect until the later of 12 months after the date of 
     enactment of this Act or 12 months after the publication of 
     such regulations by the Board.

     SEC. ____05. DISCLOSURES RELATED TO LATE PAYMENT DEADLINES 
                   AND PENALTIES.

       (a) Section 127(b) of the Truth in Lending Act (15 U.S.C. 
     1637(b)) is amended by adding at the end the following:
       ``(12) If a late payment fee is to be imposed due to the 
     failure of the obligor to make payment on or before a 
     required payment due date the following shall be stated 
     clearly and conspicuously on the billing statement:
       ``(A) The date on which that payment is due or, if 
     different, the earliest date on which a late payment fee may 
     be charged.
       ``(B) The amount of the late payment fee to be imposed if 
     payment is made after such date.''.
       (b) Regulatory Implementation.--The Board of Governors of 
     the Federal Reserve System (hereafter in this Act referred to 
     as the ``Board'') shall promulgate regulations implementing 
     the requirements of section 127 of the Truth in Lending Act, 
     as amended by subsection (a) of this section. Any provision 
     set forth in subsection (a) and such regulations shall not 
     take effect until the later of 12 months after the date of 
     enactment of this Act or 12 months after the publication of 
     such regulations by the Board.

[[Page S14674]]

     SEC. ____06. PROHIBITION ON CERTAIN ACTIONS FOR FAILURE TO 
                   INCUR FINANCE CHARGES.

       (a) Section 127 of the Truth in Lending Act (15 U.S.C. 
     1637) is amended by adding at the end the following:
       ``(h) Prohibition on Certain Actions for Failure To Incur 
     Finance Charges.--A creditor of an account under an open end 
     consumer credit plan may not terminate an account prior to 
     its expiration date solely because the consumer has not 
     incurred finance charges on the account. Nothing in this 
     subsection shall prohibit a creditor from terminating an 
     account for inactivity in 3 or more consecutive months.''.
       (b) Regulatory Implementation.--The Board of Governors of 
     the Federal Reserve System (hereafter in this Act referred to 
     as the ``Board'') shall promulgate regulations implementing 
     the requirements of section 127 of the Truth in Lending Act, 
     as amended by subsection (a) of this section. Any provision 
     set forth in subsection (a) and such regulations shall not 
     take effect until the later of 12 months after the date of 
     enactment of this Act or 12 months after the publication of 
     such regulations by the Board.

     SEC. ____07. DUAL USE DEBIT CARD.

       (a) Report.--The Board may conduct a study of, and present 
     to Congress a report containing its analysis of, consumer 
     protections under existing law to limit the liability of 
     consumers for unauthorized use of a debit card or similar 
     access device. Such report, if submitted, shall include 
     recommendations for legislative initiatives, if any, of the 
     Board, based on its findings.
       (b) Considerations.--In preparing a report under subsection 
     (a), the Board may include--
       (1) the extent to which section 909 of the Electronic Fund 
     Transfer Act (15 U.S.C. 1693g), as in effect at the time of 
     the report, and the implementing regulations promulgated by 
     the Board to carry out that section provide adequate 
     unauthorized use liability protection for consumers;
       (2) the extent to which any voluntary industry rules have 
     enhanced or may enhance the level of protection afforded 
     consumers in connection with such unauthorized use liability; 
     and
       (3) whether amendments to the Electronic Fund Transfer Act 
     (15 U.S.C. 1693 et seq.), or revisions to regulations 
     promulgated by the Board to carry out that Act, are necessary 
     to further address adequate protection for consumers 
     concerning unauthorized use liability.

     SEC. ____08. STUDY OF BANKRUPTCY IMPACT OF CREDIT EXTENDED TO 
                   DEPENDENT STUDENTS.

