[Congressional Record Volume 153, Number 64 (Friday, April 20, 2007)]
[Senate]
[Pages S4811-S4812]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. AKAKA (for himself, Mr. Durbin, Mr. Leahy, and Mr. 
        Schumer):
  S. 1176. A bill to require enhanced disclosure to consumers regarding 
the consequences of making only minimum required payments in the 
repayment of credit card debt, and for other purposes; to the Committee 
on Banking, Housing, and Urban Affairs.
  Mr. AKAKA. Mr. President, today, I am introducing the Credit Card 
Minimum Payment Warning Act. I thank Senators Durbin, Leahy, and 
Schumer for cosponsoring this legislation.
  Too many consumers in our country are burdened by significant credit 
card debt. Revolving debt, mostly comprised of credit card debt, has 
risen from $54 billion in 1980 to more than $883 billion in 2007.
  We must make consumers more aware of the long-term effects of their 
financial decisions, particularly in managing credit card debt. While 
it is relatively easy to obtain credit, especially on college campuses, 
not enough is being done to ensure that credit is properly managed. 
Currently, credit card statements fail to include vital information 
that would allow individuals to make fully informed financial 
decisions. Additional disclosure is needed to ensure that consumers 
completely understand the implications of their credit card use and the 
costs of only making the minimum payments.
  The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 
included a requirement that credit card issuers provide information to 
consumers about the consequences of only making the minimum monthly 
payment. However, this requirement fails to provide the detailed 
information on billing statements that consumers need to know to make 
informed decisions. The bankruptcy law allows credit card issuers a 
choice between disclosure statements. The first option included in the 
bankruptcy bill would require a standard ``Minimum Payment Warning.'' 
The generic warning would state that it would take 88 months to pay off 
a balance of $1,000 for bank card holders or 24 months to pay off a 
balance of $300 for retail card holders. This first option also 
includes a requirement that a toll-free number be established that 
would provide an estimate of the time it would take to pay off the 
customer's balance. The Federal Reserve Board is required to establish 
the table that would estimate the approximate number of months it would 
take to pay off a variety of account balances.
  There is a second option that the law permits. The second option 
allows the credit card issuer to provide a general minimum payment 
warning and provide a toll-free number that consumers could call for 
the actual number of months to repay the outstanding balance.
  The options available under the Bankruptcy Reform law are woefully 
inadequate. They do not require issuers to provide their customers with 
the total amount they would pay in interest and principal if they chose 
to pay off their balance at the minimum rate. Since the average 
household with debt carries a balance of approximately $10,000 to 
$12,000 in revolving debt, a warning based on a balance of $1,000 will 
not be helpful. The minimum payment warning included in the first 
option underestimates the costs of paying a balance off at the minimum 
payment. If a family has a credit card debt of $10,000, and the 
interest rate is a modest 12.4 percent, it would take more than ten and 
a half years to pay off the balance while making minimum monthly 
payments of four percent.
  My legislation would make it very clear what costs consumers will 
incur if they make only the minimum payments on their credit cards. If 
the Credit Card Minimum Payment Warning Act is enacted, the 
personalized information consumers would receive for their accounts 
would help them make informed choices about their payments toward 
reducing outstanding debt.
  My bill requires a minimum payment warning notification on monthly 
statements stating that making the minimum payment will increase the 
amount of interest that will be paid and extend the amount of time it 
will take to repay the outstanding balance. The legislation also 
requires companies to inform consumers of how many years and months it 
will take to repay their entire balance if they make only minimum 
payments. In addition, the total cost in interest and principal, if the 
consumer pays only the minimum payment, would have to be disclosed. 
These provisions will make individuals much more aware of the true 
costs of their credit card debt. The bill also requires that credit 
card companies provide useful information so that people can develop 
strategies to free themselves of credit card debt. Consumers would have 
to be provided with the amount they need to pay to eliminate their 
outstanding balance within 36 months.
  Finally, the legislation requires that creditors establish a toll-
free number so that consumers can access trustworthy credit counselors. 
In order to ensure that consumers are referred only to trustworthy 
credit counseling organizations, these agencies would have to be 
approved by the Federal Trade Commission and the Federal Reserve Board 
as having met comprehensive quality standards. These standards are 
necessary because certain credit counseling agencies have abused their 
nonprofit, tax-exempt status and taken advantage of people seeking 
assistance in managing their debt.
  In a report on customized minimum payment disclosures released in 
April 2006, the Government Accountability Office (GAO) found that 
consumers who typically carry credit balances found customized 
disclosures very useful and would prefer to receive them in their 
billing statements.
  We must provide consumers with detailed personalized information to 
assist them in making better informed choices about their credit card 
use and repayment. Our bill makes clear the adverse consequences of 
uninformed choices, such as making only minimum payments, and provides 
opportunities to locate assistance to better manage credit card debt.
  My bill is necessary to improve credit card disclosures so that 
consumers are provided relevant and useful information that hopefully 
will bring about positive behavior change among consumers. Consumers 
with lower debt levels will be better able to purchase a home, pay for 
their child's education, or retire comfortably on their own terms.
  I will ask that a letter of support from the Consumer Federation of 
America, the Center for Responsible Lending, Consumer Action, Consumers 
Union, Demos, the National Association of Consumer Advocates, U.S. 
Public Interest Research Group, the National Council of La Raza, and 
the National Consumer Law Center be printed in the Record.
  I will also ask that the text of the Credit Card Minimum Payment 
Warning Act be printed in the Record.
  I urge my colleagues to support this important legislation that will 
empower consumers by providing them with detailed personalized 
information to assist them in making informed choices about their 
credit card use and repayment. This bill makes clear the adverse 
consequences of uninformed choices such as making only minimum payments 
and provides opportunities to locate assistance to reduce credit card 
debt.
  Mr. President, I ask unanimous consent that the aforementioned 
materials be printed in the Record.

