[Congressional Record Volume 153, Number 80 (Tuesday, May 15, 2007)]
[Senate]
[Pages S6129-S6143]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
STATEMENT ON INTRODUCED BILLS AND JOINT RESOLUTIONS
By Mr. NELSON of Nebraska (for himself and Mr. Durbin):
S. 1391. A bill to amend the Elementary and Secondary Education Act
of 1965 to authorize the Secretary of Education to award grants for the
support of full-service community schools, and for other purposes; to
the Committee on Health, Education, Labor and Pensions.
Mr. NELSON of Nebraska. Mr. President, today I join House Majority
Leader Steny Hoyer in introducing legislation seeking to strengthen our
local communities through coordinated school-based efforts. The Full-
Service Community Schools Act establishes an important grant program
supporting a variety of community services, ranging from early
childhood education and family literacy efforts to job training and
nutrition services. Our schools have long served as the bedrock of
local communities; and in a time when Federal dollars have been used as
an invasive hand, I believe additional resources should be allocated to
local areas supporting enterprising instruction, public health, job
training and overall community and parental engagement.
The Full-Service Community Schools Act will direct the Department of
Education to award grants to local educational agencies and one or more
community-based organizations, nonprofit organizations, or other
public/private entities. These full-service community school dollars
will improve the coordination, delivery, effectiveness, and efficiency
of services provided to our children and families. Funds will be
awarded to those grantees coordinating at least 3 services at a school
site, including early childhood programs; literacy and reading programs
for youth and families; parenting education activities; community
service; job training and career counseling services; nutrition
services; primary health and dental care; and preventive mental health
and treatment services.
Priority will be given to grantees demonstrating a record of
effectiveness and serving at least two schools in which at least 40
percent of the children are from low-income families. These targeted
efforts will support a more efficient use of Federal, State, local, and
private-sector dollars serving the needs of children and families. A
synergy of community engagement, parental enthusiasm, and local
leadership is what America needs to address the growing challenges of
our time; and I will continue working with my colleagues to ensure such
efforts have the support of Congress. I encourage Senators to join me
by cosponsoring the Full-Service Community Schools Act of 2007.
______
By Mr. ALEXANDER (for himself, Mr. Cochran, and Mr. Cornyn):
S. 1393. A bill to amend the Immigration and Nationality Act to
prescribe the binding oath or affirmation of renunciation and
allegiance required to be naturalized as a citizen of the United
States, to encourage and support the efforts of prospective citizens of
the United States to become citizens, and for other purposes; to the
Committee on the Judiciary.
Mr. ALEXANDER. Mr. President, Senators from both parties are working
very hard these days to put together an immigration bill. The majority
leader is working hard to create an environment in which that can
happen, and I appreciate his doing that. It is not easy to do. But it
is absolutely essential that we have a comprehensive immigration bill.
This is not something Members of the Congress can blame on anybody
else. It is not the Governors' job, it is not the mayors' job, it is
not the county commissioners' job, it is not the Sheriff's job, it is
our job to decide what our immigration policy should be. It is our job
to secure the border. It is our job to make certain that those who come
here are legally here. It is also our job to make sure that those who
come here legally have an opportunity to become Americans, a chance to
become part of our country.
We have a motto above our wall that says, ``One from many.'' It
doesn't say ``Many from one.'' We are very proud of our magnificent
diversity in this country. People come here from virtually every
country in the world. Anyone who has gone to the naturalization
ceremonies can attest, where last year 650,000 new citizens stood in
courthouses all across America, raised their right hands and swore
their allegiance to this country--nothing is more moving than that. But
as much as we prize that diversity, what we prize even more is our
ability to turn all that diversity into one country.
Unity is harder than diversity. There are a lot of diverse countries
in the world, and they are ripped apart by their differences. We have
been fortunate. As other countries struggle with the idea of becoming
French, becoming German, becoming Japanese--it is hard to do. But in
this country, if you become a citizen, you have to become an American.
How do you do that? You don't do it by your race. In fact, our
Constitution says that race cannot be used.
You don't do it by any other form of ancestry. It doesn't matter
where your grandparents came from. What does matter is that you
subscribe to a few principles and that you learn a common language.
Those are the most basic elements of the unity, this fragile and
important unity that makes us the United States of America instead of
just another United Nations.
In anticipation of the immigration debate next week, I introduce
today, along with Senators Cochran and Cornyn, what we call the
Strengthening American Citizenship Act. It is an essential part of any
immigration bill because it addresses what happens after one lawfully
becomes a resident of this country and begins to think about lawfully
becoming a citizen.
This legislation will help legal immigrants who are prospective
American citizens learn our common language and learn about our ways of
government. I introduced this legislation last year, in the 109th
Congress, when we considered an immigration bill. It had several
cosponsors and it passed this body 91 to 1. It was an amendment to the
Senate immigration bill, in April of 2006.
I hope the Senate will agree again to make it a part of the bill. It
might not make the most headlines, but it will make as much lasting
difference in immigration legislation as possible.
[[Page S6130]]
Here, in brief, is what the legislation would do. First, it would
help prospective citizens learn English and it would do that in two
ways. It would provide education grants of up to $500 for English
courses for immigrants who declare their intent to become American
citizens. They might use these grants of $500, for example, to go to
any accredited agency such as ``Fuentes,'' in Los Angeles, a place I
happen to know about, which can do, for that amount of money, an
excellent job of helping, in that case mostly Spanish-speaking
citizens, learn also to speak English. So it is a $500 voucher, in
effect, to help any lawful person learn English.
Second, it will change the citizenship rules to allow those who learn
to speak English fluently to reduce from 5 to 4 years the amount of
time they have to wait to become a citizen. These are two ways we are
trying to help people learn English and by doing that value our common
language.
There are other ways to do that. Senator Kennedy and I have talked
about the fact that there are lines of people in Boston, his State, and
Nashville, in my State, of adults who want to learn English, but there
is no room for them in the adult education programs we fund. Perhaps
when we pass the Workforce Investment Act, or other appropriations
bills, we can find other ways to help people who want to learn English,
learn English. But this legislation focuses specifically on prospective
citizens who want to learn English by giving them a grant to help them
do it and by giving them an incentive to learn the language fluently.
They can become a citizen then in 4 years instead of 5.
Also, it helps prospective citizens learn more about the American way
of life. Albert Shanker, the late President of the American Federation
of Teachers, said the common school was created in America, the public
school, to help largely immigrant children learn reading and writing
and arithmetic and what it means to be an American, with the hope they
would go home and teach their parents.
The last time we had such a large percentage of foreign-born people
in our country was in about 1900, the turn of that century.
Organizations all over America got busy helping new arrivals learn
about our country, learn about our Declaration of Independence, learn
about our Constitution and the ideas that were part of it because they
knew that, since you do not become a citizen based upon your race or
your ancestry and you do it upon the idea of America, that someone
needed to help these people learn about the idea of America. Many were
very eager to do that.
The legislation I introduced today would establish a foundation to
support the activities of the Office of Citizenship within the
Department of Homeland Security so that organizations that want to
support and cooperate in efforts to reach out to prospective citizens
can do so.
It would provide grants to organizations to provide classes in
American history and civics. We are talking about a lot of prospective
citizens--650,000 or so last year. After this immigration bill it may
be more, because if you become a citizen, you are going to have to be
legally here. So we want to make sure we have plenty of help for these
who want to do that.
Third, codify the oath of allegiance. One of the most remarkable
oaths, I suppose, in the American language, is the oath of allegiance
that the 650,000 new citizens take when they become Americans. It is an
oath that goes all the way back to George Washington's time and Valley
Forge. It was essentially the oath that Washington and his officers
took at the beginning of the American revolution. It says that I,
George Washington, or I, the new citizen, declare that we owe no
allegiance or obedience--in that case, to King George;
. . . and that we renounce, refuse and abjure any allegiance
or obedience to him and do swear that I will, to the utmost
of my power, support, maintain and defend the said United
States.
Essentially, that same oath of allegiance is the oath new citizens
take. This elevates that oath of allegiance from a bureaucratic rule to
a part of the law and gives it the same dignity that the Pledge of
Allegiance has and the national anthem has. Finally, this legislation
would celebrate new citizens by focusing on these hundreds of
ceremonies that we have, in which people from all over the world wear
their best clothes, prove that they have good character, that they have
waited 5 years, that they have learned English, that they have passed a
test about citizenship, and they are ready to say: As proud as I am of
where I came from, I now pledge my allegiance to the United States of
America.
We want to celebrate those events. This instructs the Secretary of
Homeland Security to develop and implement a strategy to make those
naturalization ceremonies more important in the fabric of our everyday
life, and establish an award for citizens who have been naturalized in
the last 10 years who have made an outstanding contribution to the
American Nation. We all know in our own experiences that new Americans
are sometimes the best Americans. They make the largest contribution.
They have the best understanding of our country. We want to celebrate
what they have done.
This is legislation the Senate adopted before. Senator Cochran,
Senator Cornyn, and I are introducing it to make sure we adopt it again
when immigration comes up.
I also wish to mention that I intend on looking at a comprehensive
effort toward the same goal, which I like to call the American
citizenship agenda; learning English and what it means to becoming an
American. I have identified several areas, and I may introduce
amendments in many of these areas to the immigration bill.
These were not introduced the last time, but they would include
clarifying the mission of the Office of Citizenship within the U.S.
Citizenship and Immigration Service, establishing State citizenship
advisory boards in a number of States, coordinating efforts toward
helping immigrants learning English, American history, and civics. It
would create an employer tax credit for businesses that help their
employees learn English. As I mentioned earlier, at the beginning of
the 20th century, there were a great many businesses hiring new
Americans who spent their money, their time, and their effort to make
sure those new employees understood what it meant to become Americans.
One way to meet this need of a large percentage of foreign-born
people in our country is to provide tax incentives to businesses that
help their employees learn English. Another proposal is to require a
demonstration of English language proficiency when an individual renews
his or her green card; establishing a Presidential award for companies
that go above and beyond in bringing their employees together as
Americans; finally, asking for a Government Accountability Office study
to identify the need of lawful permanent residents not speaking English
and the associated costs; in other words, how many people living in our
country do not speak English and what would be the cost and the most
effective programs of helping them learn English.
That is my purpose today, to introduce the Strengthening American
Citizenship Act, legislation that passed when we considered the
immigration bill in 2006, and which Senators Cochran and Cornyn and I
hope will be a part of this legislation; then to discuss what I call
the Strengthening American Citizenship Agenda, which will be looking
for a variety of other ways to help make sure we not only celebrate our
diversity but we find ways to celebrate our unity.
We can look across the ocean at Europe and see the struggle in Turkey
right now for that nation's identity. We can see the difficulty France
and Germany are having as Muslim workers have a hard time integrating
into their country. We do not want the United States of America to
become a country where we have enclaves of people who have no loyalty
to the idea of this Nation. We want to create an environment where
everyone has an opportunity to think about loyalty to this country,
where almost all have a chance to think about becoming a citizen one
day, and where every single person who lives here has an opportunity to
learn to speak our common language, not just for their benefit but so
we do not become a tower of Babel or a United Nations, that we become a
United States of America, as our Founders envisioned.
______
By Ms. STABENOW (for herself, Mr. Voinovich, Mr. Kerry, Mr.
Levin, and Ms. Snowe):
[[Page S6131]]
S. 1394. A bill to amend the Internal Revenue Code of 1986, to
exclude from gross income of individual taxpayers discharges of
indebtedness attributable to certain forgiven residential mortgage
obligations; to the Committee on Finance.
Ms. STABENOW. Mr. President, under current law, only two categories
of individuals pay tax on the sale of their principle residence: the
truly fortunate who have realized a capital gain of more than $250,000,
$500,000 on a joint return, or the truly unfortunate who lose equity in
their home and are forced to pay tax if the lender forgives some
portion of the mortgage debt. Surely this is an anomalous result.
Nevertheless, newspaper and television reports describe the burdens
families all over the country are facing as lenders foreclose on
borrowers who cannot make their mortgage payments. In more and more
circumstances, these borrowers, often minorities and the elderly, are
unable to make the escalating payments associated with subprime loans
and some complex adjustable rate mortgage products.
Other media reports focus on the challenges sellers face if they live
in areas with declining home values. There are instances where the
value of housing in a whole market occasionally falls through no fault
of the homeowner. A plant closes, environmental degradations are found
nearby, a regional economic slump hits hard. This happened during the
1980s in the oil patch and in southern California and New England at
the beginning of the 90s.
This is happening right now in Michigan with the depressed automotive
industry. The Detroit metropolitan area had the highest percentage of
households in foreclosure in the 150 largest metropolitan areas, with
an average of more than 10,000 foreclosures in each quarter. The
foreclosures affected 1 out of every 21 households, nearly five times
the national average. Over the first quarter of 2007, Michigan had over
29,000 foreclosures and Detroit was on pace to record 11,000 for that
same time period.
