[Congressional Record Volume 150, Number 103 (Thursday, July 22, 2004)]
[Senate]
[Pages S8743-S8746]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. DODD:
  S. 2755. A bill to amend the Consumer Credit Protection Act to ban 
abusive credit practices, enhance consumer disclosures, protect 
underage consumers, and for other purposes; to the Committee on 
Banking, Housing, and Urban Affairs.
  Mr. DODD. Mr. President, it is often said that small things can make 
a very large difference in our society. That saying certainly fits the 
subject I have come to speak briefly about this afternoon. That little 
thing in question that I am talking about is 3\1/8\ inches wide, 2\1/8\ 
inches long, and no thicker than one's fingernail. But it has a 
monumental impact on how millions of Americans live their lives each 
and every day. The object to which I am referring, of course, is the 
credit card.
  We have come a long way from the day in 1950 when the Diner's Club 
issued the first universal credit card that allowed its holders to use 
credit at certain very select restaurants in New York City. Today, the 
credit card has become an indispensable part of how we do business in 
the United States, and across the globe, for that matter.
  For many Americans, the main appeal of the credit card is convenience 
and flexibility. They allow us to go out and eat, go to a shopping 
mall, to the movies, and stop off at the grocery store on the way home, 
without folding a single bill or fumbling for loose change in their 
pockets. Credit cards allow people to shop for products on the Internet 
in a matter of seconds.
  But for more and more Americans, credit cards serve a very different 
purpose. As the name implies, these cards provide access to credit. We 
are living in a time when real wages are failing to keep up with price 
increases, when health care costs and college tuition are on the rise. 
Millions of Americans are having difficulty making ends meet. For 
Americans who are strapped for cash, credit cards are much more than a 
convenience. They have become the only way they can afford basic 
necessities, such as food, gas, clothing, and medical care.
  These Americans are not paying by credit card because they want to; 
they are doing so because they have no other choice. It is this 
function of credit cards that make them so appealing to American 
consumers, but I must also say it is this function that presents the 
greatest danger to them as well.
  Today, the level of credit card debt in the United States is at 
record heights. Total consumer debt in America is over $2 trillion. Out 
of that, $735 billion is credit card debt. The average American 
household has over $9,000 worth of credit card debt. Let me repeat 
that. The average family living in the United States has over $9,000 of 
credit card debt. In comparison, the average family household income is 
just above $40,000.
  Due in large part to credit card debt, more Americans are filing for 
bankruptcy. Last year, over 1.6 million families declared they were 
bankrupt. For every one family that actually does file for bankruptcy, 
there are seven more whose debt suggests that they, in fact, should do 
the same.
  Credit card debt does not affect all Americans equally. It is a 
growing burden that is disproportionately being borne by middle-income, 
low-income, and working-poor families. According to a recent report, 
during the 1990s, on average, the American family saw its credit card 
debt go up by 53 percent. The debt of middle-class families, those 
earning between $50,000 and $100,000 a year, went up 75 percent. For 
the older Americans, senior citizens, their average credit card debt 
went up 149 percent. Finally, for very low-income families, those 
making less than $10,000 a year, credit card debt grew by a shocking 
184 percent.
  Why is this happening? Why are millions of Americans drowning in 
credit card debt? There are some who would describe the numbers I just 
quoted as a matter of personal responsibility, that some Americans are 
spending way beyond their means and ultimately are paying the price.
  I do believe personal responsibility is extremely important, but many 
of the victims of credit card debt today are not in that state because 
they bought a home entertainment system, an expensive vacation, or a 
plasma TV set.
  Take Roberto Towler. Roberto was a professional accountant who was 
very careful to always pay his bills on time. In early 2000 he was 
forced to take 2 months off from work because of a back injury. The 
lost salary meant he had much less cash on hand than before. He had no 
alternative but to use his credit card for toiletries, clothes for his 
children, and groceries. He eventually was able to return to work and 
scale back the use of his credit card, but he found himself barely able 
to pay back his debt. Eventually Roberto was forced to file bankruptcy 
with $22,000 of credit card debt.
  Many Americans have stories just like Mr. Towler. They work hard, 
they play by the rules, but after a few twists of fate suddenly find 
themselves in a tremendous debt. For those caught in the quicksand of 
debt, a credit card appears to be a lifeline. But, in reality, it only 
pulls them in deeper and deeper.

