[Congressional Record Volume 155, Number 28 (Wednesday, February 11, 2009)]
[Senate]
[Pages S2149-S2153]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. DODD (for himself, Mr. Levin, Mr. Menendez, Mr. Reed, Mr. 
        Akaka, Mr. Schumer, Mr. Tester, Mr. Brown, Mr. Merkley, Mr. 
        Kerry, Mr. Leahy, Mr. Durbin, Mr. Harkin, Mrs. McCaskill, Mr. 
        Whitehouse, and Mr. Casey):
  S. 414. A bill to amend the Consumer Credit Protection Act, to ban 
abusive credit practices, enhance consumer disclosures, protect 
underage consumers, and for other purposes; to the Committee on 
Banking, Housing, and Urban Affairs.
  Mr. DODD. Mr. President, I am pleased today to be reintroducing 
comprehensive credit card legislation that would reform credit card 
practices and prohibit card issuers from continuing policies that are 
threatening the financial security of American consumers and their 
families. The Credit Card Accountability, Responsibility and Disclosure 
Act, Credit CARD Act, will help to end the practices that cost American 
families billions of dollars each year.
  This is a time of serious hardship for American families. As losses 
mount as a result of the economic crisis, lenders are squeezing 
consumers, often unfairly and without adequate notice, by raising 
credit card rates and tightening repayment terms. Credit card 
delinquency rates are inching higher, and repayment rates are dipping. 
At a time when Americans are becoming increasingly reliant on credit 
cards, credit card companies are being more aggressive about finding 
ways to charge their customers. Over $17 billion in credit card penalty 
fees were charged to Americans in 2006--a ten-fold increase from what 
was charged just ten years ago. These penalties are contributing to the 
avalanche of credit card debt under which many American consumers 
increasingly find themselves buried.
  In my travels around Connecticut, I hear frequently about the burden 
of these credit card practices from constituents. Connecticut has the 
third-

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highest median amount of credit card debt in the country--$2,094 per 
person. Non-business bankruptcy filings in the State are increasing, 
and in the second quarter of last year, credit card delinquencies 
increased in 7 of the 8 counties in the State.
  In December, the Federal Reserve, Office of Thrift Supervision, and 
National Credit Union Administration finalized unfair and deceptive 
acts and practices rules aimed at curbing some of these practices. For 
example, for customers in good standing the new rules will prevent 
issuers from applying interest rate increases retroactively to credit 
card debt incurred prior to the interest rate increase. They will also 
help ensure that issuers apply payments fairly, and extend the time 
that consumers have to make their credit card payments. The rules are a 
good first step in providing needed consumer protections in some areas. 
They fall short in other important areas, however, failing to address 
issues including universal default, ``any time any reason'' repricing, 
multiple overlimit fees, and youth marketing, which I'll explain in a 
moment.
  In anticipation of rules going into effect in July of 2010, issuers 
are raising their interest rates and cutting lines of credit even on 
consumers with a long and unblemished history of good payment, thereby 
underscoring the need for this legislation.
  That is why I am reintroducing the Credit CARD Act. This bill will 
help to reform credit card practices that drag so many American 
families further and further into debt, and prevent banks from taking 
advantage of consumers through confusing, misleading, and unfair terms 
and procedures. It strengthens regulation and oversight of the credit 
card industry and prohibits the unfair and deceptive practices that in 
far too many instances keep consumers mired in debt.

  Among its other provisions, the CARD Act will eliminate imposition of 
excessive fees and penalties; universal default provisions that permit 
credit card issuers to increase interest rates on cardholders in good 
standing for reasons unrelated to the cardholder's behavior with 
respect to that card; ``Any time any reason'' changes to credit card 
agreements--the bill prevents issuers from unilaterally changing the 
terms of a credit card contract for the length of the card agreement; 
and retroactive interest rate increases, unfair payment allocation 
practices, and double-cycle billing.