One thing these news reports do not mention is the tax problem that
sellers or those in foreclosure will face if lenders forgive and do not
require payment on some or all of a mortgage debt at the time of
disposition. What happens to these people who must sell their homes
during a downturn or who cannot make their payments and go into
foreclosure? They must pay taxes on the amount forgiven; it is treated
as income.
Below are two hypothetical scenarios where owners must have to pay
taxes on the amount forgiven and those estimated taxes. The first
example is a situation where there has been a downturn in the housing
market. The second example is where a family, possibly because of loss
of job, illness, or decrease in income or significant changes in the
mortgage rate, can neither refinance the property nor sustain the
payments and the lender forecloses on the property.
------------------------------------------------------------------------
------------------------------------------------------------------------
Decrease in home prices or ``short sale''
Mortgage................................................... $100,000
Market Value at Purchase................................... 100,000
Market Value at Sale....................................... 90,000
Sale Price................................................. 90,000
Debt Remaining After Sale.................................. 10,000
Taxes Due if forgiven by the lender @ 15 percent tax rate.. 1,500
Lender forecloses
Mortgage................................................... $100,000
Foreclosure Amount......................................... 80,000
Debt Remaining After Foreclosure........................... 20,000
Taxes Due if forgiven by the lender @ 15 percent tax rate.. 3,000
------------------------------------------------------------------------
In the ``short sale'' transaction, if the lender forgives the $10,000
of outstanding debt, the family will have taxable income of $10,000 on
the transaction and owe $1,500, even though they have just sustained an
economic loss and no cash gain.
In a second scenario, if the foreclosure sale does not cover the
amount of outstanding debt on the property or $20,000, the lender might
forgive remaining debt. Again, the borrower is treated as having
received ``income'' when the debt is forgiven and in the example, would
owe $3,000 in taxes on the $20,000 that was forgiven.
Clearly it is unfair to tax people on phantom income, particularly
right at the time they have had a serious economic loss and have no
cash with which to pay the tax. My bill, the Mortgage Relief Act, will
relieve families of a tax burden when their lender forgives part of the
mortgage on a principal residence.
None of us wants to learn that families in our own districts will be
forced to pay taxes when they have no money and have incurred a
substantial loss on what, for most, is the most significant asset they
own, and possibly the only asset they have. While my legislation will
not repair their credit or punish those who mislead them into
inappropriate loans, it will prevent them from further financial harm.
Mr. KERRY. Mr. President, it is becoming more difficult for a middle
class family to purchase a home. Last week the Senate Finance Committee
held a hearing on middle class economic issues. We learned from the
witnesses that families are struggling because their fixed costs are
greater and one of these fixed costs is housing. Professor Elizabeth
Warren testified that houses purchased now are only slightly larger
than those purchased in the 1970's, but the median mortgage payment is
76 percent larger than a generation ago.
Today, there are serious problems in our mortgage lending market
which need to be addressed. Too many families are unable to make the
monthly mortgage payments on their homes. Foreclosure rates are
increasing. Some homeowners who are facing foreclosure have received
what are known as ``subprime'' loans which allow an adjustable rate of
mortgage interest or a break on payments during the first years of the
mortgage. The ``subprime'' lending market has been an important tool to
allow people with poor credit histories to obtain access to credit
including mortgages. However, in recent years some lenders have used
these ``subprime'' mortgage loans to put homeowners into mortgage
products with high interest rates that increase after a short period of
time. Additionally, some homeowners have opted to buy homes they could
not afford by using the ``subprime'' loan market. In either case, too
many homeowners have been unable to keep up with the changes in their
mortgage payments and have been forced into foreclosure.
Last year, the Commonwealth of Massachusetts had a record 19,487
foreclosure filings. One of every 92 U.S. households faced foreclosure
and there are expected to be more disclosures in 2007. Published
reports show that Massachusetts has had approximately 10,000
foreclosures filings already this year. Monthly payments on millions of
loans are expected to increase dramatically as low introductory
interest rates balloon as much as 50 percent. The Nonprofit Center for
Responsible Lending predicts that one in five subprime mortgages done
in the past 2 years will end up in foreclosure.
Today, Senators Stabenow, Voinovich and I are introducing the
Mortgage Relief Cancellation Act of 2007. This legislation will help
families who are faced with mortgages that they are unable to pay.
Fortunately, some lenders are willing to modify loans and forgive some
debt, but the borrower is required to pay income tax on the cancelled
debt.
Under present law, the discharged debt is treated as income. Some
homeowners are learning about this rule the hard way and find
themselves owing a large tax bill on debt that was forgiven. The
Mortgage Relief Cancellation Act of 2007 would exclude from income the
debt that is forgiven for certain mortgage loans.
An example of this is a situation in which a homeowner sells their
house to prevent disclosure and the proceeds do not cover the full
mortgage obligation. The lender agrees to forgive the difference. Under
the Mortgage Relief Cancellation Act of 2007, the amount forgiven would
not be included in taxable income. This legislation also addresses
forgiveness of debt as part of a restructuring arrangement.
I urge you to support this legislation.
______
By Mr. LEVIN (for himself and Mrs. McCaskill):
S. 1395. A bill to prevent unfair practices in credit card accounts,
and for other purposes; to the Committee on Banking, Housing, and Urban
Affairs.
Mr. LEVIN. Mr. President, I am introducing today, along with Senator
McCaskill, the Stop Unfair Practices in Credit Cards Act.
Credit cards are a fixture of American family life today. People use
them to buy groceries, to rent a car, shop on the Internet, pay college
tuition, and even pay their taxes. In 2005, the average family had five
credit cards. American households used nearly 700 million
[[Page S6132]]
credit cards to buy goods and services worth $1.8 trillion. Credit
cards fuel commerce, facilitate financial planning, help families deal
with emergencies. But credit cards have also contributed to record
amounts of household debt. Some credit card issuers have socked
families with sky-high interest rates of 25 and 30 percent and higher.
They have hit consumers with hefty fees for late payments, for
exceeding a credit card limit, and other transactions. In too many
cases, credit card issuers have made it all but impossible for working-
class families to climb out of debt.
That is why in 2005, the Permanent Subcommittee on Investigations,
which I chaired, on which Senator McCaskill serves, initiated an in-
depth investigation into unfair and abusive credit card industry
practices.
In the fall of 2006, the Government Accountability Office, the GAO,
released a report which I had requested, which for the first time in
years provided a comprehensive examination of the interest rates and
fees being charged by credit card companies. Following the release of
that report, and continuing through today, the subcommittee has been
deluged with calls and letters from Americans expressing anger and
frustration at the way they have been treated by their credit card
companies, and sharing stories of unfair and often abusive practices.
The subcommittee has been examining those allegations of unfair
treatment and has identified many troubling credit card industry
practices which should be banned or restricted.
Our first hearing in March focused on industry practices involving
grace periods, interest rates, and fees. It revealed a number of
unfair, often little-known, and sometimes abusive credit card
practices, which prey upon families experiencing financial hardships,
and squeezed even consumers who pay their credit card bills on time.
The legislation we are introducing today is aimed at stopping abusive
credit card practices that trap too many hard-working families in a
downward spiral of debt. American families deserve to be treated
honestly and fairly by their credit card companies. Our bill would help
ensure that fair treatment. Here are a few things our bill would do. It
would stop credit card companies from charging interest on debt that is
paid on time. It would crack down on abusive fees, including repeated
late fees and over-the-limit fees, and fees to pay your bill.
It would also prohibit the charging of interest on those fees. It
would establish guidelines on interest rate increases, including a cap
on penalty interest rate hikes at no more than 7 percent. It would
require that increased interest rates apply only to future credit card
debt and not the debt already incurred.
Our bill will be referred to the Senate Banking Committee, which has
primary jurisdiction over credit card legislation, and which has been
holding its own hearing on unfair credit card practices. Our friend,
Senator Dodd, the committee chairman, has a long history of fighting
credit card abuses. Senator Shelby, the ranking Republican, as well as
many other members of the committee, has also expressed concern about a
number of credit card problems.
It is my hope our bill and the legislative record being compiled by
our Permanent Subcommittee on Investigations will help the Banking
Committee in its deliberations and help build momentum to enact
legislation halting the unfair credit card practices that outrage
American consumers. Credit card abuse is too harmful to American
families, our economy, and our economic future to let these unfair
practices continue.
Let me describe the key provisions of our bill in more detail. The
first section of the bill would put an end to an indefensible practice
that imposes little known and unfair interest charges on many
unsuspecting, responsible consumers. Most credit cards today offer what
is called a grace period. Cardholders are told that, if they pay their
monthly credit card bill during this grace period, they will not be
charged interest on the debt for which they are being billed. What many
cardholders do not realize, however, is that this grace period
typically provides protection against interest charges only if their
monthly credit card bill is paid in full. If the cardholder pays less
than 100 percent of the monthly bill--even if the cardholder pays on
time--he or she will be charged interest on the entire billed amount,
including the portion that was paid by the specified due date.
An example shows why this billing practice is unfair and should be
stopped. Suppose a consumer who usually pays his or her credit card
account in full and owes no money as of December 1 makes a lot of
purchases in December. The consumer gets a credit card bill on January
1 for $5,020, due January 15. Suppose the consumer pays that bill on
time, but pays $5,000 instead of the full amount owed.
Most people assume that the next bill would be for the $20 in unpaid
debt, plus interest on that $20. But that commonsense assumption is
wrong. That is because current industry practice is to charge the
consumer interest not only on the $20 that wasn't paid on time, but
also on the $5,000 that was paid on time. Let me say that again.
Industry practice is to force the consumer to pay interest on the
portion of the debt that was paid on time. In other words, the consumer
would pay interest on the entire $5,020 from the first day of the
billing month, January 1, until the day the $5,000 payment was made on
January 15, compounded daily. So much for a grace period. After that,
the consumer would be charged interest on the $20 past due, compounded
daily, from January 15 to the end of the month.
The end result would be a February 1 bill that more than doubles the
$20 debt. Using an interest rate of 17.99 percent, for example, in just
one month, the $20 debt would rack up interest charges of more than
$35.
Charging $35 of interest over one month on a $20 credit card debt is
indefensible, especially when applied to a consumer who paid over 90
percent of their credit card debt on time during the grace period. Our
legislation would end this unfair billing practice by amending the
Truth in Lending Act to prohibit the charging of interest on any
portion of a credit card debt that is paid on time during a grace
period. Using our example, this prohibition would bar the charging of
interest on the $5,000 that was paid on time, and result in a February
balance that reflects what a rational consumer would have expected: the
$20 past due, plus interest on the $20 from January 1 to January 31.
The second section of our bill would address a related unfair billing
practice, which I call ``trailing interest.'' Charging trailing
interest on credit card debt is another widespread, but little known
industry practice that squeezes responsible and largely unsuspecting
consumers for still more interest charges.
Going back to our example, you might think that once the consumer
gets gouged in February by receiving a bill for $55 on a $20 debt, and
pays that bill on time and in full, without making any new purchase,
that would be the end of that credit card debt for the consumer. But
you would be wrong. It would not be the end.
Even if, on February 15, the consumer paid the February 1 bill in
full and on time--all $55--the next bill would likely have an
additional interest charge related to the $20 debt. In this case, the
charge would reflect interest that would have accumulated on the $55
from February 1 to 15, which is the time from when the bill was sent to
the day it was paid. The total interest charge in our example would be
about 38 cents. While some credit card issuers will waive trailing
interest if the next month's bill is less than $1, a common industry
practice is to fold the 38 cents into the next bill if a consumer makes
a new purchase.
Now 38 cents isn't much in the grand scheme of things. That may be
why many consumers don't notice this extra interest charge or bother to
fight it. Even if someone had questions about the amount of interest on
a bill, most consumers would be hard pressed to understand how the
amount was calculated, much less whether it was correct. But by nickel
and diming tens of millions of consumer accounts with trailing interest
charges, credit card issuers reap large profits.
This little known billing practice, which squeezes consumers for a
few more cents on the dollar, and targets responsible cardholders who
pay their bills on time and in full, goes too far.
[[Page S6133]]
If a consumer pays a credit card bill on time and in full--paying 100
percent of the amount specified by the date specified in the billing
statement--it is unfair to charge that consumer still more interest on
the debt that was just paid. Our legislation would put an end to
trailing interest by prohibiting credit card issuers from adding
interest charges to a credit card debt which the consumer paid on time
and in full in response to a billing statement.
A third problem examined by the subcommittee involves a widespread
industry practice in which credit card issuers claim the right to
unilaterally change the terms of a credit card agreement at any time
for any reason with only a 15-day notice to the consumer under the
Truth in Lending Act.
