[Congressional Record Volume 154, Number 9 (Tuesday, January 22, 2008)]
[Senate]
[Pages S105-S107]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mrs. FEINSTEIN:
  S. 2542. A bill to amend the Truth in Lending Act to provide for 
enhanced disclosure under an open end credit plan; to the Committee on 
Banking, Housing, and Urban Affairs.
  Mrs. FEINSTEIN. Mr. President, I rise to introduce the Credit Card 
Minimum Payment Notification Act.
  Many Americans now own multiple credit cards. The average American 
has four credit cards, and 1 in 7 Americans hold more than 10 cards.
  The proliferation of credit cards can be traced, in part, to a 
dramatic increase in credit card solicitation. In 1990, credit card 
companies sent about 1.1 billion solicitations to American homes; in 
2006, they sent over 9.2 billion.
  As one would expect, the increase in credit card ownership has also 
yielded an increase in credit card debt. Individuals get 6, 7, or 8 
different credit cards, pay only the minimum payment required, and many 
end up drowning in debt. That happens in case after case.
  Over the past two decades, the credit card debt of American consumers 
has nearly tripled--from $238 billion in 1989 to a staggering $800 
billion in 2005.
  As a result, the average American household now has about $9,500 of 
credit card debt. That is almost twice the average level of credit card 
debt from just 10 years ago.
  In light of these figures it should be no surprise that vast numbers 
of Americans have been filing for bankruptcy in recent years. In 2005--
just before the implementation date of the Bankruptcy Reform Act--over 
2 million non-business bankruptcies were filed.
  Many of these personal bankruptcies are people who utilize credit 
cards. The benefits and flexibility these cards offer are enormously 
attractive. However, these individual credit card holders receive no 
information on the impact of carrying a balance with compounding 
interest. Too often individuals make just the minimum payment. They pay 
it for 1 year, 2 years--they make additional purchases, they get 
another card, and another, and another.
  After, 2 or 3 years, many find that the interest on the debt is 
larger than the total purchases they originally made, such that they 
can never repay these cards--and they do not know what to do about it.
  The Credit Card Minimum Payment Notification Act would help prevent 
this problem. Let me tell you exactly what the bill would do. It would 
require credit card companies to add two items to each consumer's 
monthly credit card statement: a notice warning credit card holders 
that making only the minimum payment each month will increase the 
interest they

[[Page S106]]