  The Credit Card Act also contains additional critical consumer 
protections. Among other things, the bill would: allow customers who 
close their accounts to pay under the terms existing at the time the 
account is closed; ensure that cardholders receive sufficient 
information about the terms of their account; require issuers to lower 
penalty rates that have been imposed on a cardholder after 6 months if 
the cardholder meets the obligations of the credit card terms; and 
enhance regulators' ability to protect consumers against unfair credit 
card practices by giving each federal banking agency the authority to 
prescribe regulations governing unfair or deceptive practices by the 
institutions they regulate.
  The bill also reins in irresponsible lending through a number of 
provisions aimed at protecting young consumers who lack the ability to 
repay substantial credit card debt.
  This legislation incorporates several key concepts included in the 
legislative proposals put forth by some of my colleagues, notably 
Senators Levin, Menendez, Akaka, and Tester. Each is a cosponsor of 
this legislation, as are Senators Reed, Schumer, Brown, Merkley, Kerry, 
Leahy, Durbin, Harkin, McCaskill, Whitehouse, and Casey.
  This bill has the support of a wide array of consumer advocates and 
labor organizations, including the Center for Responsible Lending, 
Connecticut Public Interest Research Group, the Connecticut Association 
for Human Services, Consumer Action, Consumer Federation of America, 
Consumers Union, Demos, the Leadership Conference on Civil Rights, the 
NAACP, the National Association of Consumer Advocates, the National 
Consumer Law Center, the National Council of LaRaza, the Service 
Employees International Union, and the U.S. Public Interest Research 
Group. The bill also has the support of the National Small Business 
Association.
  As the U.S. economy tightens, financially vulnerable families need 
the protections of the Credit CARD Act more than ever. That is what the 
American people and the people of Connecticut are demanding. For this 
reason, I urge my colleagues to join me in cosponsoring, and eventually 
in enacting the Credit CARD Act.
  Mr. LEVIN. Mr. President, I am pleased today to join my friend and 
colleague Senator Dodd in reintroducing comprehensive legislation to 
combat credit card abuses that have been hurting American consumers for 
far too long. Our bill, which is supported and cosponsored by other 
Senate colleagues as well, is called the Credit Card Accountability 
Responsibility and Disclosure Act, or CARD Act of 2009. With the 
economic hardships facing Americans today, from falling home prices to 
rising unemployment, it is more important than ever for Congress to act 
now to stop credit card abuses and protect American families and 
businesses from unfair credit card practices.
  Every day the taxpayer is being asked to foot the bill for our 
biggest banks' irresponsible lending decisions. America's banking 
giants can't be allowed to dig themselves out of the hole they are in 
by loading up American families with unfair fees and interest charges. 
Even as the prime rate has plummeted, some credit card companies are 
hiking interest rates on millions of customers who play by the rules. 
In other words, the banks are punishing the very taxpayers that they 
have come to, hat in hand, for financial rescue. It can't be allowed to 
continue.
  Credit card companies regularly use a host of unfair practices. They 
hike the interest rates of cardholders who pay on time and comply with 
their credit card agreements. They impose interest rates as high as 32 
percent, charge interest for debt that was paid on time, and, in some 
cases, apply higher interest rates retroactively to existing credit 
card debt. They pile on excessive fees and then charge interest on 
those fees. And they engage in a number of other unfair practices that 
are burying American consumers in a mountain of debt. It's long past 
time to enact legislation to protect American consumers.
  In December, the Federal Reserve and other bank regulators finally 
issued a regulation to stop some of the most egregiously unfair 
practices. For example, the new credit card regulation stops banks from 
retroactively raising interest rates on cardholders who meet their 
obligations, requires banks to mail credit card bills at least 21 days 
before the payment due date, and forces banks to more fairly apply 
consumer payments. It is a good first step, and long overdue. But the 
regulation regrettably leaves in place many blatantly unfair credit 
card practices that mire families in debt. It fails to stop, for 
example, abuses such as charging interest on debt that was paid on 
time, charging folks a fee simply to pay their bills, and hiking 
interest rates on a credit card because of a misstep on another, 
unrelated debt, a practice known as universal default. Legislation is 
needed not only to end those abusive practices--which are not 
prohibited by the Federal Reserve regulation--but also to provide a 
statutory foundation for that new regulation so that it cannot be 
weakened in the future.