As the National Consumer Law Center testified at our hearing, this
practice means that smart shoppers who choose a credit card after
comparing a variety of card options are continually vulnerable to a
change-in-terms notice that alters the favorable terms they selected,
and provides them with only 15 days to accept the changes or find an
alternative. By asserting the right to make unilateral changes to
credit card terms on short notice, credit card issuers undermine not
only the bargaining power of individual consumers, but also principles
of fair market competition. Such unilateral changes are particularly
unfair when they alter material terms in a credit card agreement such
as the interest rate applicable to extensions of credit.
That is why our bill would impose two types of limits on credit card
interest rate hikes. First, for consumers who comply with the terms of
their credit card agreements, the bill would prohibit a credit card
issuer from unilaterally hiking an interest rate that was represented
to, and included in the disclosures provided, to a consumer under the
Truth in Lending Act, unless the consumer affirmatively agreed in
writing to the increase at the time it is proposed. This prohibition is
intended to protect responsible consumers who play by the rules from a
sudden hike in their interest rate for no apparent reason--a complaint
that the subcommittee has heard all too often. Under our bill, issuers
would no longer be able to unilaterally hike the interest rates of
cardholders who play by the rules.
The bill's second limit would apply to consumers who, for whatever
reason, failed to comply with the terms of their credit card agreement,
perhaps by paying late or exceeding the credit limit. In that
circumstance, credit card issuers would be permitted to impose a
penalty interest rate on the account, but the bill would place a cap on
how high that penalty interest rate could go.
Specifically, the bill would limit any such penalty rate hike to no
more than a 7 percent increase above the interest rate in effect before
the penalty rate was imposed. That means a 10 percent rate could rise
no higher than 17 percent, and a 15 percent rate could not exceed 22
percent. This type of interest rate limit is comparable to the caps
that today operate in many adjustable mortgages. The effect of the
credit card cap would be to prohibit penalty interest rates from
dramatically increasing the interest rate imposed on the cardholder, as
happened in cases examined by the subcommittee where credit card
interest rates jumped from 10 percent or 15 percent to as much as 32
percent. Penalty interest rate hikes that double or triple existing
interest rates are simply unreasonable and unfair.
If a credit card account were opened with a low introductory interest
rate followed by a higher interest rate after a specified period of
time, it is intended that the penalty rate cap proposed in the bill
would apply to each of those disclosed rates individually. For example,
suppose the credit card account had a 0 percent introductory rate for 6
months and a 12 percent rate after that. Suppose further that, during
the 6-month introductory period, the cardholder exceeded the credit
limit. The bill would allow the card issuer to impose a penalty
interest rate of up to 7 percent for the rest of the 6 month period.
Once the 6-month period ended, it is intended that the 12 percent rate
would take effect. If the consumer were to again exceed the limit, it
is intended that any penalty rate imposed upon the account be no
greater than 19 percent.
If a card issuer were to analyze an account and conclude that a
penalty rate increase of up to 7 percent would be insufficient to
protect against the risk of default on the account, the issuer could
choose to reduce the credit limit on the account or cancel the account
altogether. If the card issuer chose to cancel the account, it is
intended that the consumer would retain the right to pay off any debt
on the account using the interest rate that was in effect when the debt
was incurred.
The point of the bill's penalty interest rate cap is to stop penalty
interest rate hikes which are disproportional; which too often stick
families with sky-high interest rates of 25 percent, 30 percent, and
even 32 percent; and which too often make it virtually impossible for
working American families to climb out of debt.
Still another troubling practice involving credit card interest rate
hikes is the problem of retroactive application. Industry practice
today is to apply an increased interest rate not only to new debt
incurred by the cardholder, but also to previously incurred debt.
Retroactive application of a higher interest rate means that pre-
existing credit card debt suddenly costs a consumer much more to repay.
Take, for example, a $3,000 credit card debt that a consumer was paying
down each month with timely payments. Suddenly, the cardholder falls
ill, misses a payment or pays it late, and the card issuer increases
the interest rate from 15 percent to 22 percent. If applied to the
existing $3,000 debt, that higher rate would require the cardholder to
make a much steeper minimum monthly payment and pay much more interest
than originally planned. That is often enough to sink a working family
into a deepening spiral of debt from which they cannot recover.
By making it a common practice to institute after-the-fact interest
rate hikes for existing credit card debt--in effect unilaterally
changing the terms of an existing loan--the credit card industry has
unfairly positioned itself to reap greater profits at consumers'
expense. Our bill would fight back by limiting the retroactive
application of interest rate hikes to lessen the financial impact on
American households. Specifically, our bill would provide that interest
rate hikes could be applied only to future credit card debt and not to
any credit card debt incurred prior to the rate increase. Instead, any
earlier debt would continue to accrue interest at the rate previously
in effect.
The first set of provisions in our bill addresses unfair practices
related to interest rates. The next set of provisions targets unfair
practices related to fees imposed on cardholders by credit card
companies.
The need for proconsumer fee protections is illustrated by the story
of Wes Wannemacher of Ohio, a witness featured at the subcommittee's
March hearing. In 2001 and 2002, Mr. Wannemacher charged about $3,200
on a new Chase credit card to pay for expenses mostly related to his
wedding. Over the next 6 years, he paid about $6,300 toward that debt,
yet in February 2007, Chase said that he still owed them about $4,400.
How could Mr. Wannemacher pay nearly double his original credit card
debt and still owe $4,400? As he explained in his testimony, in
addition to repaying the original debt of $3,200, Mr. Wannemacher was
socked with $4,900 in interest charges, $1,100 in late fees, and 47
over-limit fees totaling $1,500, despite going over his $3,000 credit
limit by a total of $200. These facts show that Mr. Wannemacher paid
$2,600 in fees on a $3,200 debt. In addition, those fees were added to
his outstanding credit card balance, and he was charged interest on the
fee amounts, increasing his debt by hundreds if not thousands of
additional dollars. There is something so wrong with this picture, that
Chase didn't even defend its treatment of the account at the
subcommittee hearing; instead, Chase forgave the $4,400 debt that it
said was still owing on the Wannemacher credit card.
It is no secret that credit card companies are making a great deal of
money off the fees they are imposing on consumers. According to GAO,
fee income now produces about 10 percent of all income obtained by
credit card issuers. The GAO report which I commissioned on this
subject identified a
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host of different fees that have become common practice, including fees
for transferring balances, making a late payment, exceeding a credit
limit, paying a bill by telephone, and exchanging foreign currency.
According to GAO, late fees now average $34 per month and over-limit
fees average $31 per month, with some of these fees climbing as high as
$39 per month. As Mr. Wannemacher discovered, these hefty fees are not
only added to the credit card's outstanding balance, they also incur
interest. The higher the fees climb, the higher the balances owed, and
the higher the interest charges on top of that.
Charging interest on money borrowed is certainly justified, but
squeezing additional dollars from consumers by charging interest on
transaction fees goes too far. Steep fees already deepen household debt
from credit cards; those fees should not also generate interest income
for the credit card issuer. Our bill would ban this industrywide
practice by prohibiting credit card issuers from charging or collecting
interest on the fees imposed on consumers.
Mr. Wannemacher exceeded the $3,000 limit on his credit card on three
occasions in 2001 and 2002 for a total of $200. Over the following 6
years, however, he was charged over-the-limit fees on 47 occasions
totaling about $1,500. In other words, Chase tried to collect over-the-
limit fees from Mr. Wannemacher that were seven times larger than the
amount he went over the limit.
At our March hearing, Chase did not attempt to defend the 47 over-
the-limit fees it imposed; instead, it announced that it was changing
its policy and would join with others in the industry in imposing no
more than three over-the-limit fees in a row on a credit card account
with an outstanding balance that exceeded the credit limit. While
Chase's voluntary change in policy is welcome, it doesn't go far enough
in curbing abusive practices related to over-the-limit fees.
First, if a credit card issuer approves the extension of credit that
allows the cardholder to exceed the account's established credit limit,
the issuer should be allowed to impose only one over-the-limit fee for
that credit extension. One fee for one violation--especially when the
card issuer facilitated the violation by approving the excess credit
charge.
Second, the fee should be imposed only if the account balance is over
the credit limit at the end of the billing cycle. If a cardholder
exceeds the limit in the middle of the billing cycle and then takes
prompt action to reduce the balance below the limit, perhaps by making
a payment or obtaining a credit for returning a purchase, there is no
injury to the creditor and no justification for an over-the-limit fee.
Third, a credit card issuer should impose an over-the-limit fee only
when an action taken by the cardholder causes the credit limit to be
exceeded, and not when a penalty imposed by the card issuer causes the
excess charge. The card issuer should not be able to pile penalty upon
penalty, such as by assessing a late fee on an account and then, if the
late fee pushes the credit card balance over the credit limit, also
imposing an over-the-limit fee.
In addition, the bill would require credit card issuers to offer
consumers the option of establishing a true credit limit on their
account--a credit limit that could not be exceeded, because the account
would be programmed to refuse approval of any extension of credit over
the established limit. In too many cases, credit card issuers no longer
provide consumers with the option of having a fixed credit limit,
preferring instead to enable all of their cardholders to exceed their
credit limits only to be penalized by a hefty fee, added interest, and,
possibly, a penalty interest rate.
There is more. Another unfair but common fee is what I call the
``pay-to-pay fee.'' It is the $5 to $15 fee that many issuers charge
consumers to pay their credit card bill on time by using the telephone.
To me, charging folks a fee to pay their bills is a travesty. My bill
would prohibit a credit card issuer from charging a separate fee to
allow a credit cardholder to pay all or part of a credit card balance.
Another fee that has raised eyebrows is the one charged by credit
card issuers to exchange dollars into or from a foreign currency. A
number of issuers today charge an amount equal to 2 percent of the
amount of currency being exchanged in addition to a 1-percent
``conversion fee'' charged by Visa or Master Card, for a total of 3
percent Our bill responds by requiring foreign currency exchange fees
to reasonably reflect the actual costs incurred by the creditor to
perform the currency exchange, and requiring regulators to ensure
compliance with that standard.
In addition to unfair practices involving interest rates and fees,
the subcommittee investigation uncovered several unfair industry
practices involving how credit cardholder payments are applied to
satisfy finance charges and other credit card debt. One such practice
that has caught the subcommittee's attention is the industrywide
practice of applying consumer payments first to the balances with the
lowest interest rates.
Right now, a single credit card account often carries balances
subject to multiple interest rates. Credit cards typically use one
interest rate for purchases, another for cash advances, and a third for
balance transfers. Many card issuers also offer new customers low
introductory interest rates, such as 0 or 1 percent, but limit these
``come on'' rates to a short time period or to a balance transferred
from another card. Moreover, many of these interest rates may vary over
time, since it is a common practice to offer variable interest rates
that rise and fall according to a specified rate or index.
When a consumer payment is made, credit card issuers currently have
complete discretion on how to apply that payment to the various
balances bearing different interest rates. Consumers are typically
given no option to direct where their payments are applied. Today,
virtually all credit card issuers apply a consumer payment first to the
balance with the lowest interest rate. After that balance is paid off,
card issuers apply the payment to the balance with the next lowest
interest rate, and so on.
This payment practice clearly favors creditors over consumers. It
allows the card issuers to direct payments first to the balances that
provide them with the lowest returns, and minimize payments to the
balances bearing the highest interest rates so those balances can
accumulate more interest for a longer period. Consumers who want to pay
off a cash advance bearing a 20 percent interest rate, for example, are
told that they cannot make that payment until they first pay off all
other balances with a lower interest rate.
Our bill would replace this unfair industrywide practice with a
proconsumer approach. Reversing current industry practice, the bill
would require cardholder payments to be applied first to the balance
bearing the highest interest rate, and then to each successive balance
bearing the next highest rate, until the payment is used up. The bill
would also require credit card issuers to apply cardholder payments in
the most effective way to minimize the imposition of any fees or
interest charges to the account.
In addition, the bill would prohibit credit card issuers from
imposing late fees on consumers if the issuer was itself responsible
for the delay in crediting the payment. For example, if a card issuer
changed the mailing address for payments, had to shut down its mail
sorting equipment for repairs, or mistakenly routed a consumer payment
to the wrong department, the issuer would not be allowed to assess a
late fee on the cardholder for the resulting late payment. Instead, if
the card issuer caused the late payment, it would be barred from
assessing a late fee on the consumer.
In addition to provisions to improve practices related to interest
rates, fees, and consumer payments, the bill would add two new
definitions to the Truth in Lending Act, intended to further address
concerns related to unfair credit card practices.
The first definition involves use of the term, ``prime rate.'' Many
credit card issuers today use variable interest rates that are linked
to the ``prime rate'' or ``prime interest rate'' and vary over time.