  We often speak of the ill and infirm as living on borrowed time. 
These people are living on borrowed money.
  In the middle of all this are credit card companies. If we demand 
responsibility from individuals, and we should, and we do demand it, 
then we also ought to demand it from corporations as well. 
Responsibility is not limited to those who are consumers alone.
  The reason I am here today is because a good deal of the blame for 
the crisis in credit card debt we are seeing in America lies in the 
practices of credit card companies.
  I am not someone who takes regulatory reform lightly. I am not a 
believer in regulation that stifles innovation or efficiency. But at 
the same time, when we see practices that are truly hurting working 
families around the country, I believe we have an obligation to act. 
Just what kind of practices are we talking about? Let me spell it out.
  Let's start with interest rates. I am not naive about this. I 
certainly do not expect credit card companies to be terribly benevolent 
when it comes to interest rates. But what I expect, and what all 
Americans deserve, is honesty and fairness.
  We have all seen print ads and commercials that advertise 
fantastically low interest rates, sometimes as low as zero percent. But 
what these commercials don't tell you is that these teaser rates, as 
they are called, often expire and rise considerably only after a few 
months.

[[Page S8744]]

  If you slip up even once by failing to make a minimum monthly 
payment, your interest rate may go up even faster. Just one mistake can 
be enough to drive an interest rate up by nearly 30 percentage points. 
Of course that information is usually hidden in the fine print of a 
lengthy disclosure statement.
  Most Americans would assume that their interest rates will stay low 
as long as they make their minimum monthly payments. Not so. Today, 
credit card companies don't just look at the bill that you pay them, 
they look at your entire financial picture in deciding how high your 
interest rate ought to be, how high a rate they ought to charge you.
  I learned of a doctor in Illinois who had always paid his credit card 
bills on time and stayed within his credit card limits. Then one day he 
took a look at his bill and discovered that the interest rate on his 
credit card had jumped from 6 percent to nearly 17 percent. He asked 
the credit card issuer, why? The company said that he was now a higher 
risk.
  What was the reason?
  He had taken out a mortgage on his new home.
  This is incredible to me. There are few things more rewarding to a 
family than buying their first home. We celebrate home ownership here 
in America. Apparently for credit card companies it's a reason to 
celebrate as well, because it's an excuse to charge higher interest 
rates.
  Interest rates, of course, are not the only way credit card companies 
make money. In recent years, more and more companies have found another 
way to increase their bottom lines, by assessing exorbitant fees for 
the most minor of offenses. Miss a payment by a single day and you may 
be charged $30 or even $40 for that mistake. Gone are the grace periods 
that gave consumers some reasonable leeway.
  Over the past 2 years, the amount of money generated by credit card 
fees has simply skyrocketed. In fact, the term ``skyrocketed'' may be 
something of an understatement. In 1996, the fees raised $1.7 billion 
for credit card companies. That's 1996. Last year the credit card 
companies raised $11 billion in fees alone, only 8 years later.
  You might think that if credit card companies know that someone is a 
risk they would take some action to limit that person's spending, such 
as lowering their credit line. Or perhaps they might not issue a card 
to that person in the first place.