  The bill we are introducing today will not only help protect 
consumers and ensure their fair treatment, but it will also make 
certain that credit card companies willing to do the right thing are 
not put at a competitive disadvantage by companies continuing unfair 
practices.
  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, but credit cards have become such complex financial 
products that even improved disclosure will frequently not be enough to 
curb the abuses. Some practices are so confusing that consumers can't 
easily understand them. Additionally, better disclosure does not always 
lead to greater market competition, especially when essentially an 
entire industry is using and benefiting from practices that unfairly 
hurt consumers.
  In 2006, Americans used 700 million credit cards to buy about $2 
trillion in

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goods and services. The average family now has 5 credit cards. Credit 
cards are being used to pay for groceries, mortgage payments, even 
taxes. And they are saddling U.S. consumers, from college students to 
seniors, with a mountain of debt. The latest figures show that U.S. 
credit card debt is now approaching $1 trillion. These consumers are 
routinely being subjected to unfair practices that squeeze them for 
ever more money, sinking them further and further into debt.
  Congress acted boldly and quickly to bail out the banks; now is time 
to do something for the consumer. Too many American families are being 
hurt by too many unfair credit card practices to delay action any 
longer. I commend Senator Dodd, Chairman of the Senate Banking 
Committee, for tackling credit card reform, and look forward to 
Congress promptly and urgently taking the steps needed to ban unfair 
practices that are causing so much pain and financial damage to 
American families.
  Abusive credit card practices are a concern that I have been tracking 
over the past several years through the Permanent Subcommittee on 
Investigations, which I chair. The Subcommittee held two investigative 
hearings in 2007, exposing those practices, and based on those 
hearings, I introduced legislation--the Stop Unfair Practices in Credit 
Cards Act, S. 1395--to ban the outrageous credit card abuses we 
documented. I am pleased that Senators McCaskill, Leahy, Durbin, 
Bingaman, Cantwell, Whitehouse, Kohl, Brown, Kennedy, and Sanders 
joined as cosponsors. The Dodd-Levin bill we are introducing today 
incorporates almost all of S. 1395, and adds other important 
protections as well. It is the strongest credit card bill yet.
  The Dodd-Levin bill includes, for example, the following provisions 
that also appeared in the bill I introduced with Senator McCaskill and 
others. It would:
  No Interest on Debt Paid on Time. Prohibit interest charges on any 
portion of a credit card debt which the card holder paid on time during 
a grace period.
  Prohibition on Universal Default. Prohibit credit card issuers from 
increasing interest rates on cardholders in good standing for reasons 
unrelated to the cardholder's behavior with respect to that card.
  Apply Interest Rate Increases Only to Future Debt. Require increased 
interest rates to apply only to future credit card debt, and not to 
debt incurred prior to the increase.
  No Interest on Fees. Prohibit the charging of interest on credit card 
transaction fees, such as late fees and over-the-limit fees.
  Restrictions on Over-Limit Fees. Prohibit the charging of repeated 
over-limit fees for a single instance of exceeding a credit card limit.
  Prompt and Fair Crediting of Card Holder Payments. Require payments 
to be applied first to the credit card balance with the highest rate of 
interest, and to minimize finance charges.
  Fixed Credit Limits. Require card issuers to offer consumers the 
option of operating under a fixed credit limit that cannot be exceeded.
  No Pay-to-Pay Fees. Prohibit charging a fee to allow a credit card 
holder to make a payment on a credit card debt, whether payment is by 
mail, telephone, electronic transfer, or otherwise.
  The Dodd-Levin bill also includes important additional protections. 
It would:
  Require issuers to lower penalty rates that have been imposed on a 
cardholder after 6 months if the cardholder commits no further 
violations.
  Enhance protection against unfair and deceptive practices by giving 
each federal banking agency the authority to prescribe regulations 
governing unfair or deceptive practices by banks or savings and loan 
institutions.
  Improve disclosure requirements by, for example, requiring issuers to 
provide individual consumer account information and to disclose the 
period of time and total interest it will take to pay off the card 
balance if only minimum monthly payments are made.
  Protect young consumers from credit card solicitations.