For example, a disclosure may indicate that a credit card will bear an
interest rate equal to the prime rate plus a specified number of
percentage points. Since the 1950s, the term ``prime rate'' has been
commonly understood to mean the lowest interest rate offered by U.S.
banks to their
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most creditworthy borrowers. That is how the term is defined, for
example, in Webster's Collegiate Dictionary.
The problem, however, is that no current statute or regulation
defines the prime rate referenced in credit card disclosures under the
Truth in Lending Act, and some card issuers have stated expressly that
the prime rate used in credit card agreements does not necessarily
match the lowest interest rates they provide to their most creditworthy
borrowers. Litigation has also arisen between cardholders and card
issuers as to what is meant by the term and whether cardholders are
being misled. A cite is Lum v. Bank of America, 361 F.3d 217 (3d Cir.
2004).
To remedy this gap in the law, the bill would require credit card
disclosures under the Truth in Lending Act that reference the prime
rate to use the bank prime loan rate published by the Federal Reserve
Board. This published rate is widely accepted in the financial
community as an accurate depiction of the lowest interest rate offered
by U.S. banks to their most creditworthy borrowers, and the rate is
readily available to the public on the Federal Reserve Web site. By
mandating use of this published rate, the bill will ensure that
consumers are not deceived by a credit card issuer using a misleading
definition of the commonly used term ``prime rate.''
The second definition added by the bill to the Truth in Lending Act
involves specifying the ``primary federal regulator'' of a credit card
issuer. Today, many credit card issuers are federally chartered or
regulated banks subject to one or more Federal bank regulators. The
bill would make it clear that when a card issuer is a Federal bank, its
primary Federal regulator is the same primary regulator assigned to the
bank under Federal banking law. The provision would also make it clear
that the primary Federal regulator is responsible for overseeing the
bank's credit card operations, ensuring compliance with credit card
statutes and regulations, and enforcing the prohibition against unfair
or deceptive acts or practices in the Federal Trade Commission Act.
Another provision in the bill would make it clear that Federal
regulators are expected to conduct at least annual audits to ensure
card issuer compliance with the statutes and regulations seeking to
ensure fair and effective credit card operations.
The next section of the bill would improve current credit card data
collection efforts. Right now, credit card issuers file periodic
reports with the Federal Reserve providing information about credit
card interest rates and profits. This data plays a critical role in
credit card oversight efforts, as well as financial and economic
analyses related to consumer spending and household debt. The bill
would strengthen current data collection efforts by requiring more
specific information on interest rates and fees. For example, current
data reports cannot be used to determine how many credit card accounts
have interest rates of 25 percent or greater, what types of fees are
imposed on consumers, or how many cardholders are affected by such
interest rates and fees. The new bill would ensure that regulators,
credit card users, and the public have the information needed to answer
those basic questions.
The bill would also require the development of credit card
industrywide estimates of the approximate relative income derived from
interest rates, fees imposed on cardholders, fees imposed on merchants,
and any other material source of income. GAO provided this information
for the first time in its 2006 report, estimating that the credit card
industry now derives about 70 percent of its income from interest
charges, 20 percent from interchange fees imposed on merchants, and 10
percent from fees imposed on consumers. This valuable information
should continue to be collected so that regulators, credit card users,
and the public gain a more informed understanding of the credit card
industry.
The bill's data collection requirements are largely modeled upon and
intended to replicate key interest rate, fee, and revenue data
presented by GAO in its 2006 report, ``Credit Cards: Increased
Complexity in Rates and Fees Heightens Need for More Effective
Disclosures to Consumers.'' Credit card experts were also consulted to
determine what information would be most helpful to strengthen credit
card oversight.
The final provision in the bill would provide a 6-month transition
period for credit card issuers to implement the bill's provisions.
Credit card issuers like to say that they are engaged in a risky
business, lending unsecured debt to millions of consumers, and that's
why they have to set interest rates so high and impose so many fees.
But the data shows that, typically, 95 to 97 percent of U.S.
cardholders pay their bills. And it is clear that credit card
operations are enormously profitable. For the last decade, credit card
issuers have reported year after year of solid profits, maintained
their position as the most profitable sector in the consumer lending
field, and reported consistently higher rates of return than commercial
banks. Credit card issuers make such a hefty profit that they sent out
8 billion pieces of mail last year soliciting people to sign up.
With profits like those, credit card issuers can afford to stop
treating American families unfairly. They can give up charging interest
on debt that was paid on time, give up charging consumers a fee to pay
their bills, give up hiking interest rates from 15 percent to 32
percent, and give up imposing repeated over-the-limit fees for a single
over-the-limit purchase. As one Michigan businessman expressed it to
the subcommittee, ``I don't blame the credit card issuers for putting
me into debt, but I do blame them for keeping me there.''
Some argue that Congress doesn't need to ban unfair credit card
practices; they contend that improved disclosure alone will empower
consumers to seek out better deals. Sunlight can be a powerful
disinfectant, which is why I have strongly urged the Federal Reserve
Board to expedite its regulatory effort to strengthen credit card
disclosure and help consumers understand and compare how various credit
cards work. But credit cards have become such complex financial
products that even improved disclosure will frequently not be enough to
curb the abuses--first because some practices are so complex that
consumers can't easily understand them, and second because better
disclosure does not always lead to greater market competition,
especially when virtually an entire industry is using and benefiting
from practices that disadvantage consumers.
So when we find credit card practices that are inherently unfair,
consumers are often best served, not by greater disclosure, but by
stopping the unfair practices that take advantage of them. Among those
practices identified in this bill are unfair interest charges that
squeeze consumers who pay their credit card debt on time; unilateral
and retroactive interest rate hikes that deepen and prolong credit card
debt; unreasonable fees; and payment allocation practices that prevent
consumers from paying off the credit card debts bearing the highest
interest rates first.
Congress needs to enact proconsumer legislation that puts an end to
unfair credit card practices. I am afraid that these practices are too
entrenched, too profitable to the credit card companies, and too immune
to consumer pressure for the companies to change them on their own. Our
bill offers measures that would combat a host of unfair practices that
plague consumers and unfairly deepen and prolong their debt. I look
forward to working with my colleagues to address these problems.
Mr. President, I ask unanimous consent that the text of the bill be
printed in the Record.
There being no objection, the text of the bill was ordered to be
printed in the Record, as follows:
S. 1395
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 ``Stop Unfair Practices in
Credit Cards Act of 2007''.
SEC. 2. STOP UNFAIR INTEREST RATES AND FEES.
Section 163 of the Truth in Lending Act (15 U.S.C. 1666b)
is amended--
(1) by striking the section title and all that follows
through ``If an open'' and inserting the following:
``Sec. 163. Billing period and finance charges
``(a) Billing Period.--
``(1) Fourteen-day minimum.--If an open'';
(2) by striking ``(b) Subsection (a)'' and inserting the
following:
``(2) Excusable cause.--Subsection (a)''; and
[[Page S6136]]
(3) by adding at the end the following:
``(b) No Interest Charge on Debt That Is Paid on Time.--If
an open end consumer credit plan provides a time period
within which an obligor may repay any portion of the credit
extended without incurring an interest charge, and the
obligor repays all or a portion of such credit within the
specified time period, the creditor may not impose or collect
an interest charge on the portion of the credit that was
repaid within the specified time period.
``(c) No Interest on Debt That Is Paid on Time and in
Full.--In an open end consumer credit plan, if a billing
statement requests an obligor to repay within a specified
time period all of the credit extended under the plan and
related finance charges, and the obligor pays all of the
specified amount within the specified time period, the
creditor may not impose or collect an additional interest
charge on the amount that was paid in full and within the
specified time period.
``(d) Limits on Interest Rate Increases.----
``(1) In general.--With respect to a credit card account
under an open end consumer credit plan, the creditor shall
not increase the periodic rate of interest applicable to
extensions of credit while such account remains open,
unless--
``(A) such increase is pursuant to the expiration of an
introductory rate which was disclosed under section
127(c)(6);
``(B) such increase is pursuant to the application of a
variable rate which was disclosed under section
127(c)(1)(A)(i)(II);
``(C) such increase is pursuant to the application of a
penalty rate which was disclosed under subsections (a)(4) and
(c)(1)(A)(i) of section 127; or
``(D) the obligor has provided specific written consent to
such increase at the time such increase was proposed.
``(2) Limit on penalty interest rate.--If an obligor fails
to repay an extension of credit in accordance with the terms
of a credit card account under an open end consumer credit
plan, and the creditor determines to apply a penalty rate, as
described in paragraph (1)(C), notwithstanding paragraph
(1)(D), such penalty rate may not, while such account is
open, exceed 7 percentage points above the interest rate that
was in effect with respect to such account on the date
immediately preceding the first such penalty increase for
such account.
``(e) Interest Rate Increases Limited to Future Credit
Extensions.--With respect to a credit card account under an
open end consumer credit plan, if the creditor increases the
periodic interest rate applicable to an extension of credit
under the account, such increased rate shall apply only to
extensions of credit made on and after the date of such
increase under the account, and any extension of credit under
such account made before the date of such increase shall
continue to incur interest at the rate that was in effect on
the date prior to the date of the increase.
``(f) No Interest Charges on Fees.--With respect to a
credit card account under an open end consumer credit plan,
if the creditor imposes a transaction fee on the obligor,
including a cash advance fee, late fee, over-the-limit fee,
or balance transfer fee, the creditor may not impose or
collect interest with respect to such fee amount.
``(g) Fixed Credit Limit.--With respect to each credit card
account under an open end consumer credit plan, the creditor
shall offer to the obligor the option of obtaining a fixed
credit limit that cannot be exceeded, and with respect to
which any request for credit in excess of such fixed limit
must be refused, without exception and without imposing an
over-the-limit fee or other penalty on such obligor.
``(h) Over-the-Limit Fee Restrictions.--With respect to a
credit card account under an open end consumer credit plan,
an over-the-limit fee, as described in section
127(c)(1)(B)(iii)--
``(1) may be imposed on the account only when an extension
of credit obtained by the obligor causes the credit limit on
such account to be exceeded, and may not be imposed when such
credit limit is exceeded due to a penalty fee, such as a late
fee or over-the-limit fee, that was added to the account
balance by the creditor; and
``(2) may be imposed only once during a billing cycle if,
on the last day of such billing cycle, the credit limit on
the account is exceeded, and no additional over-the-limit fee
shall be imposed in a subsequent billing cycle with respect
to such excess credit, unless the obligor has obtained an
additional extension of credit in excess of such credit limit
during such subsequent cycle.
``(i) Other Fees.--
``(1) No fee to pay a billing statement.--With respect to a
credit card account under an open end consumer credit plan,
the creditor may not impose a separate fee to allow the
obligor to repay an extension of credit or finance charge,
whether such repayment is made by mail, electronic transfer,
telephone authorization, or other means.
``(2) Reasonable currency exchange fee.--With respect to a
credit card account under an open end consumer credit plan,
the creditor may impose a fee for exchanging United States
currency with foreign currency in an account transaction,
only if--
``(A) such fee reasonably reflects the actual costs
incurred by the creditor to perform such currency exchange;
``(B) the creditor discloses publicly its method for
calculating such fee; and
``(C) the primary Federal regulator of such creditor
determines that the method for calculating such fee complies
with this paragraph.
``(j) Annual Audit.--The primary Federal regulator of a
card issuer shall audit, on at least an annual basis, the
credit card operations and procedures used by such issuer to
ensure compliance with this section and section 164,
including by reviewing a sample of billing statements to
determine when they were mailed and received, and by
reviewing a sample of credit card accounts to determine when
and how payments and finance charges were applied. Such
regulator shall promptly require the card issuer to take any
corrective action needed to comply with this section.''.
SEC. 3. STOP UNFAIR APPLICATION OF CARD PAYMENTS.
Section 164 of the Truth in Lending Act (15 U.S.C. 1666c)
is amended--
(1) by striking the section heading and all that follows
through ``Payments'' and inserting the following:
``Sec. 164. Prompt and fair crediting of payments
``(a) In General.--Payments''; and
(2) by adding at the end the following:
``(b) Application of Payment.--Upon receipt of a payment
from a cardholder, the card issuer shall--
``(1) apply the payment first to the card balance bearing
the highest rate of interest, and then to each successive
balance bearing the next highest rate of interest, until the
payment is exhausted; and
``(2) after complying with paragraph (1), apply the payment
in the most effective way to minimize the imposition of any
finance charge to the account.
``(c) Changes by Card Issuer.--If a card issuer makes a
material change in the mailing address, office, or procedures
for handling cardholder payments, and such change causes a
material delay in the crediting of a cardholder payment made
during the 60-day period following the date on which such
change took effect, the card issuer may not impose any late
fee or finance charge for a late payment on the credit card
account to which such payment was credited.''.