  But there is a little secret the credit card companies don't want 
Americans to know. They are actively soliciting and signing up 
customers who are tremendous credit risks. They are soliciting these 
people not in spite of the risk, but because of it.
  Contrary to what one might think, customers who cannot afford to pay 
their bills on time are the credit card companies' best customers--not 
their worst. Unbelievably, these customers who do pay on time are known 
within the credit card industry as ``deadbeats.''
  Let me repeat that. Those who pay their credit card bills on time are 
known within the industry as ``deadbeats.'' Why is this? Because when 
people fail to pay their bills on time, that means more profits for the 
credit card industry, in the form of more interest charges and penalty 
fees.
  How much more of a profit? Let's say you are the average American, 
with $9,000 in credit card debt, which is the case today. Let's say you 
stopped accumulating any more debt and decided you would pay it off by 
making the minimum monthly payment of 2 percent. Let's say further that 
your interest rate is 15 percent--which is just about the average 
today, I might add.
  How long would it take you to pay off that debt? Five years? Ten 
years? Twenty years? It would take 39 years to pay off your debt. Over 
the course of those 39 years, you would pay $14,000 in interest 
payments alone, in addition to the $9,000 you owe. This is all 
assuming, of course, that your interest rate wouldn't rise over those 
years and that you wouldn't be hit with unexpected fees.
  Credit card companies know this. They know their greatest chance of 
financial profit lies in those customers who have the least chance of 
paying their bills on time. That is why they continue to solicit these 
customers and that is why those who do pay on time are known within the 
industry as the deadbeats.
  Last year, credit card companies mailed out 5 billion solicitations 
to about 200 million individuals in the United States. The average 
person received about one offer every other week. The average household 
received more than one per week. I guarantee that a great many of these 
people do not have sparkling credit ratings, yet these companies 
continue to send out offer after offer, hoping that yet another 
customer will take the bait.
  Mr. President, I ask unanimous consent to have printed in the Record 
an article from the July 6, 2004 edition of the Wall Street Journal 
entitled ``Growing Profit Source for Banks: Fees from Riskiest Card 
Holders.''
  This goes into the topic in greater detail.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

          [From the Wall Street Journal Online, July 6, 2004]

    Growing Profit Source for Banks: Fees From Riskiest Card Holders

                         (By Mitchell Pacelle)

       When Jennifer Reid opened her credit-card statement in 
     April, she discovered how expensive it was to make full use 
     of her credit.
       The 42-year-old X-ray technologist had run through $10,000 
     of her $12,000 credit line on an MBNA Corp. card. In April, 
     her annual interest rate abruptly jumped to 24.98%, up from 
     19.98% the prior month and far above the initial single-digit 
     rate.
       ``I don't understand,'' she recalls telling an MBNA 
     customer-service representative on the phone, complaining 
     that she hadn't been late with a single payment. The 
     representative agreed but pointed out that she had run up 
     more than $5,000 of debt on two other cards. Also, she was 
     making only slightly more than the minimum suggested monthly 
     payments on her MBNA card. He said the company now saw her as 
     a credit risk and feared it would take her forever to pay off 
     her debts. ``Isn't that what you want consumers to do?'' she 
     snapped back.
       That's a question more financially strapped bank customers 
     are asking these days. For consumers who pay off their 
     credit-card balances each month, shop aggressively for 
     interest rates as low as 0%, and take advantage of generous 
     credit-card rewards programs, consumer credit has never been 
     cheaper. But for others like Ms. Reid, who went into debt so 
     she could move to a better job in Florida from South 
     Carolina, the trend is in the other direction.
       Card users, consumer advocates and some industry experts 
     complain that banks are attempting to squeeze more and more 
     revenue from consumers struggling to make ends meet. Instead 
     of cutting these people off as bad credit risks, banks are 
     letting them spend--and then hitting them with larger and 
     larger penalties for running up their credit, going over 
     their credit limits, paying late and getting cash advances 
     from their credit cards. The fees are also piling up for 
     bounced checks and overdrawn accounts.
       ``People think they are being swindled,'' says industry 
     consultant Duncan MacDonald, formerly a lawyer for the 
     credit-card division of Citigroup Inc. Penalty fees aren't 
     new, but they are becoming more important to the 
     industry's bottom line and are being borne by the people 
     who can least afford to pay them, he contends.
       Cardweb.com, a consulting group that tracks the card 
     industry, says credit-card fees, including those from 
     retailers, rose to 33.4% of total credit-card revenue in 
     2003. That was up from 27.9% in 2000 and just 16.1% in 1996. 
     The average monthly late fee hit $32.01 in May, up from 
     $30.29 a year earlier and $13.30 in May 1996, the company 
     said. In 2003, the credit-card industry reaped $11.7 billion 
     from penalty fees, up 9% from $10.7 billion a year earlier, 
     according to Robert Hammer, an industry consultant.
       ``As competitive pressure builds on the front-end pricing, 
     it has pushed a lot of the profit streams to the back end of 
     the card--to these fees,'' says Robert McKinley, chief 
     executive of CardWeb.com. Over the past two years, he said, 
     ``it's become much more aggressive.'' At industry 
     conferences, he notes, talk often turns to ``what the market 
     will bear.''
       Banks say that penalties and fees are a necessary component 
     of new models for pricing financial services. Gone are the 
     days when banks collected hefty annual fees on all credit 
     cards and charged fat interest rates to all customers. Now, 
     the banks say, they must rely on risk-based pricing models 
     under which customers with the shakiest finances pay higher 
     rates and more fees.
       ``We look at teaser rates as an area that we have to be 
     competitive in,'' said Richard Srednicki, a top credit-card 
     executive at J.P. Morgan Chase & Co., during a conference 
     call with investors last fall. He said the bank tries to 
     ``mix and match how we compete'' on interest rates and fees 
     ``in order to make the kinds of returns that we're looking 
     for.''
       An MBNA spokesman declined to comment on Ms. Reid's 
     experience but noted that one of the most important 
     considerations in setting a credit card's interest rate is 
     ``how a customer manages his account.'' If a customer's 
     financial circumstances change for