       (a) Study.--
       (1) In general.--The Comptroller General of the United 
     States shall conduct a study regarding the impact that the 
     extension of credit described in paragraph (2) has on the 
     rate of bankruptcy cases filed under title 11, United States 
     Code.
       (2) Extension of credit.--The extension of credit referred 
     to in paragraph (1) is the extension of credit to individuals 
     who are--
       (A) claimed as dependents for purposes of the Internal 
     Revenue Code of 1986; and
       (B) enrolled in postsecondary educational institutions.
       (b) Report.--Not later than 1 year after the date of 
     enactment of this Act, the Comptroller General of the United 
     States shall submit to the Senate and the House of 
     Representatives a report summarizing the results of the study 
     conducted under subsection (a).
                                  ____



                    amendment no. 2764, as modified

  (Purpose: To provide for greater accuracy in certain means testing)

       On page 7, strike line 24 through page 8, line 3, and 
     insert the following:
       ``(I) the sum of--
       ``(aa) the total of all amounts scheduled as contractually 
     due to secured creditors in each month of the 60 months 
     following the date of the petition; and
       ``(bb) any additional payments to secured creditors 
     necessary for the debtor, in filing a plan under chapter 13 
     of this title, to maintain possession of the debtor's primary 
     residence, motor vehicle, or other property necessary for the 
     support of the debtor and the debtor's dependents, that 
     serves as collateral for secured debts; divided by
       ``(II) 60.
                                  ____



                    amendment no. 2661, as modified

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

       On page 12, between line 10 and 11, insert the following:
       ``In any case in which a motion to dismiss or convert or a 
     statement is required to be filed by this subsection, the 
     U.S. Trustee or Bankruptcy Administrator may decline to file 
     a motion to dismiss or convert pursuant to 704(b)(2) or if
       ``(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;
       ``(bb) $15,000.''

  Mr. GRASSLEY. I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The bill clerk proceeded to call the roll.
  Mr. GRASSLEY. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                           Amendment No. 2762

  Mr. GRASSLEY. Mr. President, I ask unanimous consent that we now move 
to consideration of the amendment by the Senator from New York that we 
call the safe harbor amendment, and I ask unanimous consent that there 
be 10 minutes, 5 minutes for the Senator from New York----
  Mr. SCHUMER. Could we have 10 minutes on each side?
  Mr. GRASSLEY. OK, 10 minutes on this side and 10 minutes to be 
controlled by the Senator from New York.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. SCHUMER. Just to make sure, no second-degree amendments prior to 
the vote on this amendment?
  Mr. GRASSLEY. We have no objection to that.
  The PRESIDING OFFICER. Without objection, it is so ordered. The 
Senator from New York is recognized for 10 minutes.
  Mr. SCHUMER. Mr. President, the Senator from Illinois, Mr. Durbin, 
and I are offering an amendment to do some commonsense housecleaning 
with respect to the means test safe harbor now in the bill and, more 
significantly, to restore something that was unfortunately taken out of 
the bill by the managers' amendment: true protection for low- and 
moderate-income bankruptcy filers from coercive predator litigation 
tactics involving section 707(b) of the bankruptcy code.
  First the housecleaning: The managers' amendment included a provision 
stating that the bill's means test could not be used to remove low- and 
moderate-income debtors from chapter 7. That was undoubtedly a big step 
forward for this bill, and I congratulate the managers for having taken 
that step.
  Now that the means test no longer applies to low- and moderate-income 
bankruptcy filers, it makes no sense for these individuals to have to 
file means test calculations based on their income and expenses along 
with the other papers they must file upon declaring bankruptcy. 
Likewise, it makes no sense for U.S. trustees to have to do means test 
calculations with respect to low- and moderate-income bankruptcy filers 
who, I repeat, cannot be means tested out of chapter 7. This imposes 
unnecessary burdens on debtors and wastes taxpayer dollars by leaving 
these requirements in place.
  Our amendment would fix the problem by deleting these requirements 
only in cases involving low- and moderate-income bankruptcy filers. 
These filers would still have to document their income and expenses. 
They just wouldn't have to do means test calculations anymore, which 
are no longer required.
  Now for the more important issue, the issue of protecting low- and 
moderate-income bankruptcy filers from any coercive creditor litigation 
tactics under 707(b). Sad to say, this only became an issue 2 days or 
so ago. The bill formerly had a provision preventing creditors from 
bringing any motion under 707(b) against low- and moderate-income 
bankruptcy filers. That included motions under the means test, motions 
alleging that the debtor filed for chapter 7 in bad faith, and motions 
alleging that the totality of the circumstances of the debtor's 
financial situation demonstrated abuse. Bankruptcy trustees could bring 
these motions against low- and moderate-income debtors, and 
appropriately so, just not creditors.
  According to the report language for this bill, the ban on predator 
motions existed to protect low-income filers; in other words, no 
motion, no prospect for creditor coercion. Last year's Senate