SEC. 4. STOP DECEPTIVE DISCLOSURE.
Section 127(e) of the Truth in Lending Act (15 U.S.C.
1637(e)) is amended by adding at the end the following:
``(3) Interest rate linked to prime rate.--If a credit card
solicitation, application, agreement, or plan specifies use
of a variable interest rate established by reference to a
`prime rate', `prime interest rate', or similar rate or
index, the referenced rate shall be disclosed and defined as
the bank prime loan rate posted by a majority of the top 25
(by assets in domestic offices) United States chartered
commercial banks, as published by the Board of Governors of
the Federal Reserve System. To avoid an unfair or deceptive
act or practice, a card issuer may not use the term `prime
rate' to refer to any other type of interest rate.''.
SEC. 5. DEFINITIONS.
Section 103 of the Truth in Lending Act (15 U.S.C. 1602) is
amended by adding at the end the following:
``(cc) Primary Federal Regulator.--
``(1) In general.--The term `primary Federal regulator',
when used with respect to a card issuer that is a depository
institution, has the same meaning as the term `appropriate
Federal banking agency', under section 3 of the Federal
Deposit Insurance Act.
``(2) Areas of responsibility.--For each card issuer within
its regulatory jurisdiction, the primary Federal regulator
shall be responsible for overseeing the credit card
operations of the card issuer, ensuring compliance with the
requirements of this title, and enforcing the prohibition
against unfair or deceptive acts or practices.''.
SEC. 6. STRENGTHEN CREDIT CARD INFORMATION COLLECTION.
Section 136(b) of the Truth in Lending Act (15 U.S.C.
1646(b)) is amended--
(1) in paragraph (1)--
(A) by striking ``The Board shall'' and inserting the
following:
``(A) In general.--The Board shall''; and
(B) by adding at the end the following:
``(B) Information to be included.--The information under
subparagraph (A) shall include, as of a date designated by
the Board--
``(i) a list of each type of transaction or event for which
one or more of the card issuers has imposed a separate
interest rate upon a cardholder, including purchases, cash
advances, and balance transfers;
``(ii) for each type of transaction or event identified
under clause (i)--
``(I) each distinct interest rate charged by the card
issuer to a cardholder, as of the designated date; and
``(II) the number of cardholders to whom each such interest
rate was applied during the calendar month immediately
preceding the designated date, and the total amount of
interest charged to such cardholders at each such rate during
such month;
``(iii) a list of each type of fee that one or more of the
card issuers has imposed upon a cardholder as of the
designated date, including any fee imposed for obtaining a
cash advance, making a late payment, exceeding the credit
limit on an account, making a balance transfer, or exchanging
United States dollars for foreign currency;
``(iv) for each type of fee identified under clause (iii),
the number of cardholders upon whom the fee was imposed
during the calendar month immediately preceding the
designated date, and the total amount of fees imposed upon
cardholders during such month;
[[Page S6137]]
``(v) the total number of cardholders that incurred any
interest charge or any fee during the calendar month
immediately preceding the designated date; and
``(vi) any other information related to interest rates,
fees, or other charges that the Board deems of interest.'';
and
(2) by adding at the end the following:
``(5) Report to congress.--The Board shall, on an annual
basis, transmit to Congress and make public a report
containing an assessment by the Board of the profitability of
credit card operations of depository institutions. Such
report shall include estimates by the Board of the
approximate, relative percentage of income derived by such
operations from--
``(A) the imposition of interest rates on cardholders,
including separate estimates for--
``(i) interest with an annual percentage rate of less than
25 percent; and
``(ii) interest with an annual percentage rate equal to or
greater than 25 percent;
``(B) the imposition of fees on cardholders;
``(C) the imposition of fees on merchants; and
``(D) any other material source of income, while specifying
the nature of that income.''.
SEC. 7. CONFORMING AMENDMENT.
Section 8 of the Fair Credit and Charge Card Disclosure Act
of 1988 (15 U.S.C. 1637 note) is repealed.
SEC. 8. EFFECTIVE DATE.
This Act and the amendments made by this Act shall become
effective 180 days after the date of enactment of this Act.
______
By Mr. REID (for himself and Mr. Cochran):
S. 1398. A bill to expand the research and prevention activities of
the National Institute of Diabetes and Digestive and Kidney Diseases,
and the Centers for Disease Control and Prevention with respect to
inflammatory bowel disease; to the Committee on Health, Education,
Labor, and Pensions.
Mr. REID. Mr. President, I rise today to introduce legislation
focused on a devastating condition known as inflammatory bowel disease,
IBD.
Crohn's disease and ulcerative colitis, collectively known as
inflammatory bowel disease, IBD, are chronic disorders of the
gastrointestinal tract which afflict approximately 1.4 million
Americans, 30 percent of whom are diagnosed in their childhood years.
IBD can cause severe abdominal pain, fever, and intestinal bleeding.
Complications related to the disease include; arthritis, osteoporosis,
anemia, liver disease, growth and developmental challenges, and
colorectal cancer. Inflammatory bowel disease represents a major cause
of morbidity from digestive illness and has a devastating impact on
patients and families.
In the 108th Congress, I sponsored bipartisan legislation focused on
IBD. Several important provisions of that bill were incorporated into
legislation known as the Research Review Act which was enacted in 2005.
The legislation I am introducing today builds on the progress made in
2005 by calling for an increased Federal investment in biomedical
research on IBD. The hope for a better quality of life for patients and
families depends on basic and clinical research sponsored by the
National Institute of Diabetes and Digestive and Kidney Diseases,
NIDDK, at the National Institutes of Health. The Inflammatory Bowel
Disease Research Act calls for an expansion of NIDDK's research
portfolio on Crohn's disease and ulcerative colitis in order to
capitalize on several exciting discoveries that have broadened our
understanding of IBD in recent years. By increasing our investment in
this area, we will maximize the possibility that we will be able to
offer hope to millions of Americans who suffer from this debilitating
disease. At the same time, progress in this area could also mean we
would save millions of dollars in net health care expenditures through
reduced hospitalizations and surgeries.
In addition to biomedical research, this legislation also calls on
the Centers for Disease Control and Prevention to expand its IBD
epidemiology program to include additional studies focused on pediatric
IBD. As I mentioned earlier, 30 percent of individuals with IBD are
diagnosed in their childhood years. Children with IBD often miss school
activities for reasons related to IBD and run the risk of having
delayed puberty and impaired growth as a result of this illness. It is
therefore appropriate that we also dedicate resources to efforts that
will allow us to better understand pediatric IBD.
Mr. President, I urge all Senators to join me in this important cause
by cosponsoring the Inflammatory Bowel Disease Research Act.
Mr. President, I ask unanimous consent that the text of the bill be
printed in the Record.
There being no objection, the text of the bill was ordered to be
printed in the Record, as follows:
S. 1398
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 ``Inflammatory Bowel Disease
Research Enhancement Act''.
SEC. 2. FINDINGS.
Congress makes the following findings:
(1) Crohn's disease and ulcerative colitis are serious
inflammatory diseases of the gastrointestinal tract.
(2) Crohn's disease may occur in any section of the
gastrointestinal tract but is predominately found in the
lower part of the small intestine and the large intestine.
Ulcerative colitis is characterized by inflammation and
ulceration of the innermost lining of the colon. Complete
removal of the colon in patients with ulcerative colitis can
potentially alleviate and cure symptoms.
(3) Because Crohn's disease and ulcerative colitis behave
similarly, they are collectively known as inflammatory bowel
disease. Both diseases present a variety of symptoms,
including severe diarrhea, abdominal pain with cramps, fever,
and rectal bleeding. There is no known cause of inflammatory
bowel disease, or medical cure.
(4) It is estimated that up to 1,400,000 people in the
United States suffer from inflammatory bowel disease, 30
percent of whom are diagnosed during their childhood years.
(5) Children with inflammatory bowel disease miss school
activities because of bloody diarrhea and abdominal pain, and
many adults who had onset of inflammatory bowel disease as
children had delayed puberty and impaired growth and have
never reached their full genetic growth potential.
(6) Inflammatory bowel disease patients are at high risk
for developing colorectal cancer.
SEC. 3. NATIONAL INSTITUTE OF DIABETES AND DIGESTIVE AND
KIDNEY DISEASES; INFLAMMATORY BOWEL DISEASE
RESEARCH EXPANSION.
Subpart 3 of part C of title IV of the Public Health
Service Act (42 U.S.C. 285c et seq.) is amended by adding at
the end the following:
``SEC. 434B. INFLAMMATORY BOWEL DISEASE.
``(a) In General.--The Director of the Institute shall
expand, intensify, and coordinate the activities of the
Institute with respect to research on inflammatory bowel
disease. Such research may be focused on, but not limited to,
the following areas:
``(1) Genetic research on susceptibility for inflammatory
bowel disease, including the interaction of genetic and
environmental factors in the development of the disease.
``(2) Research targeted to increase knowledge about the
causes and complications of inflammatory bowel disease in
children.
``(3) Animal model research on inflammatory bowel disease,
including genetics in animals.
``(4) Clinical inflammatory bowel disease research,
including clinical studies and treatment trials.
``(5) Expansion of the Institute's Inflammatory Bowel
Disease Centers program with a focus on pediatric research.
``(6) The training of qualified health professionals in
biomedical research focused on inflammatory bowel disease,
including pediatric investigators.
``(7) Other research priorities identified by the
scientific agendas `Challenges in Inflammatory Bowel Disease
Research' (Crohn's and Colitis Foundation of America) and
`Chronic Inflammatory Bowel Disease' (North American Society
for Pediatric Gastroenterology, Hepatology and Nutrition).
``(b) Authorization of Appropriations.--To carry out
subsection (a), there are authorized to be appropriated
$80,000,000 for fiscal year 2008, $90,000,000 for fiscal year
2009, and $100,000,000 for fiscal year 2010.''.
SEC. 4. CENTERS FOR DISEASE CONTROL AND PREVENTION; EXPANSION
OF INFLAMMATORY BOWEL DISEASE EPIDEMIOLOGY
PROGRAM.
Part A of title III of the Public Health Service Act (42
U.S.C. 241 et seq.) is amended by adding at the end the
following:
``SEC. 310A. CENTERS FOR DISEASE CONTROL AND PREVENTION;
EXPANSION OF INFLAMMATORY BOWEL DISEASE
EPIDEMIOLOGY PROGRAM.
``(a) In General.--Not later than 1 year after the date of
enactment of this Act, the Director of the Centers for
Disease Control and Prevention shall expand the Inflammatory
Bowel Disease Epidemiology Program within the National Center
for Chronic Disease Prevention and Health Promotion to
include additional studies focused on--
``(1) the incidence and prevalence of pediatric
inflammatory bowel disease in the United States;
``(2) genetic and environmental factors associated with
pediatric inflammatory bowel disease;
``(3) age, race or ethnicity, gender, and family history of
individuals diagnosed with pediatric inflammatory bowel
disease; and
``(4) treatment approaches and outcomes in pediatric
inflammatory bowel disease.
``(b) Consultation.--The Director shall carry out
subsection (a) in consultation with a national voluntary
patient organization with experience serving the population
of individuals with pediatric inflammatory bowel
[[Page S6138]]
disease and organizations representing physicians and other
health professionals specializing in the treatment of such
populations.
``(c) Authorization of Appropriations.--To carry out this
section, there are authorized to be appropriated $5,000,000
for fiscal year 2008, and such sums as may be necessary for
each of fiscal years 2009 and 2010.''.
______
By Mr. BIDEN:
S. 1399. A bill to amend the Internal Revenue Code of 1986 to combine
the Hope Scholarship Credit and the deduction for qualified tuition and
related expenses into a refundable college affordability and creating
chances for educational success for students (ACCESS) credit, to
establish an Early Federal Pell Grant Commitment Demonstration Program,
and to increase the maximum Federal Pell Grant Award; to the Committee
on Finance.
Mr. BIDEN. Mr. President, I rise today to introduce the College
Affordability and Creating Chances for Educational Success for Students
Act of 2007, or College ACCESS Act. It will make a 2-year or 4-year
college degree affordable for every student.
The United States is the largest economy in the world, and our
skills, our brains, are the foundation of our economic strength.
However, if we do not substantially expand access to higher education,
we will not be able to count on continued dominance. Consider the
facts: China and India both produce twice as many engineers a year as
we produce. One out of five U.S. scientists and engineers are foreign-
born. An Indian engineer costs only 20 percent of an American engineer.
By 2010, the U.S. will produce about 15 percent of the world's science
and engineering doctorate degrees. This is down from 50 percent, half
the world total, in 1970. High-speed access to information has leveled
the playing field, radiologists in India are reading x-rays from
American hospitals.