[[Page S4812]]

  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                                   April 17, 2007.
     Hon. Daniel K. Akaka,
     U.S. Senate,
     Washington, D.C. 20510
       Dear Senator Akaka: The undersigned national consumer and 
     civil rights organizations write to strongly support the 
     Credit Card Minimum Payment Warning Act. The Act would 
     require credit card issuers to disclose more information to 
     consumers about the costs associated with paying their bills 
     at ever-declining minimum payment rates. The Act provides a 
     personalized ``price tag'' so consumers can understand the 
     real costs of credit card debt and avoid financial problems 
     in the future.
       Undisputed evidence links the rise in bankruptcy in recent 
     years to the increase in consumer credit outstanding. These 
     numbers have moved in lockstep for more than 20 years. 
     Revolving credit, for example (most of which is credit card 
     debt) ballooned from $214 billion in January 1990 to $873 
     billion currently. As family debt increases, debt service 
     payments on items such as interest and late fees take an 
     ever-increasing piece of their budget. For some families, 
     this contributes to the collapse of their budget. Bankruptcy 
     becomes the only way out.
       Credit card issuers have exacerbated the financial problems 
     that many families have faced by lowering minimum payment 
     amounts. This decline in the typical minimum payment is a 
     significant reason for the rise in consumer bankruptcies in 
     recent years. A low minimum payment often barely covers 
     interest obligations. It convinces many borrowers that they 
     are financially sound as long as they can meet all of their 
     minimum payment obligations. However, those who cannot afford 
     to make these payments often carry so much debt that 
     bankruptcy is usually the only viable option.
       This bill will provide consumers several crucial pieces of 
     information on their monthly credit card statement: A 
     ``minimum payment warning'' that paying at the minimum rate 
     will increase the amount of interest that is owed and the 
     time it will take to repay the balance; The number of years 
     and months that it will take the consumer to pay off the 
     balance at the minimum rate; The total costs in interest and 
     principal if the consumer pays at the minimum rate; The 
     monthly payment that would be required to pay the balance off 
     in 3 years.
       The bill also requires that credit card companies provide a 
     toll-free number that consumers can call to receive 
     information about credit counseling and debt management 
     assistance. In order to assure that consumers are referred to 
     honest, legitimate non-profit credit counselors, the bill 
     requires the Federal Reserve to screen these agencies to 
     ensure that they meet rigorous quality standards.
       Our groups commend you for offering this very important and 
     long-overdue piece of legislation. It provides the kind of 
     personalized, timely disclosure information that will help 
     debt-choked families make informed decisions and, with the 
     help of additional protections against abusive credit card 
     lending, start to work their way back to financial health.
       For more information, please contact Travis Plunkett at the 
     Consumer Federation of America at 202-387-6121.
           Sincerely,
         Travis B. Plunkett, Legislative Director, Consumer 
           Federation of America; Gail Hillebrand, Senior 
           Attorney, Consumers Union; Cindy Zeldin, Federal 
           Affairs Coordinator, Economic Opportunity Program, 
           Demos: A Network for Ideas & Action; Kim Warden, Vice 
           President, Federal Affairs, Center for Responsible 
           Lending; Alys Cohen, Staff Attorney, National Consumer 
           Law Center; Edmund Mierzwinski, Consumer Programs 
           Director, U.S. Public Interest Research Group; Linda 
           Sherry, Director, National Priorities, Consumer Action; 
           Ira Rheingold, Executive Director, National Association 
           of Consumer Advocates; Beatriz Ibarra, Assets Policy 
           Analyst, National Council of La Raza.
                                  ____


                                S. 1176

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Credit Card Minimum Payment 
     Warning Act of 2007''.

     SEC. 2. ENHANCED CONSUMER DISCLOSURES REGARDING MINIMUM 
                   PAYMENTS.