[[Page S8745]]

     the worse, he said, the bank has to raise the rate ``as a way 
     of balancing that greater risk.''
       Such variable pricing has been embraced in recent years by 
     airlines, mortgage lenders and others. What raises the 
     hackles of bank customers, however, is that many don't 
     discover the rate changes and penalty fees until they have 
     already been hit with them. Those who complain are directed 
     to disclosure statements that most consumers never read. 
     These disclosures, says Mr. MacDonald, have ballooned from 
     little more than a page 20 years ago to 30 pages or more of 
     small print today.
       Federal Comptroller of the Currency John D. Hawke Jr., one 
     of the nation's top bank regulators, warned bankers at a 
     conference last fall that ``no retail banking activity 
     generates more consumer complaints'' than credit-card 
     practices, ``and where there are persistent and serious 
     complaints, there is a fertile seedbed for legislation.''
       Mr. Hawke raised the case in which a customer presents a 
     credit card at the cash register and the bank approves the 
     transaction even though it knows that the purchase will 
     push the customer over his credit limit. ``If, as a 
     practical matter, the line has been increased, is it 
     unfair or deceptive for the creditor to continue to impose 
     an overline `penalty'?'' he asked.
       Until the early 1990s, most banks offered one main credit-
     card product. It typically carried an annual interest rate of 
     about 18% and an annual fee of $25. Cardholders who paid late 
     or strayed over their credit limit were charged modest fees. 
     Profits from good customers covered losses from those who 
     defaulted.
       Then card issuers, in an effort to grab market share, began 
     scrapping annual fees and vying to offer the lowest annual 
     interest rates. They junked simple pricing models in favor of 
     complex ones they say were tailored to cardholders' risk and 
     behavior. Eager to sustain growth in a market approaching 
     saturation, they began offering more cards to consumers with 
     spotty credit.
       By the late 1990s, banks were attracting consumers with low 
     introductory rates, then subjecting some of them to a myriad 
     of ``risk-related fees,'' such as late fees and over-limit 
     fees. A 2001 survey by the Federal Reserve showed that 30% of 
     general-purpose credit-card holders had paid a late fee in 
     the prior year.
       Like Ms. Reid, more customers are seeing red when they 
     discover the penalties on bank statements. Credit-card late-
     payment charges have risen to as high as $39 for some 
     customers of Bank of America Corp., MBNA, and Providian 
     Financial Corp., and fewer banks grant grace periods. 
     Cardholders who exceed their credit limits face ``over 
     limit'' fees as high as $39 a month.
       In a survey of 140 credit cards this year, the advocacy 
     group Consumer Action said 85% of the banks make it a 
     practice to raise interest rates for customers who pay late--
     often after a single late payment. Nearly half raise rates if 
     they find out that a customer is in arrears with another 
     creditor.
       Since the banks disclose the fees in the fine print of 
     their mailings, they have had little to fear from regulators 
     and the courts. Consumer lawyers have lost a string of 
     lawsuits challenging such practices. A little-noticed April 
     ruling by the U.S. Supreme Court said credit-card companies 
     don't have to include various penalty fees when they 
     calculate the ``finance charge'' listed on a customer's 
     monthly statement.
       And bank regulators have been reluctant to promulgate new 
     regulations. The Federal Reserve Board and four other 
     regulatory groups recently disappointed consumer groups by 
     failing to take a strong stand against ``bounce protection'' 
     plans. These programs allow customers to overdraw their 
     checking accounts in exchange for a fee each time they do it 
     that can exceed $30. Critics call bounce protection little 
     more than an expensive short-term loan since the overdrawn 
     amount must be covered quickly.
       Banks are charging as much as $32 per transaction when 
     customers write a check or make a debit-card purchase without 
     enough money in their accounts to cover the payment. Five 
     years ago, $20 was more typical.
       Alicia Flynn, who works in the billing department of a San 
     Francisco hospital, used her Bank of America debit card on 
     Jan. 28 of last year to make four small purchases, including 
     a $2.27 cup of cafeteria soup. But several checks she and her 
     husband had written also hit their account that day. When the 
     bank tallied up the account later that day, it posted some of 