[[Page S14675]]

bill had the same protection for low- and moderate-income filers. And 
even this year's House bill, which many consider more stringent than 
the Senate bill, had this protection. Yet at this late stage in the 
game, the managers' amendment deleted much of this bill's so-called 
safe harbor against creditor 707(b) motions. It continues to protect 
low- and moderate-income bankruptcy filers from motions under the means 
test but now, for the first time, leaves these debtors vulnerable to 
creditor motions alleging debtor bad faith or that the totality of the 
circumstances demonstrated debtor abuse.
  This chart illustrates the problem. Under the House's bill, safe 
harbor creditors can bring means test or totality of circumstances 
motions only against above-median-income debtors. Under the Senate 
bill, as modified by the managers' amendment, motions against all 
debtors, even those with income below median income for a household of 
similar size, can be brought by creditors.
  What is the big deal about leaving low- and moderate-income debtors 
vulnerable to creditor motions based on these grounds? The big deal is 
what some aggressive creditors will do with these motions. These 
creditors will use these motions and threats to bully poorer debtors 
into giving up their bankruptcy rights altogether, whether that means 
staying away from bankruptcy altogether, giving up their bankruptcy 
claims, or agreeing that certain of their debts simply won't be reduced 
or eliminated by virtue of bankruptcy.
  This should trouble all of us. Debtors who can't afford to litigate 
with their creditors will just bow to creditors' demands.
  Now, if I sound alarmist, I do so because the record is filled with 
examples of aggressive creditors using the motions and leverage they 
currently have under the bankruptcy code to coerce low- and moderate-
income debtors into giving up their bankruptcy rights in some form.
  In a review of a bankruptcy court case for the Western District of 
Oklahoma, the judge described that creditor's practice as follows:

       A review of the practices of [creditor's] attorneys . . . 
     indicated that in 1996 the firm filed 45 complaints seeking 
     exceptions to discharges on behalf of creditors having debts 
     arising from credit card agreements; that 100 such complaints 
     were filed in 1997. . . .
       The firm's pattern of conduct appears as little more than 
     the use of this court and the bankruptcy code to coerce from 
     these debtors reaffirmation of their unsecured credit card 
     debt or some portion of it.

  I could go on with other examples, but I will not to save the time of 
my colleagues.
  Here's a bankruptcy judge from the Western District of Missouri 
describing the litigation practices of AT&T Universal Card Services: 
The [fraud] complaints, filed by AT&T, were filed solely to extract a 
settlement from debtors. Once AT&T realized that the case would not 
settle and that is would actually be required to offer evidence to 
support the allegations in the complaints, it moved to dismiss.
  A woman from California described her experience.

       . . . on the day we went to the bankruptcy hearing, we were 
     approached by a woman from [a retail creditor]. She explained 
     to me who she was. At the time, I was due to give birth in 
     two weeks. The woman told us we needed either to pay our bill 
     in full or return items such as a sofa, washing machine, and 
     vacuum. We weren't going to the hearing because we had money, 
     and we couldn't afford to replace these items, which we 
     needed. We explained these things and found an attorney. The 
     woman then said we could keep the items if we signed a paper 
     saying we would continue making payments. . . . We signed, of 
     course.

  There is absolutely nothing illegal about making certain types of 
threats today. There is not enough in this bill to stop most threats of 
this nature from being made--and succeeding--tomorrow.
  If you still think I am thrusting at windmills, let me direct your 
attention to a real-life letter from a creditor's attorney to a 
debtor's attorney. The words speak for themselves.

       We have reason to believe that your client may have 
     committed fraud in the use of the above-referenced credit 
     relationship. . . .
       Be assured that our company is aware of the deadline for 
     filing an objection to dischargeability and has calendared 
     this date.