pay and the amount of time it takes to repay their debt; and examples 
of the amount of time and money required to repay a credit card debt if 
only minimum payments are made.
  If the consumer makes only minimum payments for, 6 consecutive 
months, the amount of time and money required to repay the individual's 
specific credit card debt, under the terms of their credit card 
agreement.
  The bill would also require that a toll-free number be included on 
statements, to allow consumers to call and speak to a live person to 
get an estimate of the time and money required to repay their balance 
if only minimum payments are made.
  If the consumer makes only minimum payments for 6 consecutive months, 
they will receive a toll-free number for an accredited credit 
counseling service.
  The disclosure requirements in this bill would only apply if the 
consumer has a minimum payment that is less than 10 percent of the debt 
on the credit card. Otherwise, none of these disclosures would be 
required on their statement.
  Statistics vary about the number of individuals who make only the 
minimum payments. One study in 2004 determined that 35 million people 
pay only the minimum on their credit cards. In a 2005 poll, 40 percent 
of respondents said that they pay the minimum or slightly more.
  What is certain is that many Americans pay only the minimum, and that 
paying only the minimum has harsh financial consequences.
  I suspect that most people would be surprised to know how much 
interest can pile up when paying the minimum. Take the average 
household, with $9,500 of credit card debt, and the average credit card 
interest rate, which last week was 13.74 percent. If only the 2 percent 
minimum payment is made, it will take them 35 years and $21,799.07 to 
pay off the card.
  That is if the family doesn't spend another cent on their credit 
cards--an unlikely assumption. In other words, the family will need to 
pay over $12,000 in interest to repay just $9,500 of principal.
  For individuals or families with more than average debt, the pitfalls 
are even greater. $20,000 of credit card debt at the average 13.74 
percent interest rate will take 42 years and more than $46,300 to pay 
off if only the minimum payments are made.
  Mr. President, 13.74 percent is only the average rate. Interest rates 
around 20 percent are not uncommon. Penalty interest rates on credit 
cards average 27.3 percent, and seven major credit cards charge penalty 
rates of more than 30 percent.
  Even if we assume only a 20 percent interest rate, a family that has 
the average debt of $9,500 at a 20 percent interest rate and makes the 
minimum payments will need an incredible 82 years and $55,084 to pay 
off that initial $9,500 of debt. That's $45,584 in interest payments--
an amount that approaches 5 times the original debt. These examples are 
far from extreme.
  Last March, the Permanent Subcommittee on Investigations of the 
Committee on Homeland Security and Governmental Affairs heard testimony 
from Wesley Wannemacher, a consumer from Lima, OH.
  Mr. Wannemacher charged $3,200 to a credit card in 2001 and 2002. He 
never charged anything on the card again, but he spent the next 6 years 
struggling to pay it off, as he experienced the kinds of events that 
American households routinely face--unexpected medical expenses, a 
growing family, and so on.
  By early 2007 Mr. Wannemacher had paid $6,300 on the initial $3,200 
in debt, but he still owed $4,400 on the card. Interest charges, late 
fees, and $1,500 in fees for going over the limit--even though the 
balance had only exceeded the limit three times--had resulted in total 
charges of $10,700 for that initial $3,200 in credit.
  Fortunately for Mr. Wannemacher, his credit card company reviewed his 
account--after it became known that he was going to testify to Congress 
about his experience. The remaining balance on his account was 
forgiven.
  Mr. President, testifying before a Senate committee is not something 
that Americans could--or should have to--do to escape from crushing 
credit card debt.
  That is one of the reasons why it is so important for this Congress 
to pass the Credit Card Minimum Payment Notification Act.
  There will always be people who cannot afford to pay more than their 
minimum payments. But there is also a large number of consumers who can 
afford to pay more but feel comfortable paying the minimum payment 
because they don't realize the consequences of doing so.
  Now I am certainly not trying to demonize credit cards or the credit 
card industry. Credit cards are an important part of everyday life, and 
they help the economy operate more smoothly by giving consumers and 
merchants a reliable, convenient way to exchange funds.
  However, I do think that people should understand the dangers of 
paying only their monthly minimums. In this way individuals will be 
able to act responsibly.
  The bottom line is that for many consumers, the two percent minimum 
payment is a financial trap.
  The Credit Card Minimum Payment Notification Act is designed to 
ensure that people are not caught in this trap through lack of 
information. The bill tracks the language of an amendment I cosponsored 
during the debate on the 2005 bankruptcy bill.
  The language of this bill is based on a California law, the 
California Credit Card Payment Warning Act, passed in 2001. 
Unfortunately, in 2002, this California law was struck down in U.S. 
District Court as being preempted by the 1968 Truth in Lending Act.
  The Truth in Lending Act was enacted in part because Congress found 
that, ``The informed use of credit results from an awareness of the 
cost thereof by consumers.''
  This bill would amend the Truth in Lending Act, and would also 
further its core purpose.
  These disclosures will allow consumers to know exactly what it means 
for them to carry a balance and only make minimum payments, so they can 
make informed decisions on credit card use and repayment.
  The disclosure required by this bill is straightforward--how much it 
will cost to pay off the debt if only minimum payments are made, and 
how long it will take to do it. As for expense, my staff tells me that 
on the Web site Cardweb.com, there is a free interest calculator that 
does these calculations in under a second. Moreover, I am told that 
banks make these calculations internally to determine credit risk. The 
expense of making these disclosures would be minimal.
  Percentage rates and balances are constantly changing, and each 
month, the credit card companies are able to assess the minimum 
payment, late fees, over-the-limit fees and finance charges for 
millions of accounts.
  If the credit card companies can put in their bills what the minimum 
monthly payment is, they can certainly figure out how to disclose to 
their customers how much it might cost them if they stick to that 
minimum payment.
  The credit card industry is the most profitable sector of banking, 
and in 2006 it made $36.8 billion in profits--an increase of nearly 80 
percent from their profits in 2000. I don't think they will have any 
trouble implementing the requirements of this bill.
  I believe that this legislation is extraordinarily important and that 
it will reduce bankruptcies. In the face of the subprime mortgage 
crisis, and as we appear to be heading toward a recession, this bill is 
needed now more than ever.
  The harsh effects of the 2005 bankruptcy bill are starting to become 
apparent. I continue to believe that a bill requiring a limited but 
meaningful disclosure by credit card companies is a necessary 
accompaniment. I think you will see consumers acting more cautiously if 
these disclosures are made, and I believe that will be good for the 
bankruptcy courts in terms of reducing their caseloads, and also good 
for American consumers.
  The credit card debt problem facing our Nation is significant. I 
believe that this bill is an important step in providing individuals 
with the information needed to act responsibly, and it does so with a 
minimal burden on the industry.
  I urge my colleagues to support this legislation.