     the checks before the debit- card charges, which had already 
     been cleared at the register. That left the account 
     overdrawn by $40.17. The Flynns were hit with separate $28 
     ``insufficient fund'' fees for two checks and all four 
     debit-card transactions, hitting the maximum daily penalty 
     of $140.
       ``It is somewhat like having a meter maid put five parking 
     citations on your car for one parking violation,'' complains 
     Mrs. Flynn's husband, Richard Flynn.
       Mr. Flynn later learned that subtracting the biggest check 
     first is standard procedure for Bank of America. In response 
     to his complaint letter, a Bank of America representative 
     enclosed a copy of a booklet she said every customer received 
     when opening an account, and directed Mr. Flynn to page 54. 
     It describes the policy and warns customers that ``this 
     method may result in additional overdraft fees.''
       A bank spokesman maintains that most customers want large 
     checks to clear first because they tend to be for important 
     items such as a rent payment. The $28 penalty fee, he said, 
     is intended to ``make sure that customers don't run their 
     balances so close to zero,'' and is priced ``to assign a cost 
     of the risk it exposes the bank to.''
       Banking fees have long been a subject of legislation and 
     litigation. One decision that has helped banks boost their 
     penalty fees came in 1996, when the Supreme Court said states 
     can't regulate such charges if they're levied by out-of-state 
     banks.
       The 1968 federal Truth in Lending Act was enacted to 
     promote ``awareness of credit costs on the part of 
     consumers.'' It required ``meaningful disclosure of credit 
     terms'' but didn't say anything specifically about credit-
     card fees. In the act, Congress directed the Federal Reserve 
     Board to enact regulations. The Fed responded with Regulation 
     Z, which requires credit-card issuers to disclose the cost of 
     credit as a dollar amount, known as the ``finance charge,'' 
     and as an annual percentage rate. Fees for late payments and 
     the like were not to be included in either calculation.
       As a college student in the mid-1990s, Sharon R. Pfennig 
     signed up for a card with a $2,000 credit limit. In 1997, 
     buying clothing at a mall, she blew past her credit limit by 
     $192. Household International Inc. began tacking on a $20 
     over-limit fee each month. Ms. Pfennig stopped using the card 
     and continued to make her $45 minimum monthly payments. But 
     the monthly penalty fee, coupled with the $35 to $40 she paid 
     each month as interest on her debt, caused her balance to 
     continue climbing. Her monthly over-limit fee then jumped to 
     $29, and her fee total eventually ballooned to about $700.
       In 1999, Ms. Pfennig filed a lawsuit in Ohio federal court 
     against Household and MBNA, which had purchased the Household 
     credit-card portfolio that contained her account. The lawsuit 
     accused Household of misrepresenting the true cost of credit 
     by not including over-limit fees in its disclosed ``finance 
     charges'' on her monthly statement. The suit said this 
     practice, which adhered to Regulation Z, nonetheless violated 
     the Truth in Lending Act.
       An appeals court agreed with Ms. Pfennig but the Supreme 
     Court, ruling April 21 of this year, sided with the credit-
     card company. It said Regulation Z is reasonable and 
     companies that follow it are in compliance with the law.
       ``I'm getting completely disheartened,'' said Sandusky, 
     Ohio, consumer lawyer Sylvia Goldsmith, who represented Ms. 
     Pfennig before the high court.
       In the Pfennig case, MBNA and Household defended the 
     treatment of fees under current disclosure regulations as 
     simpler for both consumers and banks. ``This bright-line rule 
     ensures that creditors disclose over-limit fees in an 
     understandable and consistent manner, permitting consumers to 
     compare such fees across time and across credit-card issuers 
     in a meaningful way,'' the two banks noted in a Supreme Court 
     brief.
       For now, the only way for consumers to know what they're 
     getting into is to plow through the disclosure materials they 
     receive when they open bank accounts or get new credit cards. 
     Most never do--as Mr. Flynn, the disgruntled Bank of America 
     customer, admits. ``We just opened a simple bank account, and 
     they gave us a 78-page booklet, small print, and they expect 
     us to read and understand it,'' he complains.
       Ms. Reid, the Florida cardholder, says she is far more 
     careful now about studying her credit-card mail. ``I read eve 
     single solitary word now. I hope one of these days I won't 
     have to have a credit card at all.''