This is a global economy. In a world where America's competitive
advantage gap is closing fast, we should be ensuring guaranteeing that
every student can pursue higher education. The importance of a college
degree has never been greater, but over the next decade 2 million
students will forgo college because of cost. The price tag of a degree
at a four year public college has risen 35 percent in the last 5 years,
the largest increase in tuition and fees in any 5-year period in the
last 30 years. We can not approach college as if it is a luxury, rather
than a necessity. And we should be worried about the rising costs that
are putting college out of reach for more and more Americans. We aren't
giving students and their families enough financial support to obtain
their educational goals, it is that simple.
We need to act, and we need to act now, and that is why I am
introducing the College ACCESS Act. This legislation addresses some of
the disparities in our current system with innovative new ways to help
Americans pay for college.
First, my College ACCESS Plan fully covers the average cost of
tuition and fees at a 2-year public college and covers more than half
of the average cost of tuition and fees at a public 4-year college.
Right now, students and their families can take advantage of either
the Hope Credit or the tuition and fees deduction, obtaining a maximum
benefit of $1,120 or $1,650, respectively. Although these incentives
help to make college more affordable, they fall far short of providing
the level of relief needed to ensure that all students can afford
college.
By replacing the Hope Credit and the tuition and fees deduction with
a single $3,000 credit, the equivalent of a $12,000 deduction, and
making it refundable, middle class and low income families will get
real help with college costs. My College ACCESS tax credit simplifies
this process and is indexed annually for inflation. So, when the cost
of college goes up, the amount of assistance goes up as well.
Second, my College ACCESS proposal increases Pell Grants. When this
program was established, it covered most of the cost of tuition at a 4-
year public college. This is no longer the case. Currently, the maximum
annual Pell Grant award is $4,310, and the average annual cost of
tuition and fees at a 4-year public college is $5,800. Students are
seeing their tuition costs rise every year while the levels of Federal
funding fail to keep up. This reality is one that more and more
students are facing every day, a reality that says, you can go to
college, but only if you can afford it, and you won't get much help
from us.
My College ACCESS Act seeks to remedy this by raising the maximum
Pell Grant award to $5,100 for 2007-2008, followed by increases of $300
per year for the next 5 years, for a maximum Pell Grant in 2011-2012 of
$6,300.
Finally, the College ACCESS Plan would provide funding for a
demonstration program in four states that would commit a maximum
Federal Pell Grant award to eligible 8 grade students so they know
they're going to get this assistance when they graduate. By using the
same eligibility criteria as the National School Lunch Program,
students would be identified based on need, and then provided with
information on the Pell Grant program, the costs of college, and what
Federal and State financial assistance is available to them.
Right now, students don't find out if they are eligible for Federal
aid until their senior year, much less how much they will receive. If
you've ever put kids through college, like I have, you know that this
time frame doesn't allow much leeway for planning ahead. An earlier
promise of Federal aid will begin the conversation about college early
and continue it through high school. That way, students and their
families can visualize college in their future, and this goal can
sustain them through the moment they open that acceptance letter.
My mother has an expression that I think rings true in the larger
scope of America: ``Children tend to become that which you expect of
them.'' I want a country where we expect much from America's children.
Our future, and our economic security, depend on it.
I ask unanimous consent that a summary of this bill be included in
the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
The College ACCESS Act of 2007
Title I--College ACCESS Tax Credit
Consolidate two existing tax incentives--the Hope
Scholarship Credit and the tuition and fees deduction--and
replaces them with a single $3,000 refundable tax credit that
is the equivalent of a $12,000 deduction. The College ACCESS
Tax Credit would fully cover the average cost of tuition and
fees at a public two-year college, $2,300, and would cover
more than half of the average cost of tuition and fees at a
public four-year college, $5,800. Currently, the tuition and
fees deduction has a maximum value of $1,120, about 20
percent of the average cost of tuition and fees at a public
four-year college. The Hope Scholarship Credit is more
valuable, with a maximum value of $1,650, about 28 percent of
the average cost of tuition and fees at a public four-year
college.
Expand eligibility for the tax credit to ease the burden of
paying for college for more families. Currently, the Hope
Scholarship Credit is phased out for married couples earning
$90,000 to $110,000, $45,000 to $55,000 for individuals.
Married couples earning $130,000 to $160,000, $65,000-$80,000
for individuals, are eligible only for a reduced tuition and
fees deduction. The College ACCESS Tax Credit expands
eligibility, providing the full credit to married couples
whose adjusted gross income is less than $130,000, $65,000
for individuals and phasing out the credit for married
couples with incomes between $130,000 and $166,000, $65,000
and $83,000 for individuals. Broadening the income limits for
this credit would result in approximately 4 million more hard
working American families being eligible for this assistance
than under the current tax incentives and limits. Recognizing
that the cost of college rises each year, both the income
limits and phase-out range for the credit would be adjusted
annually for inflation. Furthermore, families could claim a
credit for more than one eligible dependent in a school year.
In pursuing their education, individuals will be eligible for
credits totaling up to $12,000 toward an undergraduate
degree, associate's degree, certificate, or continuing
education as well as credits totaling up to $6,000 toward a
graduate degree; as long as they are enrolled at least half-
time.
Make the tuition tax credit refundable. Making the College
ACCESS Tax Credit refundable would expand this incentive to
the very students and families that need it the most, low
income families. This credit would allow low income families
to qualify for up to $3,000 to cover tuition payments that
aren't covered by Pell Grants. Low income students who do
attend college often face prohibitive costs even after
receiving aid from the government and their institution.
Title II--Early Federal Pell Grant Commitment Demonstration Program
Fund a demonstration program that would commit Pell Grants
to students in 8 grade. Currently, most students find out
whether or not they will receive a Pell Grant during their
senior year of high school. Starting the financial aid
process earlier would allow
[[Page S6139]]
families and students to plan ahead for college and develop
an expectation that the future includes higher education. The
proposal provides funding for an Early Pell Grant Commitment
Demonstration Program in four States, each of which would
commit Pell Grants to two cohorts of up to 10,000 8 grade
students, one in school year 2007-2008, and one in school
year 2008-2009. Participation would be contingent on
students' 8 grade eligibility for free or reduced price meals
under the National School Lunch Program. Participants would
qualify for the Automatic Zero Expected Family Contribution
on the Free Application for Federal Student Aid, FAFSA,
guaranteeing them a maximum Pell Grant, $4,310 for 2007-08.
Additionally, the act requires an independent evaluation to
be conducted to determine the impact and effectiveness of the
program.
Provide students with essential information regarding the
costs of college as well as available State and Federal
assistance. The Early Pell Grant Demonstration Project would
provide funding for States, in conjunction with the
participating local education agencies, to conduct targeted
information campaigns beginning in the 8 grade and continuing
through students' senior year. These campaigns would inform
students and their families of the program and provide
information about the cost of a college education, State and
Federal financial assistance, and the average amount of aid
awards. A targeted information campaign, along with a
guarantee of a maximum Pell Grant, would provide information
essential to the college-planning process and would help
break down the barriers that cost and information often form.
Title III--Increase Federal Pell Grant Maximum Award
Expand the maximum Pell Grant from $4,310 to $5,100. In
1975, the maximum Pell Grant covered 84 percent of the cost
of tuition, fees, room, and board at a four-year public
college (Pell Grants, unlike tax incentives, can be used to
pay for the cost of room and board). The maximum Pell Grant
this year covered 33 percent of the average cost of tuition,
fees, room, and board at a public four-year college, $12,115.
While Congress increased the maximum Pell Grant for 2007-2008
to $4,310, a more substantial increase is long overdue, as
the cost of tuition has outpaced the growth in family income
for the last two decades. The College ACCESS Act would
increase the maximum Pell Grant to $5,100 for 2007-2008,
followed by increases of $300 per year for the next five
years, for a maximum Pell Grant in 2011-12 of $6,300.
Estimated Five-Year Costs
Title I--$24.1 Billion
Title II--$35 billion
Title III--$36.5 million
______
By Mr. ENZI (for himself, Mr. Alexander, Mr. Allard, Mr. Burr,
Mr. Isakson, and Ms. Murkowski):
S. 1400. A bill to amend the Higher Education Act of 1965 to improve
the information and repayment options to student borrowers, and for
other purposes; to the Committee on Health, Education, Labor, and
Pensions.
Mr. ENZI. Mr. President, I rise to speak about the Student
Information Means a Positive Loan Experience Act, the SIMPLE Act, which
I, along with Senators Alexander, Allard, Burr and Isakson, am
introducing today. With the increasing debt level of many students, it
is important to make sure borrowers have good options for managing
their debt and good information on the available options so they make
wise, informed decisions.
We are calling this the SIMPLE Act for a reason. We have heard
testimony from experts and comments from borrowers and other
stakeholders about the information borrowers receive currently. On the
one hand, borrowers receive so much information that they have
``information overload,'' which leads to confusion. On the other hand,
many borrowers do not receive good information about the full range of
tools available to help them repay their loans. What has come through
loud and clear is that we need to simplify the information and spell
out the impact of selecting various options. Borrowers need better,
clearer information to help them make better decisions, not more
repayment plans and confusing choices.
There are already four repayment plans in the Federal Family
Education Loan program and four in Direct Loans. From the data we have
obtained, it is clear that the vast majority of borrowers with Stafford
loans have a standard repayment plan. Many borrowers are not taking
advantage of the graduated, extended or income sensitive/income
contingent repayment plans currently available.
Rather than adding another repayment plan, this bill makes the
existing repayment plans more flexible, by providing borrowers with the
option to pay only the interest on their loans for the first 2 years
they are in repayment, regardless of their repayment plan. The bill
also expands access to the extended repayment plan to borrowers with
$20,000 of student loan debt, instead of the $30,000 currently needed
to qualify for extended repayment plans.
The bill also revises the definition of economic hardship, raising
the eligibility cut-off point to 150 percent of the poverty line and
taking family size into account when making the determination of
eligibility.
To make sure borrowers understand the availability of the various
options, and the impact different repayment plans would have on their
payments, the bill expands and clarifies the information to be provided
to borrowers during their exit interview. Information on repayment
plans available will include a discussion of the different features of
each plan, average anticipated monthly payment amounts, and the ability
of the borrower to prepay their loans or to change repayment plans.
The bill requires borrowers to be provided with clear information on
the availability of deferment and forbearance. These are two excellent
debt management tools, but borrowers must understand the potential
impact on their loan principal and total interest paid on their loans
when they choose these options.
During exit counseling, borrowers must also be provided with
information on the effect of consolidating student loans on the
borrower's underlying loan benefits, including grace periods, loan
forgiveness and cancellation. Borrowers must be informed that different
lenders offering consolidation loans may offer different borrower
benefits.
Last, but not least, borrowers must be given notice that information
on their student loans is housed in the National Student Loan Database
and they must be told how to access their information. It will help
them keep track of the status of their loans and the outstanding
principal.
All of this is designed to help borrowers ask questions first, then
make decisions that are right for them. The concept is simple, and
requires a few, but essential changes to the Higher Education Act to
put them into effect.
Mr. President, I ask unanimous consent that the text of the bill be
printed in the Record.
There being no objection, the text of the bill was ordered to be
printed in the Record, as follows:
S. 1400
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 ``Student Information Means a
Positive Loan Experience Act of 2007''.
SEC. 2. PURPOSE.
The purpose of this Act is to improve--
(1) the repayment plans available to borrowers of loans
under title IV of the Higher Education Act of 1965 (20 U.S.C.
1070 et seq.); and
(2) borrowers' understanding of--
(A) the repayment plans available for such loans;
(B) the conditions under which such loans may be cancelled
or forgiven; and
(C) the availability of deferments, forbearance, and
consolidation for such loans, and the impact on the balance
of such loans and total interest paid of using those options.
SEC. 3. FLEXIBLE REPAYMENT PLANS.
(a) Student Loan Requirements.--Section 427(a)(2)(H) of the
Higher Education Act of 1965 (20 U.S.C. 1077(a)(2)(H)) is
amended by inserting ``, and, if applicable, the option of
electing to delay repayment or principal for the first 2
years of the repayment period'' before the semicolon at the
end.