  The problem is unequal bargaining power. It simply pays for the 
creditor to put a debtor in the position of having to burn through 
several thousand dollars in attorney's fees fighting over a $100 TV 
set.
  I want to be clear about something. I am not arguing that low- and 
moderate-income debtors should be exempt from motions to remove them 
from chapter 7 for filing in bad faith or filing for chapter 7 
abusively in light of the totality of their financial circumstances. 
All I am saying is that when it comes to a debtor with $20,000 in 
yearly income, leave it to the bankruptcy trustees to bring these 
motions. Leave it to the numerous other provisions of this bill that 
graft new antifraud language onto the bankruptcy code to remedy the 
problem. Just don't leave these debtors and their families vulnerable 
to the small, but not insignificant, number of wolves among the 
creditor population.
  I was leafing through Congress Daily one day last month, and I ran 
into this advertisement run by the supporters of bankruptcy reform. The 
ad features Mel from Mel's Auto Repairs, expressing concern: ``wealthy 
customers getting a free ride in bankruptcy,'' ``wealthy filers,'' 
``higher-income filers,'' ``wealthy Americans today . . . erasing their 
debts while continuing to live an affluent lifestyle.'' The theme of 
``bankruptcy abuse by the wealthy'' pervades the whole ad.
  Mel is right. Wealthy persons do abuse the bankruptcy system, and too 
often. And it needs to be stopped. But surely, subjecting low- and 
moderate-income debtors to new and potent creditor motions has nothing 
to do with cracking down on wealthy deadbeats. The rhetoric of this ad 
doesn't match the reality of this bill--particularly its provision 
subjecting a single debtor with $20,000 in income, a married debtor 
with a household income of $30,000, or a debtor with a spouse and two 
kids with a household income of $40,000, to the threat of coercive 
creditor litigation tactics involving 707(b) of the bankruptcy code.
  I urge colleagues to vote in favor of this amendment and to simply 
restore this bill to what it used to be and to where the House bill is.
  I yield the remainder of my time.
  The PRESIDING OFFICER. The Senator from Iowa.
  Mr. GRASSLEY. Mr. President, first of all, I thank the Senator from 
New York for his cooperation with us on a couple of amendments he has 
worked out with us and has withdrawn so we could get closer to 
completion of work on this particular amendment.
  In the case of his amendment just now offered, and my opposition to 
it, I want to say we have taken into consideration some of the 
complaints he has made--not about our bill, but complaints he would 
have made about some of the people writing legislation in this area, 
that they would go too far. But I think his amendment goes too far 
because it would have the effect of letting bankrupts below the 
national median income file for bankruptcy and do it in bad faith. That 
would make the small businesses and honest Americans who stand to lose 
out--they will be told they can't do anything about it. What we want is 
opportunity in our legal system, in the bankruptcy system, in the 
courts there, to be able to make a judgment, if there is bad faith 
used, to do something about it--most importantly, to discourage that 
sort of activity.
  So I think this amendment gets us back to the point where we are now 
under existing law--inviting abuse of the bankruptcy code.
  Under our bill, which we have been debating for the last several days 
on the floor of the Senate, and particularly as modified by the 
managers' amendment now, people below the national median income are 
not subject to motions by anybody under the means test. But there is 
another part of this bill that says the bankruptcy cases can be 
dismissed if the debtor filed for bankruptcy in bad faith. At this 
point, the creditors are allowed to file motions asking a bankruptcy 
judge to dismiss a case if it is filed in bad faith. That is the way 
our litigation system works and should continue to work.
  In an effort to go the extra mile, however, I accepted an amendment, 
by Senator Reed of Rhode Island and Senator Sessions, to put new 
safeguards in place to prevent creditors using any power they have to 
file bad faith motions as a tactic to force a debtor to