  Mr. DODD. What I find most troubling about this trend is that credit 
card companies have set their sights on the most vulnerable members of 
our society when it comes to debt--low-income individuals, the elderly, 
mentally retarded, and most recently, our children.
  Go to any college campus in America and you are bound to come across 
a table where an enthusiastic sales person is offering free T-shirts, 
or sports bags, or Frisbees--almost anything in exchange for signing up 
as a credit card customer. According to a report on CBS News, the 
average college student is offered 8 cards in his or her first semester 
in college--8 credit cards. By the end of college, the average 
graduating senior has 6 credit cards in his or her name.
  Why are credit card companies targeting college students so 
frequently? Because of their limited experience with financial matters, 
students tend to accumulate debt very quickly, and as a result, more 
and more of our young people are falling deeper and deeper into the 
financial hole from which they cannot escape.
  In 1998, 67 percent of college students had a credit card. Today, 83 
percent have credit cards. In 1998, the average college student 
graduated with $1,800 in credit card debt. Today the average college 
senior graduates with $3,000 in credit card debt.
  I was shocked to learn that the fastest growing segment of our 
population that is forced to declare bankruptcy is people under the age 
of 25. Think of

[[Page S8746]]

that. The fastest growing group of people declaring bankruptcy are 
people under the age of 25.
  When we think about bankruptcy, we generally envision middle-aged 
Americans with failed businesses, investments gone bad, perhaps medical 
bills that have spiraled out of control. The answer is not so. It's 
college kids, recent graduates.
  Some time ago, a piece on ``60 Minutes II'' told a story of one 
student's circumstance, Sean Moyer. I have told the story on the floor 
before but I think it deserves being repeated.
  Sean's life began to spin out of control as a result of huge debts 
racked up in 3 years of college. He could not get loans to go to law 
school, as he dreamed. His parents couldn't afford to pay his way.
  Sean Moyer had 12 credit cards and more than $10,000 in debts. He had 
two jobs, one at the library, another as a security guard in a Holiday 
Inn, but he still could not pay the collectors who continually harassed 
him with letters and phone calls. In 1998, Sean Moyer took his own 
life.
  Three years after his son's death, his mother still gets pre-approved 
credit card offers in Sean's name. According to his mother, one company 
preapproved Sean for a $100,000 credit card line.
  How is the credit card industry doing as a result of these practices? 
These companies are thriving. Credit Card Management, an industry 
publication, reported that 2003 was the most profitable year for credit 
cards since the magazine began tracking the industry in 1992.
  What makes matters even more astonishing is that this is happening 
when interest rates are at an all-time low. Yet, for millions of 
Americans, the interest rates they read about in the newspapers, those 
set by the Federal Reserve, bear absolutely no relationship whatsoever 
to interest rates that appear on their credit card bills.
  Still, the industry wants more. In recent years, while they have been 
encouraging consumers to accumulate debt, credit card companies have 
simultaneously been lobbying Congress to change bankruptcy laws to make 
it harder and harder for people to have their debts forgiven. This 
amounts to a two pronged attack on working families in America--get 
people into as much debt as possible, and then change the rules of the 
game so they can't get rid of that debt.
  It is time we stood up for consumers. It is time we restored a sense 
of responsibility to this industry.
  I am here today to introduce the Credit Card Accountability, 
Responsibility, and Disclosure Act of 2004, also known as the Credit 
CARD Act. This bill takes aim at what I consider to be some of the more 
egregious abuses of consumers by credit card companies.
  This bill takes some simple, common-sense steps to stop abusive 