(b) FFEL Repayment Plans.--Section 428(b)(9) of the Higher
Education Act of 1965 (20 U.S.C. 1078(b)(9)) is amended--
(1) in subparagraph (A)--
(A) in the first sentence of the matter preceding clause
(i), by inserting ``, and the election described in
subparagraph (C)'' after ``thereon'';
(B) in clause (ii), by inserting ``, which plan shall be
established by the lender with the informed agreement of the
borrower'' before the semicolon at the end; and
(C) by striking clause (iv) and inserting the following:
``(iv) for new borrowers on or after October 7, 1998, who
accumulate outstanding loans under this part totaling more
than $20,000, an extended repayment plan, with a fixed annual
or graduated repayment amount paid over an extended period,
not to exceed 25 years, except that the borrower shall repay
annually a minimum amount determined in accordance with
paragraph (1)(L)(i).''; and
(2) by adding at the end the following:
``(C) Option for first 2 years.--A lender shall offer each
new borrower of loans on or
[[Page S6140]]
after October 7, 1998, the opportunity to elect, for the
first 2 years of repayment of such loans, to delay the
repayment of principal, regardless of the repayment plan
selected under this paragraph.''.
(c) Direct Loan Repayment Plans.--Section 455(d) of the
Higher Education Act of 1965 (20 U.S.C. 1087e(d)) is
amended--
(1) in paragraph (1)--
(A) in the matter preceding subparagraph (A)--
(i) in the first sentence, by inserting ``, and the
election described in paragraph (6)'' after ``the loan''; and
(ii) in the third sentence, by striking ``may choose'' and
inserting ``shall choose from''; and
(B) in subparagraph (C), by striking ``428(b)(9)(A)(v)''
and inserting ``428(b)(9)(A)(iv)''; and
(2) by adding at the end the following:
``(6) Option for first 2 years.--The Secretary shall offer
each new borrower of loans on or after October 7, 1998, the
opportunity to elect, for the first 2 years of repayment of
such loans, to delay the repayment of principal, consistent
with section 428(b)(9)(C).''.
(d) Effective Date.--The amendments made by this section
shall apply with respect to loans for which the first
disbursement is made on or after October 7, 1998.
SEC. 4. REVISED DEFINITION OF ECONOMIC HARDSHIP.
Section 435(o)(1) of the Higher Education Act of 1965 (20
U.S.C. 1085(o)(1)) is amended--
(1) in subparagraph (A)(ii), by striking ``100 percent of
the poverty line for a family of 2'' and inserting ``150
percent of the poverty line applicable to the borrower's
family size''; and
(2) in subparagraph (B)(ii), by striking ``to a family of
2'' and inserting ``to the borrower's family size''.
SEC. 5. USEFUL AND COMPREHENSIVE STUDENT LOAN INFORMATION FOR
BORROWERS.
(a) Insurance Program Agreements.--Section 428(b)(1) of the
Higher Education Act of 1965 (20 U.S.C. 1078(b)(1)) is
amended--
(1) in subparagraph (X), by striking ``and'' after the
semicolon;
(2) in subparagraph (Y)(ii), by striking the period at the
end and inserting ``; and''; and
(3) by adding at the end the following:
``(Z) provides that the lender shall, at the time the
lender grants a deferment to a borrower who received a loan
under section 428H and is eligible for a deferment under
section 427(a)(2)(C), provide information to the borrower to
enable the borrower to understand the impact of
capitalization of interest on the borrower's loan principal
and total amount of interest to be paid during the life of
the loan.''.
(b) Guaranty Agreements.--Section 428(c)(3)(C) of the
Higher Education Act of 1965 (20 U.S.C. 1078(c)(3)(C)) is
amended--
(1) in clause (i), by striking ``and'' after the semicolon;
(2) in clause (ii), by striking ``and'' after the
semicolon;
(3) by inserting after clause (ii) the following:
``(iii) the lender shall, at the time of granting a
borrower forbearance, provide information to the borrower to
enable the borrower to understand the impact of
capitalization of interest on the borrower's loan principal
and total amount of interest to be paid during the life of
the loan; and
``(iv) the lender shall contact the borrower not less often
than once every 180 days during the period of forbearance to
inform the borrower of--
``(I) the amount of unpaid principal and the amount of
interest that has accrued since the last statement of such
amounts provided to the borrower by the lender;
``(II) the fact that interest will accrue on the loan for
the period of forbearance;
``(III) the amount of interest that will be capitalized,
and the date on which capitalization will occur;
``(IV) the ability of the borrower to pay the interest that
has accrued before the interest is capitalized; and
``(V) the borrower's option to discontinue the forbearance
at any time; and''.
(c) Lender Agreements.--Section 428C(b)(1) of the Higher
Education Act of 1965 (20 U.S.C. 1078-3(b)(1)) is amended--
(1) in subparagraph (E), by striking ``and'' after the
semicolon;
(2) by redesignating subparagraph (F) as subparagraph (G);
and
(3) by inserting after subparagraph (E) the following:
``(F) that the lender shall, upon application for a
consolidation loan, provide the borrower with information
about the possible impact of loan consolidation, including--
``(i) the total interest to be paid and fees to be paid on
the consolidation loan, and the length of repayment for the
loan;
``(ii) whether consolidation would result in a loss of loan
benefits under this part or part D, including loan
forgiveness, cancellation, and deferment;
``(iii) in the case of a borrower that plans to include a
Federal Perkins Loan under part E in the consolidation loan,
that once the borrower adds the borrower's Federal Perkins
Loan to a consolidation loan--
``(I) the borrower will lose all interest-free periods that
would have been available for such loan under part E, such as
the periods during which no interest accrues on the Federal
Perkins Loan while the borrower is enrolled in school at
least half-time, the grace period, and the periods during
which the borrower's student loan repayments are deferred
under section 464(c)(2); and
``(II) the borrower will no longer be eligible for
cancellation of part or all of a Federal Perkins loan under
section 465(a);
``(iv) the ability of the borrower to prepay the
consolidation loan, pay such loan on a shorter schedule, and
to change repayment plans;
``(v) that borrower benefit programs for a consolidation
loan may vary among different lenders;
``(vi) the consequences of default on the consolidation
loan; and
``(vii) that by applying for a consolidation loan, the
borrower is not obligated to agree to take the consolidation
loan; and''.
(d) Information Dissemination.--Subparagraph (M) of section
485(a)(1) of the Higher Education Act of 1965 (20 U.S.C.
1092(a)(1)(M)) is amended to read as follows:
``(M) the terms and conditions of the loans that students
receive under parts B, D, and E;''.
(e) Exit Counseling.--Subparagraph (A) of section 485(b)(1)
of the Higher Education Act of 1965 (20 U.S.C. 1092(b)(1)(A))
is amended by striking the subparagraph designation and all
that follows through ``465.'' and inserting the following:
``(A) Each eligible institution shall, through financial aid
offices or otherwise, provide counseling to borrowers of
loans that are made, insured, or guaranteed under part B
(other than loans made pursuant to section 428C or loans made
to parents pursuant to section 428B), or made under part D
(other than Federal Direct Consolidation Loans or Federal
Direct PLUS Loans made to parents) or E, prior to the
completion of the course of study for which the borrower
enrolled at the institution or at the time of departure from
such institution. The counseling required by this subsection
shall include--
``(i) information on the repayment plans available,
including a discussion of the different features of each plan
and sample information showing the difference in interest
paid and total payments under each plan;
``(ii) the average anticipated monthly repayments under the
standard repayment plan and, at the borrower's request, the
other repayment plans for which the borrower is eligible;
``(iii) such debt and management strategies as the
institution determines are designed to facilitate the
repayment of such indebtedness;
``(iv) an explanation that the borrower has the ability to
prepay each such loan, pay the loan on a shorter schedule,
and change repayment plans;
``(v) the terms and conditions under which the student may
obtain full or partial forgiveness or cancellation of
principal or interest under sections 428J, 460, and 465 (to
the extent that such sections are applicable to the student's
loans);
``(vi) the terms and conditions under which the student may
defer repayment of principal or interest or be granted
forbearance under subsections (b)(1)(M) and (o) of section
428, 428H(e)(7), subsections (f) and (l) of section 455, and
section 464(c)(2), and the potential impact of such deferment
or forbearance;
``(vii) the consequences of default on such loans;
``(viii) information on the effects of using a
consolidation loan to discharge the borrower's loans under
parts B, D, and E, including, at a minimum--
``(I) the effects of consolidation on total interest to be
paid, fees to be paid, and length of repayment;
``(II) the effects of consolidation on a borrower's
underlying loan benefits, including all grace periods, loan
forgiveness, cancellation, and deferment opportunities;
``(III) the ability of the borrower to prepay the loan or
change repayment plans; and
``(IV) that borrower benefit programs may vary among
different loan holders; and
``(ix) a notice to borrowers about the availability of the
National Student Loan Data System and how the system can be
used by a borrower to obtain information on the status of the
borrower's loans.''.
(f) Conforming Amendment.--Section 455(g) of the Higher
Education Act of 1965 (20 U.S.C. 1087e(g)) is amended by
striking ``428C(b)(1)(F)'' and inserting ``428C(b)(1)(G)''.
SEC. 6. REPORT REQUIRED.
Section 141(c) of the Higher Education Act of 1965 (20
U.S.C. 1018(c)) is amended--
(1) in the subsection heading, by striking ``Plan and
Report'' and inserting ``Plan, Report, and Briefing''; and
(2) by adding at the end the following:
``(4) Briefing on enforcement of student loan provisions.--
The Chief Operating Officer shall provide an annual briefing
to the members of the authorizing committees on the steps the
PBO has taken and is taking to ensure that lenders are
providing the information required under clauses (iii) and
(iv) of section 428(c)(3)(C) and sections 428(b)(1)(Z) and
428C(b)(1)(F).''.
______
By Mr. ENZI (for himself, Mr. Alexander, Mr. Allard, Mr. Burr,
Mr. Isakson, Mr. Roberts, and Ms. Murkowski):
S. 1401. A bill to improve the National Student Loan Data System; to
the Committee on Health, Education, Labor, and Pensions.
Mr. ENZI. Mr. President, I rise to speak about the Student Financial
Aid Data Privacy Protection Act, which I, along with Senators
Alexander, Allard, Burr, Isakson and Roberts, am
[[Page S6141]]
introducing today. In a climate where our personal financial
information is at risk, it is now more important than ever to ensure
that the Department of Education is providing appropriate safeguards
around one of the world's largest databases, National Student Loan Data
System.
The Department of Education has not inspired confidence in its
ability to protect its data systems from those bad actors who would
misuse the financial information of students and parents. Indeed in
2006 the House Committee on Oversight and Government Reform gave the
Department of Education a failing grade for its efforts to improve the
security of its data systems in compliance with the Federal Information
Security Management Act.
More recently, on April 17 of this year the Department of Education
suspended the access of lenders, services and guaranty agencies to the
National Student Loan Data System. While I am pleased to see that the
Department of Education is monitoring this database, it is clear from
the information provided by the Department of Education that this
unprecedented restriction of access was done without having in place
clear standard operating procedures for limiting and restoring access
to the database.
The National Student Loan Data System is a vital tool for lenders,
universities and students. It is a system that is absolutely essential
to the efficient functioning of our country's higher education loan and
grant programs. When the operation of this system suffers, students
suffer.
Students and parents depend on this system to consolidate their
loans. Lenders and guaranty agencies depend on this system to verify
whether students should be entering their repayment period. And our
institutions of higher education depend on this system to determine
whether students are exceeding caps on how much they should be
borrowing to attend college.
This bill sets out operating principles for the National Student Loan
Data System, to ensure that the Department of Education continues to
manage this database in manner that advances the best interests of
students. The bill requires the Department of Education establish
protocols for limiting access to the database when there are suspicions
that the system is being used inappropriately, and the steps to be
taken in order to restore access.
This bill also requires the Department of Education, lenders and
guaranty agencies to assist students and parents in better
understanding how their sensitive, financial information is entered
into the National Student Loan Data System and then accessed by
thousands of lenders, consolidators and guaranty agencies across the
country.
Finally, the bill prohibits nongovernmental researchers and policy
analysts from accessing sensitive borrower-specific information, and
directs the Secretary of Education to explore ways to empower students
and parents to control which lenders are accessing their sensitive,
financial information.
We must help the 14.3 million students and their families who trust
the Department of Education to protect their personal financial
information. Action is needed to restore confidence in the ability of
the Department of Education to manage the National Student Loan Data
System. I want to thank Senators Alexander, Allard, Burr, Isakson and
Roberts for joining me in this effort, and look forward to this bill
being included in our efforts to reauthorize the Higher Education Act.
I ask unanimous consent that the text of the bill be printed in the
Record.
There being no objection, the text of the bill was ordered to be
printed in the Record, as follows:
S. 1401
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 ``Student Financial Aid Data
Privacy Protection Act''.
SEC. 2. NATIONAL STUDENT LOAN DATA SYSTEM.
Section 485B of the Higher Education Act of 1965 (20 U.S.C.