  To understand why these protections are needed, I would like to 
provide a brief overview of some of the most prevalent credit card 
abuses we uncovered and some of the stories that American consumers 
shared with us during the course of the inquiries carried out by my 
Permanent Subcommittee on Investigations.
  The first case history we examined illustrates the fact that major 
credit card issuers today impose a host of fees on their cardholders, 
including late fees and over-the-limit fees that are not only 
substantial in themselves but can contribute to years of debt for 
families unable to immediately pay them.
  Wesley Wannemacher of Lima, Ohio, testified at our March 2007 
hearing. In 2001 and 2002, Mr. Wannemacher used a new credit card to 
pay for expenses mostly related to his wedding. He charged a total of 
about $3,200, which exceeded the card's credit limit by $200. He spent 
the next six years trying to pay off the debt, averaging payments of 
about $1,000 per year. As of February 2007, he'd paid about $6,300 on 
his $3,200 debt, but his billing statement showed he still owed $4,400.
  How is it possible that a man pays $6,300 on a $3,200 credit card 
debt, but still owes $4,400? Here's how. On top of the $3,200 debt, Mr. 
Wannemacher was charged by the credit card issuer about $4,900 in 
interest, $1,100 in late fees, and $1,500 in over-the-limit fees. He 
was hit 47 times with over-limit fees, even though he went over the 
limit only 3 times and exceeded the limit by only $200. Altogether, 
these fees and the interest charges added up to $7,500, which, on top 
of the original $3,200 credit card debt, produced total charges to him 
of $10,700.
  In other words, the interest charges and fees more than tripled the 
original $3,200 credit card debt, despite payments by the cardholder 
averaging $1,000 per year. Unfair? Clearly, but our investigation has 
shown that sky-high interest charges and fees are not uncommon in the 
credit card industry. While the Wannemacher account happened to be at 
Chase, penalty interest rates and fees are also employed by other major 
credit card issuers.
  The week before our March hearing, Chase decided to forgive the 
remaining debt on the Wannemacher account, and while that was great 
news for the Wannemacher family, that decision didn't begin to resolve 
the problem of excessive credit card fees and sky-high interest rates 
that trap too many hard-working families in a downward spiral of debt.
  These high fees are made worse by the industry-wide practice of 
including all fees in a consumer's outstanding balance so that they 
also incur interest charges. Those interest charges magnify the cost of 
the fees and can quickly drive a family's credit card debt far beyond 
the cost of their initial purchases. It is one thing for a bank to 
charge interest on funds lent to a consumer; charging interest on 
penalty fees goes too far.
  A second troubling case history involves Charles McClune, a 51-year-
old Michigan resident who is married with one child. Mr. McClune has a 
credit card account which he closed in 1998, and has been trying to pay 
off for more than 10 years. Due to excessive fees and interest rates, 
and despite paying more than four times his original credit card debt 
of less than $4,000, Mr. McClune still owes thousands on his credit 
card, with no end in sight.
  Mr. McClune first opened his credit card account while in college, in 
1986, at Michigan National Bank through a student-targeted credit 
promotion. After leaving college, the credit limit on his card was 
increased to $4,000. By 1993, although he had not exceeded the credit 
limit through purchases, Mr. McClune had missed some payments and was 
assessed interest and fees that pushed his balance over the $4,000 
limit. From 1993 to 1996, he exceeded his limit again, on several 
occasions, due to interest and fee charges. He stopped making purchases 
on the credit card in 1995.

  In 1996, Mr. McClune's credit card account was purchased by Chase 
Bank. In 1998, Mr. McClune asked Chase to close the account, and Chase 
did so. Although he never made a single purchase on his credit card 
while the account was with Chase, Chase repeatedly increased the 
interest rate on his account, including after the account was closed. 
In 2002, for example, his interest rate was about 21 percent; by 
October 2005, it had climbed to 29.99 percent where it remained for 
more than two years until March 2008; it then

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dropped slightly to 29.24 percent. The higher interest rates were 
applied retroactively to Mr. McClune's closed account balance, 
increasing the size of his minimum payments and his overall debt.