[[Page S14676]]

give up his or her rights. That should not be allowed. The Reed 
Sessions amendment corrects that. The projections in the Reed Sessions 
amendment were also developed in close consultation with the White 
House.
  Our bill further provides that if a motion to dismiss is filed and 
the judge dismisses it, the judge can assess penalties against a 
creditor who filed the motion if the motion wasn't substantially 
justified. So we want to make sure that creditors who would abuse some 
of their power in court would not--if it was not substantially 
justified, if their position was not substantially justified, then 
action should be taken against them, and that is entirely fair as well. 
So we have a fair system with tough penalties for creditor abuses.
  Now, the amendment of Senator from New York will return to the system 
we have today. Under current law, creditors can't file motions when a 
chapter 7 case is abusive or improper. And every observer acknowledges 
that the current system doesn't work at all in terms of catching abuse; 
hence, a major part of this bill is to correct this situation.
  We went to great length in our committee report on this bankruptcy 
bill to discuss this point in very much detail. So this amendment 
should be defeated because it prevents the provisions prohibiting bad 
faith bankruptcy from being enforced. That is like saying to deadbeats 
it is not OK to file for bankruptcy in bad faith, but we are not going 
to do anything about it if you do. And, of course, that is exactly the 
wrong signal we want to send. We want to make sure that people who go 
into bankruptcy are people who have a legitimate reason for being there 
and that they aren't taking advantage of bankruptcy to somehow help 
themselves, and in bad faith is part of that process.

  Mr. President, how much time do I have left?
  The PRESIDING OFFICER. The Senator from Iowa has 5 minutes remaining, 
and the Senator from New York used all the time allowed.
  Mr. GRASSLEY. I yield the remainder of my time.
  Mr. SCHUMER. Mr. President, may I ask unanimous consent for 1 minute 
to respond?
  Mr. GRASSLEY. Then I will reserve my time, if I may.
  The PRESIDING OFFICER. The Senator from Iowa reserves his time.
  Does the Senator object to the unanimous-consent request?
  Mr. GRASSLEY. I do not object.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. SCHUMER. I thank my colleague. I wish to answer.
  The bill's provisions purporting to prevent and ameliorate coercive 
creditor litigation tactics will not be able to undo the damage done by 
giving creditors the right to bring 707(b) ``totality of the 
circumstances'' and ``bad faith'' motions against low- and moderate-
income debtors.
  Section 102 of the bill says a court may award a debtor costs and 
attorney's fees if a court rules against the creditor's 707(b) motion 
and that motion was not ``substantially justified.'' This provision 
will not deter coercive creditor litigation tactics. It doesn't cover 
coercive threats to bring 707(b) motions, which are often sufficient to 
force a debtor to give up his or her bankruptcy rights.
  Finally, this sanctions provision contains an exception which 
precludes any award against a creditor that holds a claim of under 
$1,000, no matter how wealthy the creditor is.
  The PRESIDING OFFICER. The Senator from Iowa.
  Mr. GRASSLEY. Mr. President, the issue that the Senator from New York 
just brought up of threats being used is exactly what the Reed-Sessions 
amendment deals with. I suggest this was also very much a point that 
was raised by people at the White House that we have been discussing--
the whole issue of bankruptcy over a long period of time.
  This was also worked out because this was a major concern. They did 
not want this abuse. They did not want the issue of threats. We agree 
with them, as we had to work it out with Senators Sessions and Reed 
because the bill, as they saw it, was not adequate enough in this area.
  As people vote on this amendment, I hope they will consider that we 
have been trying to respond in a very legitimate and strong way against 
the use of threats.
  Mr. SCHUMER. Will the Senator yield for a question?
  Mr. GRASSLEY. The answer is yes.
  Mr. SCHUMER. I thank the Senator for his careful deliberation and his 
yielding.
  It is my understanding that section 203 of the bill deemed it a 
violation of the automatic stay for a creditor to engage in any 
communication other than a recitation of the creditor's rights, and 
this would deal with threat. This provision would be stricken from the 
bill by the Reed-Sessions amendment. So the Reed-Sessions amendment 
didn't deal with the problem, but it actually took out the basic 
protection that a low-income debtor would have against threat.
  Is that not correct?
  Mr. GRASSLEY. If you threaten somebody during reaffirmation, the 
Sessions-Reed amendment is set aside.
  I yield the remainder of my time.
  I ask unanimous consent that the Senator from Louisiana be granted 5 
minutes to speak as if in morning business.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Ms. LANDRIEU. I thank the Senator.
  The PRESIDING OFFICER. The Senator from Louisiana is recognized for 5 
minutes.

                          ____________________