[[Page S107]]

  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. 2542

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

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Credit Card Minimum Payment 
     Notification Act of 2008''.

     SEC. 2. ENHANCED DISCLOSURE UNDER AN OPEN END CREDIT PLAN.

       Section 127(b) of the Truth in Lending Act (15 U.S.C. 
     1637(b)) is amended by adding at the end the following:
       ``(13) Enhanced disclosure under an open end credit plan.--
       ``(A) In general.--A credit card issuer shall, with each 
     billing statement provided to a cardholder in a State, 
     provide the following on the front of the first page of the 
     billing statement, in type no smaller than that required for 
     any other required disclosure, but in no case in less than 8-
     point capitalized type:
       ``(i) A written statement in the following form: `Minimum 
     Payment Warning: Making only the minimum payment will 
     increase the interest you pay and the time it takes to repay 
     your balance.'.
       ``(ii) Either of the following:

       ``(I) A written statement in the form of and containing the 
     information described in item (aa) or (bb), as applicable, as 
     follows:

       ``(aa) A written 3-line statement, as follows: `A one 
     thousand dollar ($1,000) balance will take 17 years and 3 
     months to pay off at a total cost of two thousand five 
     hundred ninety dollars and thirty-five cents ($2,590.35). A 
     two thousand five hundred dollar ($2,500) balance will take 
     30 years and 3 months to pay off at a total cost of seven 
     thousand seven hundred thirty-three dollars and forty-nine 
     cents ($7,733.49). A five thousand dollar ($5,000) balance 
     will take 40 years and 2 months to pay off at a total cost of 
     sixteen thousand three hundred five dollars and thirty-four 
     cents ($16,305.34). This information is based on an annual 
     percentage rate of 17 percent and a minimum payment of 2 
     percent or ten dollars ($10), whichever is greater.'. In the 
     alternative, a credit card issuer may provide this 
     information for the 3 specified amounts at the annual 
     percentage rate and required minimum payment that are 
     applicable to the cardholder's account. The statement 
     provided shall be immediately preceded by the statement 
     required by clause (i).
       ``(bb) Instead of the information required by item (aa), 
     retail credit card issuers shall provide a written 3-line 
     statement to read, as follows: `A two hundred fifty dollar 
     ($250) balance will take 2 years and 8 months to pay off at a 
     total cost of three hundred twenty-five dollars and twenty-
     four cents ($325.24). A five hundred dollar ($500) balance 
     will take 4 years and 5 months to pay off at a total cost of 
     seven hundred nine dollars and ninety cents ($709.90). A 
     seven hundred fifty dollar ($750) balance will take 5 years 
     and 5 months to pay off at a total cost of one thousand 
     ninety-four dollars and forty-nine cents ($1,094.49). This 
     information is based on an annual percentage rate of 21 
     percent and a minimum payment of 5 percent or ten dollars 
     ($10), whichever is greater.'. In the alternative, a retail 
     credit card issuer may provide this information for the 3 
     specified amounts at the annual percentage rate and required 
     minimum payment that are applicable to the cardholder's 
     account. The statement provided shall be immediately preceded 
     by the statement required by clause (i). A retail credit card 
     issuer is not required to provide this statement if the 
     cardholder has a balance of less than five hundred dollars 
     ($500).