  Chase also assessed Mr. McClune repeated over-the-limit and late 
fees, which began at $29 and increased over time to $39 per fee. Chase 
cannot locate statements for Mr. McClune's account prior to February 
2001, so there is no record of all the fees he has paid. The records in 
existence show that, since February 2001, he has paid 64 over-the-limit 
fees totaling $2,200. Those fees stopped after the March 2007 hearing 
before my Subcommittee, in which Chase promised to stop charging more 
than three over-the-limit fees for a single violation of a credit card 
limit. In addition to the 64 over-the-limit fees, since February 2001, 
Chase has charged Mr. McClune nearly $2,000 in late fees.
  The records also show that since 2001, Mr. McClune was contacted by 
telephone on several occasions by Chase representatives seeking payment 
on his account. If he agreed to make a payment over the telephone, 
Chase charged him--without notifying him at the time--a fee of $12 to 
$15 per telephone payment. When asked about these fees, Chase told the 
Subcommittee that the fees were imposed, because on each occasion Mr. 
McClune had spoken with a ``live advisor.'' Since 2001, he has paid a 
total of $160 in these pay-to-pay fees.
  Altogether, since 2001, Mr. McClune has paid nearly $4,400 in fees on 
a debt of less than $4,000. If the more than four years of missing 
credit card bills were available from 1996 to 2000, this fee total 
would be even higher. In addition, each fee was added to Mr. McClune's 
outstanding credit card balance, and Chase charged him interest on the 
fee amounts, thereby increasing his debt by thousands of additional 
dollars.
  In February 2001, Chase records show that Mr. McClune's credit card 
debt totaled nearly $5,200. For the next 7 years, although he did not 
pay every month, Mr. McClune paid nearly $2,000 per year toward his 
credit card debt, but was unable to pay it off. At one time, he paid 
$150 every two weeks for several weeks. Those payments did not bring 
his debt under the $4,000 credit limit, or reduce his interest rate.
  In January 2007, Mr. McClune received a letter from Chase stating 
that if he made his next payment on time, he would receive a $50 credit 
on his debt. Mr. McClune cashed out his IRA and paid $4,000 on his 
credit card debt. Because he made this payment in February, however, he 
did not receive the $50 credit for an on-time payment. Instead, he was 
assessed a $39 late fee, a $39 over-the-limit fee, and a $14.95 payment 
fee for making the $4,000 payment over the telephone.
  Mr. McClune was never offered a payment plan or a reduced interest 
rate by Chase to help him pay down his debt. His credit card bills show 
that from February 2001 to June 2008, he paid Chase a total of $15,800. 
If the four years of missing credit card bills from 1996 to 2000 were 
available, his total payments would likely exceed $20,000. In June 
2008, his credit card bill showed he was charged 29 percent interest 
and a $39 late fee on a balance of $3,300.
  How could Mr. McClune pay $15,000 to $20,000 on credit card purchases 
of less than $4,000, and still owe $3,300? His credit card statements 
since 2001 show that he was socked with over $9,700 in interest 
charges, $2,200 in over-the-limit fees, $2,000 in late fees, and $160 
in pay-to-pay fees. All of these interest charges and fees were 
assessed by Chase while the account was closed and without a single 
purchase having been made since 1995. Despite his lack of purchases and 
payments totaling $15,800, Chase records show that, from February 2001 
until June 2008, Mr. McClune was able to reduce his credit card balance 
by only about $1,850.
  Mr. McClune is not trying to avoid his debt. He has made years of 
payments on a closed credit card account that he has not used to make a 
purchase in 13 years. He has paid thousands and thousands of dollars--
four and possibly five times what he originally owed--in an attempt to 
pay off his credit card account. He is still paying. But his thousands 
of dollars in payments are not enough for his credit card issuer which 
is squeezing him for every cent it can, fair or not, for years on end.
  Tragically, Mr. McClune and Mr. Wannemacher have a lot of company in 
their credit card experiences. The many case histories investigated by 
the Subcommittee show that responsible cardholders across the country 
are being squeezed by unfair credit card lending practices involving 
excessive fee and interest charges. The current regulatory regime--even 
with the new Federal Reserve regulation--is insufficient to prevent 
these ongoing credit card abuses. Legislation is badly needed.