practices, educate cardholders, and stiffen the penalties on 
corporations that violate the law.
  First of all, I think we can all agree that it is reasonable for a 
consumer to be clearly notified if his or her interest rates are going 
up. That is not a radical idea, that is just common sense. My bill 
would require clear disclosure of any rate changes so there aren't any 
surprises for the average consumer.
  I also don't believe a company should be able to retroactively change 
the interest rate on debt that already exists. If you want to raise 
interest rates, fine, but raise them on future debt, not existing debt. 
Our bill would prohibit any retroactive interest rate changes.
  Second, I believe that companies should be rewarding people for 
responsible card use--not penalizing them. If you pay your bills on 
time, your interest rate shouldn't go up. If you pay off your balances 
in full, your company shouldn't be able to charge you any new fees. If 
you decide to cancel your card, your interest rate shouldn't go up. I 
am pointing out these facts because that is exactly what happens. My 
bill would codify all of these common-sense principles into law.
  Third, my bill would protect some of the most vulnerable in our 
society--our Nation's youth--by implementing new requirements for 
issuing credit cards to people under the age of 21. We are not going to 
prohibit college students from getting cards, but we are going to make 
sure that companies can't simply give away cards to millions and 
millions of students who they know will rack up years and years worth 
of debt and potentially face bankruptcy and financial ruin before their 
working lives have barely begun.
  If you apply for a credit card and you are under 21, under this bill 
you will need one of three things: A signature of a parent or guardian 
who is willing to take responsibility for your debt; information 
indicating that you have some other means of repaying any debt; or a 
certification that you have completed a credit counseling course. And 
if you are a credit card company that offers cards to students under 
21, you will be required to comply with these requirements--or face 
serious penalties.
  Finally, this bill requires companies to be honest with consumers by 
introducing some new disclosure requirements. The most important one is 
a box--prominently located on every single bill--containing four simple 
pieces of information: The total balance on your account; your minimum 
monthly payment; how long it will take to pay your bill if all you pay 
is the minimum monthly payment; and finally, how much you will have to 
pay over time--in both interest and principal--if you only make the 
minimum payments.
  The reason for these disclosures is simple, and to many, probably 
obvious: To allow consumers to know exactly what it means to carry a 
debt, so they can decide whether or not to do so.
  The Credit CARD Act also contains a number of additional disclosure 
requirements to bring more transparency to an industry that has clearly 
reaped benefits from the use of fine print and lengthy and confusing 
policy statements.
  We are not asking for much here--only that companies be fair and 
straightforward with consumers. Let us see some real disclosures so 
Americans can understand what their bill means, how much they are being 
charged, and why.
  No one wants credit cards to disappear. I certainly believe credit 
cards are tremendously valuable and worthwhile as long as they are 
handled responsibly. And no one wants people who need and deserve 
credit to have no way to get it. But we can't simply stand by as more 
and more Americans fall deeper and deeper into debt with no way out. We 
need to take some responsible action so that the credit card can still 
be a useful financial tool without being a ticket to financial ruin.
  If we are going to pass bankruptcy bills in the Senate that demand 
more responsibility from consumers, shouldn't we demand more 
responsibility from creditors, as well? This bill, the Credit CARD Act, 
does just that, and I urge my colleagues in the Senate to adopt it.
  I ask unanimous consent for the text of the bill to be printed in the 
Record.
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