       ``(II) A written statement providing individualized 
     information indicating an estimate of the number of years and 
     months and the approximate total cost to pay off the entire 
     balance due on an open-end credit card account if the 
     cardholder were to pay only the minimum amount due on the 
     open-ended account based upon the terms of the credit 
     agreement. For purposes of this subclause only, if the 
     account is subject to a variable rate, the creditor may make 
     disclosures based on the rate for the entire balance as of 
     the date of the disclosure and indicate that the rate may 
     vary. In addition, the cardholder shall be provided with 
     referrals or, in the alternative, with the `800' telephone 
     number of the National Foundation for Credit Counseling 
     through which the cardholder can be referred, to credit 
     counseling services in, or closest to, the cardholder's 
     county of residence. The credit counseling service shall be 
     in good standing with the National Foundation for Credit 
     Counseling or accredited by the Council on Accreditation for 
     Children and Family Services. The creditor is required to 
     provide, or continue to provide, the information required by 
     this clause only if the cardholder has not paid more than the 
     minimum payment for 6 consecutive months, beginning after 
     July 1, 2002.

       ``(iii)(I) A written statement in the following form: `For 
     an estimate of the time it would take to repay your balance, 
     making only minimum payments, and the total amount of those 
     payments, call this toll-free telephone number: (Insert toll-
     free telephone number).'. This statement shall be provided 
     immediately following the statement required by clause 
     (ii)(I). A credit card issuer is not required to provide this 
     statement if the disclosure required by clause (ii)(II) has 
     been provided.
       ``(II) The toll-free telephone number shall be available 
     between the hours of 8 a.m. and 9 p.m., 7 days a week, and 
     shall provide consumers with the opportunity to speak with a 
     person, rather than a recording, from whom the information 
     described in subclause (I) may be obtained.
       ``(III) The Federal Trade Commission shall establish not 
     later than 1 month after the date of enactment of this 
     paragraph a detailed table illustrating the approximate 
     number of months that it would take and the approximate total 
     cost to repay an outstanding balance if the consumer pays 
     only the required minimum monthly payments and if no other 
     additional charges or fees are incurred on the account, such 
     as additional extension of credit, voluntary credit 
     insurance, late fees, or dishonored check fees by assuming 
     all of the following:

       ``(aa) A significant number of different annual percentage 
     rates.
       ``(bb) A significant number of different account balances, 
     with the difference between sequential examples of balances 
     being no greater than $100.
       ``(cc) A significant number of different minimum payment 
     amounts.
       ``(dd) That only minimum monthly payments are made and no 
     additional charges or fees are incurred on the account, such 
     as additional extensions of credit, voluntary credit 
     insurance, late fees, or dishonored check fees.

       ``(IV) A creditor that receives a request for information 
     described in subclause (I) from a cardholder through the 
     toll-free telephone number disclosed under subclause (I), or 
     who is required to provide the information required by clause 
     (ii)(II), may satisfy the creditor's obligation to disclose 
     an estimate of the time it would take and the approximate 
     total cost to repay the cardholder's balance by disclosing 
     only the information set forth in the table described in 
     subclause (III). Including the full chart along with a 
     billing statement does not satisfy the obligation under this 
     paragraph.
       ``(B) Definitions.--In this paragraph:
       ``(i) Open-end credit card account.--The term `open-end 
     credit card account' means an account in which consumer 
     credit is granted by a creditor under a plan in which the 
     creditor reasonably contemplates repeated transactions, the 
     creditor may impose a finance charge from time to time on an 
     unpaid balance, and the amount of credit that may be extended 
     to the consumer during the term of the plan is generally made 
     available to the extent that any outstanding balance is 
     repaid and up to any limit set by the creditor.
       ``(ii) Retail credit card.--The term `retail credit card' 
     means a credit card that is issued by or on behalf of a 
     retailer, or a private label credit card, that is limited to 
     customers of a specific retailer.
       ``(C) Exemptions.--
       ``(i) Minimum payment of not less than ten percent.--This 
     paragraph shall not apply in any billing cycle in which the 
     account agreement requires a minimum payment of not less than 
     10 percent of the outstanding balance.
       ``(ii) No finance charges.--This paragraph shall not apply 
     in any billing cycle in which finance charges are not 
     imposed.''.
                                 ______