1092b) is amended--
(1) by redesignating subsections (d) through (g) as
subsections (e) through (h), respectively;
(2) by inserting after subsection (c) the following:
``(d) Principles for Administering the Data System.--In
managing the National Student Loan Data System, the Secretary
shall take actions necessary to maintain confidence in the
data system, including, at a minimum--
``(1) ensuring that the primary purpose of access to the
data system by guaranty agencies, eligible lenders, and
eligible institutions of higher education is for legitimate
program operations, such as the need to verify the
eligibility of a student, potential student, or parent for
loans under part B, D, or E;
``(2) prohibiting nongovernmental researchers and policy
analysts from accessing personally identifiable information;
``(3) creating a disclosure form for students and potential
students that is distributed when such students complete the
common financial reporting form under section 483, and as a
part of the exit counseling process under section 485(b),
that--
``(A) informs the students that any title IV grant or loan
the students receive will be included in the National Student
Loan Data System, and instructs the students on how to access
that information;
``(B) describes the categories of individuals or entities
that may access the data relating to such grant or loan
through the data system, and for what purposes access is
allowed;
``(C) defines and explains the categories of information
included in the data system;
``(D) provides a summary of the provisions of the Federal
Educational Rights and Privacy Act of 1974 and other
applicable Federal privacy statutes, and a statement of the
students' rights and responsibilities with respect to such
statutes;
``(E) explains the measures taken by the Department to
safeguard the students' data; and
``(F) includes other information as determined appropriate
by the Secretary;
``(4) requiring guaranty agencies, eligible lenders, and
eligible institutions of higher education that enter into an
agreement with a potential student, student, or parent of
such student regarding a loan under part B, D, or E, to
inform the student or parent that such loan shall be--
``(A) submitted to the data system; and
``(B) accessible to guaranty agencies, eligible lenders,
and eligible institutions of higher education determined by
the Secretary to be authorized users of the data system;
``(5) regularly reviewing the data system to--
``(A) delete inactive users from the data system;
``(B) ensure that the data in the data system are not being
used for marketing purposes; and
``(C) monitor the use of the data system by guaranty
agencies and eligible lenders to determine whether an agency
or lender is accessing the records of students in which the
agency or lender has no existing financial interest; and
``(6) developing standardized protocols for limiting access
to the data system that include--
``(A) collecting data on the usage of the data system to
monitor whether access has been or is being used contrary to
the purposes of the data system;
``(B) defining the steps necessary for determining whether,
and how, to deny or restrict access to the data system; and
``(C) determining the steps necessary to reopen access to
the data system following a denial or restriction of
access.''; and
(3) by striking subsection (e) (as redesignated by
paragraph (1)) and inserting the following:
``(e) Reports to Congress.--
``(1) Annual report.--Not later than September 30 of each
fiscal year, the Secretary shall prepare and submit to the
appropriate committees of Congress a report describing--
``(A) the results obtained by the establishment and
operation of the National Student Loan Data System authorized
by this section;
``(B) the effectiveness of existing privacy safeguards in
protecting student and parent information in the data system;
``(C) the success of any new authorization protocols in
more effectively preventing abuse of the data system;
``(D) the ability of the Secretary to monitor how the
system is being used, relative to the intended purposes of
the data system; and
``(E) any protocols developed under subsection (d)(6)
during the preceding fiscal year.
``(2) Study.--
``(A) In general.--The Secretary shall conduct a study
regarding--
``(i) available mechanisms for providing students and
parents with the ability to opt in or opt out of allowing
eligible lenders to access their records in the National
Student Loan Data System; and
``(ii) appropriate protocols for limiting access to the
data system, based on the risk assessment required under
subchapter III of chapter 35 of title 44, United States Code.
``(B) Submission of study.--Not later than 3 years after
the date of enactment of the Student Financial Aid Data
Privacy Protection Act, the Secretary shall prepare and
submit a report on the findings of the study to the
appropriate committees of Congress.''.
______
By Mr. GRASSLEY:
S. 1402. A bill to amend the Investment Advisors Act of 1940, with
respect
[[Page S6142]]
to the exemption to registration requirements; to the Committee on
Banking, Housing, and Urban Affairs.
Mr. GRASSLEY. Mr. President, I would like to introduce an important
piece of legislation aimed at closing a loophole in our securities
laws. This bill, The Hedge Fund Registration Act, is pretty simple.
It's only two pages long. All it does is clarify that the Securities
and Exchange Commission has the authority to require hedge funds to
register, so the government knows who they are and what they're doing.
Technically speaking, this bill would amend section 203(b)(3) of the
Investment Advisers Act of 1940. It would narrow the current exemption
from registration for certain investment advisers. This exemption is
used by large, private pooled investment vehicles, commonly referred to
as ``hedge funds.'' Hedge funds are operated by advisers who manage
billions of dollars for groups of wealthy investors in total secrecy.
They should at least have to register with the SEC, like other
investment advisors do.
Currently, the exemption applies to any investment adviser who had
fewer than 15 clients in the preceding year and who does not hold
himself out to the public as an investment adviser. The Hedge Fund
Registration Act narrows this exemption and closes a loophole in the
securities laws these hedge funds use to avoid registering with the SEC
and operate in secret.
Much has been reported during the last few years regarding hedge
funds and the market power they yield because of the large amounts of
capital they invest. In fact, some estimates are that these pooled
investment vehicles account for nearly 30 percent of the daily trades
in U.S. financial markets. The power and influence of that amount of
volume is not some passing fad. It represents a new element in our
financial markets. Congress needs to ensure that the SEC knows who is
controlling these massive pools of money to ensure the integrity and
security of the markets.
The failure of Amaranth and the increasing interest in hedge funds as
investment vehicles for public pension money means that this is not
just a high stakes game for the super rich. Hedge funds affect regular
investors. They affect the markets as a whole.
My recent oversight of the SEC has convinced me that the Commission
and the Self-Regulatory Organizations, SROs, need much more information
about the activities of hedge funds in order to protect the markets
from institutional insider trading and other potential abuses.
This legislation is one small, simple step toward greater
transparency. All it does is require that hedge funds register and tell
the regulators who they are. This is not a burden. It is just common
sense. Organizations that wield hundreds of billions of dollars in
market power every day need to register with the agency that Americans
rely on to regulate the financial markets.
The SEC has already attempted to do this by regulation. Congress
needs to act because of a decision made last year by a Federal appeals
court. In 2006, the DC Circuit Court of Appeals overturned an SEC
administrative rule that required registration of hedge funds. That
decision effectively ended all registration of hedge funds with the
SEC, unless and until Congress takes action.
The Hedge Fund Registration Act would respond to that court decision
by narrowing the current registration exemption and bring much needed
transparency to hedge funds.
Most people say the devil is in the details. Well here they are. This
bill would authorize the SEC to require all investment advisers,
including hedge fund managers, to register with the SEC. Only those
that meet all four of the following criteria would be exempt: 1.
managed less than $50 million, 2. had fewer than 15 clients, 3. did not
hold himself out to the public as an investment advisor, and 4. managed
the assets for fewer than 15 investors, regardless of whether
investment is direct or through a pooled investment vehicle, such as a
hedge fund.
The Hedge Fund Registration Act is a first step in ensuring that the
SEC simply has clear authority to do what it already tried to do.
Congress must act to ensure that our laws are kept up to date as new
types of investments appear.
That said, this legislation didn't have many friends the last time I
introduced it as an amendment. These funds don't want people to know
what they do and have fought hard to keep it that way. Well, I think
that is all the more reason to shed some sunlight on them to see what
they're up to.
I urge my colleagues to cosponsor and support this legislation, as we
work to protect all investors, large and small.
______
By Mr. INHOFE:
S. 1404. A bill to provide for Congressional authority with respect
to certain acquisitions, mergers, and takeovers under the Defense
Production Act of 1950; to the Committee on Banking, Housing, and Urban
Affairs.
Mr. INHOFE. Mr. President, this is an important issue, one I have
raised many times over the years. I have testified before the Banking
Committee, and introduced numerous bills.
It is not a new issue. There have been at least four high-profile
times in the last 12 years where proposed foreign acquisitions in the
U.S. have threatened our security.
In 1998, President Clinton tried to turn over management of a 144-
acre terminal at the former U.S. Naval Station in Long Beach to the
Chinese Ocean Shipping Company, COSCO--a subsidiary of the People's
Liberation Army.
I am going to quote from an LA Times article from that time:
The embattled COSCO deal came to an end Thursday night,
when congressional conferees submitted to Congress the 1998-
99 Defense Authorization Bill . . . Leading the effort to
block COSCO from the facility were Sen. James Inhofe (R-OK)
and Rep. Duncan Hunter [of the] San Diego area.
That was one battle that we won.
Since working in 1995 to prevent Los Angeles ports from being
controlled by Chinese interests, I have continued my pressure on the
issue. For example, I expressed my concern with the CFIUS process over
2 years ago in the spring of 2005 when I delivered four speeches on
China. While examining this issue I came across a disturbing example of
China buying the U.S. company, Magnequench Inc., and moving it
piecemeal back to mainland China.
Let me read from the floor speech I gave on April 4, 2005:
I believe that CFIUS does not have a broad enough
conception of U.S. security. One example of CFIUS falling
short is with Magnequench International Incorporated. In 1995
Chinese corporations bought GM's Magnequench, a supplier of
rare earth metals used in the guidance systems of smart-
bombs. Over twelve years, the company has been moved
piecemeal to mainland China, leaving the U.S. with no
domestic supplier of a critical component of rare-earth
magnets. CFIUS approved this transfer.
The United States now has no domestic supplier of rare earth metals,
which are essential for precision-guided munitions.
That was one we lost.
Following this series of four speeches that spring, on July 20, 2005,
I introduced Senate amendment No. 1311 as an amendment to the annual
National Defense Authorization Act for Fiscal Year 2006. My amendment
prompted the very beginning of the legislative pursuit of this issue in
recent years. For example, my amendment prompted another, later,
second-degree amendment, Senate amendment No. 1335, by Senator Shelby,
then the chairman of the Senate Banking Committee.
I also testified before the U.S.-China Commission on July 21, 2005.
The U.S.-China Economic and Security Review Commission is a bipartisan
committee created in 2000 to monitor, investigate, and submit to
Congress an annual report on the national security implications of the
bilateral trade and economic relationship between the United States and
the People's Republic of China.
The Commission is composed of 12 members, 3 of whom are selected by
each of the majority and minority leaders of the Senate, and the
Speaker and the minority leader of the House. The Commissioners serve
2-year terms.
Their recommendations are consistent with the amendment I introduced
to the Defense authorization bill that would have made some of the
necessary changes to CFIUS.
On September 28, 2005, the Government Accountability Office issued a
report on CFIUS that is right in line with the recommendations of the
US-China Commission. So this has not just been me saying that CFIUS is
in need of
[[Page S6143]]
critical change--it's the U.S.-China Commission and the GAO as well.
When my amendment stalled over a committee jurisdictional point, on
September 29, 2005, I chose to introduce the changes as a stand-alone
bill, the Foreign Investment Security Act of 2005, S. 1797, which was
referred to the Banking Committee. That bill was the first bill
introduced in recent years on this topic.
Later the Banking Committee held a hearing on the GAO report, and I
testified before them on October 20, 2005, at that hearing.
In all of these ways I have just mentioned, the Banking Committee was
prompted by me to pursue this topic.
In the past couple of years, several high profile business deals have
been approved by CFIUS that would allow foreign-owned companies, in
particular companies that are owned or controlled by foreign
governments, to acquire other companies doing business in the United
States.
More recently I was concerned with China's state-owned CNOOC
attempted to buyout Unocal, a US oil company. We won this one because
of Congressional pressure, and CNOOC withdrew its bid. Over the past 2
years, I have been pointing out that the CFIUS process has ignored some
major issues which threaten our national security.
The most publicized deal was the state owned Dubai Ports World, DPW,
purchase of Peninsular and Oriental Steam Navigation, P&O, that would
have allowed DPW to take over the operations at various east coast
ports in the United States. The public outcry against this deal lead
DPW to abandon its plans to operate the U.S. ports and that portion of
the takeover was sold to U.S. based companies. However since the DPW-
P&O deal was canceled, other transactions have been approved by CFIUS
that are just as questionable.
CFIUS has received over 1,600 notifications and investigated under
40. Of those, only one acquisition has been stopped by the President.
This is a critical issue at a critical time. CFIUS seems to only get
scrutiny when some major deal is in the papers. I have been paying
attention to it all along. It needs reform, and I hope we can make some
progress.
I am glad that Congress is now taking a closer look at CIFIUS reform.
Rest assured that I continue to push for this badly needed reform and
as Congress addresses this issue, I will keep your thoughts in mind.
Note too that I will ensure in particular that the national security
aspects of this work are appropriately attended to. I will not stand
idly by and allow a bill that is weak on national defense to pass.
Let us all work together to ensure that the legislative process
performs appropriately to defend our Nation, and let this bill I am
introducing today be a new start.
____________________