       Section 127(b) of the Truth in Lending Act (15 U.S.C. 
     1637(b)) is amended by adding at the end the following:
       ``(11)(A) Information regarding repayment of the 
     outstanding balance of the consumer under the account, 
     appearing in conspicuous type on the front of the first page 
     of each such billing statement, and accompanied by an 
     appropriate explanation, containing--
       ``(i) the words `Minimum Payment Warning: Making only the 
     minimum payment will increase the amount of interest that you 
     pay and the time it will take to repay your outstanding 
     balance.';
       ``(ii) the number of years and months (rounded to the 
     nearest month) that it would take for the consumer to pay the 
     entire amount of that balance, if the consumer pays only the 
     required minimum monthly payments;
       ``(iii) the total cost to the consumer, shown as the sum of 
     all principal and interest payments, and a breakdown of the 
     total costs in interest and principal, of paying that balance 
     in full if the consumer pays only the required minimum 
     monthly payments, and if no further advances are made;
       ``(iv) the monthly payment amount that would be required 
     for the consumer to eliminate the outstanding balance in 36 
     months if no further advances are made; and
       ``(v) a toll-free telephone number at which the consumer 
     may receive information about accessing credit counseling and 
     debt management services.
       ``(B)(i) Subject to clause (ii), in making the disclosures 
     under subparagraph (A) the creditor shall apply the interest 
     rate in effect on the date on which the disclosure is made.
       ``(ii) If the interest rate in effect on the date on which 
     the disclosure is made is a temporary rate that will change 
     under a contractual provision specifying a subsequent 
     interest rate or applying an index or formula for subsequent 
     interest rate adjustment, the creditor shall apply the 
     interest rate in effect on the date on which the disclosure 
     is made for as long as that interest rate will apply under 
     that contractual provision, and then shall apply the adjusted 
     interest rate, as specified in the contract. If the contract 
     applies a formula that uses an index that varies over time, 
     the value of such index on the date on which the disclosure 
     is made shall be used in the application of the formula.''.

     SEC. 3. ACCESS TO CREDIT COUNSELING AND DEBT MANAGEMENT 
                   INFORMATION.

       (a) Guidelines Required.--
       (1) In general.--Not later than 1 year after the date of 
     enactment of this Act, the Board of Governors of the Federal 
     Reserve System and the Federal Trade Commission (in this 
     section referred to as the ``Board'' and the ``Commission'', 
     respectively) shall jointly, by rule, regulation, or order, 
     issue guidelines for the establishment and maintenance by 
     creditors of a toll-free telephone number for purposes of the 
     disclosures required under section 127(b)(11) of the Truth in 
     Lending Act, as added by this Act.
       (2) Approved agencies.--Guidelines issued under this 
     subsection shall ensure that referrals provided by the toll-
     free number include only those agencies approved by the Board 
     and the Commission as meeting the criteria under this 
     section.
       (b) Criteria.--The Board and the Commission shall only 
     approve a nonprofit budget and credit counseling agency for 
     purposes of this section that--
       (1) demonstrates that it will provide qualified counselors, 
     maintain adequate provision for safekeeping and payment of 
     client funds, provide adequate counseling with respect to 
     client credit problems, and deal responsibly and effectively 
     with other matters relating to the quality, effectiveness, 
     and financial security of the services it provides;
       (2) at a minimum--
       (A) is registered as a nonprofit entity under section 
     501(c) of the Internal Revenue Code of 1986;
       (B) has a board of directors, the majority of the members 
     of which--
       (i) are not employed by such agency; and
       (ii) will not directly or indirectly benefit financially 
     from the outcome of the counseling services provided by such 
     agency;
       (C) if a fee is charged for counseling services, charges a 
     reasonable and fair fee, and provides services without regard 
     to ability to pay the fee;
       (D) provides for safekeeping and payment of client funds, 
     including an annual audit of the trust accounts and 
     appropriate employee bonding;
       (E) provides full disclosures to clients, including funding 
     sources, counselor qualifications, possible impact on credit 
     reports, any costs of such program that will be paid by the 
     client, and how such costs will be paid;
       (F) provides adequate counseling with respect to the credit 
     problems of the client, including an analysis of the current 
     financial condition of the client, factors that caused such 
     financial condition, and how such client can develop a plan 
     to respond to the problems without incurring negative 
     amortization of debt;
       (G) provides trained counselors who--
       (i) receive no commissions or bonuses based on the outcome 
     of the counseling services provided;
       (ii) have adequate experience; and
       (iii) have been adequately trained to provide counseling 
     services to individuals in financial difficulty, including 
     the matters described in subparagraph (F);
       (H) demonstrates adequate experience and background in 
     providing credit counseling;
       (I) has adequate financial resources to provide continuing 
     support services for budgeting plans over the life of any 
     repayment plan; and
       (J) is accredited by an independent, nationally recognized 
     accrediting organization.
                                 ______