  Another galling practice featured in our March hearing involves the 
fact that credit card debt that is paid on time routinely accrues 
interest charges, and credit card bills that are paid on time and in 
full are routinely inflated with what I call ``trailing interest.'' 
Every single credit card issuer contacted by the Subcommittee engaged 
in both of these unfair practices which squeeze additional interest 
charges from responsible cardholders.
  Here's how it works. Suppose a consumer who usually pays his account 
in full, and owes no money on December 1st, makes a lot of purchases in 
December, and gets a January 1 credit card bill for $5,020. That bill 
is due January 15. Suppose the consumer pays that bill on time, but 
pays $5,000 instead of the full amount owed. What do you think the 
consumer owes on the next bill?
  If you thought the bill would be the $20 past due plus interest on 
the $20, you would be wrong. In fact, under industry practice today, 
the bill would likely be twice as much. That's because the consumer 
would have to pay interest, not just on the $20 that wasn't paid on 
time, but also on the $5,000 that was paid on time. In other words, the 
consumer would have to pay interest on the entire $5,020 from the first 
day of the new billing month, January 1, until the day the bill was 
paid on January 15, compounded daily. So much for a grace period! In 
addition, the consumer would have to pay the $20 past due, plus 
interest on the $20 from January 15 to January 31, again compounded 
daily. In this example, using an interest rate of 17.99 percent (which 
is the interest rate charged to Mr. Wannamacher), the $20 debt would, 
in one month, rack up $35 in interest charges and balloon into a debt 
of $55.21.
  You might ask--hold on--why does the consumer have to pay any 
interest at all on the $5,000 that was paid on time? Why does anyone 
have to pay interest on the portion of a debt that was paid by the date 
specified in the bill--in other words, on time? The answer is, because 
that's how the credit card industry has operated for years, and they 
have gotten away with it.
  There's more. You might think that once the consumer gets gouged in 
February, paying $55.21 on a $20 debt, and pays that bill on time and 
in full, without making any new purchases, that would be the end of it. 
But you would be wrong again. It's not over.
  Even though, on February 15, the consumer paid the February bill in 
full and on time--all $55.21--the next bill has an additional interest 
charge on it, for what we call ``trailing interest.'' In this case, the 
trailing interest is the interest that accumulated on the $55.21 from 
February 1 to 15, which is the time period from the day when the bill 
was sent to the day when it was paid. The total is 38 cents. While some 
issuers will waive trailing interest if the next month's bill is less 
than $1, if a consumer makes a new purchase, a common industry practice 
is to fold the 38 cents into the end-of-month bill reflecting the new 
purchase.
  Now 38 cents isn't much in the big scheme of things. That may be why 
many consumers don't notice these types of extra interest charges or 
try to fight them. 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 incorrect. But 
by nickel and diming tens of millions of consumer accounts, credit card 
issuers reap large profits. I think it is indefensible to make 
consumers pay interest on debt which they pay on time. It is also just 
plain wrong to charge trailing interest when a bill is paid on time and 
in full.
  My Subcommittee's second hearing focused on another set of unfair 
credit card practices involving unfair interest

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rate increases. Cardholders who had years-long records of paying their 
credit card bills on time, staying below their credit limits, and 
paying at least the minimum amount due, were nevertheless socked with 
substantial interest rate increases. Some saw their credit card 
interest rates double or even triple. At the hearing, three consumers 
described this experience.
  Janet Hard of Freeland, Michigan, had accrued over $8,000 in debt on 
her Discover card. Although she made payments on time and paid at least 
the minimum due for over two years, Discover increased her interest 
rate from 18 percent to 24 percent in 2006. At the same time, Discover 
applied the 24 percent rate retroactively to her existing credit card 
debt, increasing her minimum payments and increasing the amount that 
went to finance charges instead of the principal debt. The result was 
that, despite making steady payments totaling $2,400 in twelve months 
and keeping her purchases to less than $100 during that same year, 
Janet Hard's credit card debt went down by only $350. Sky-high interest 
charges, inexplicably increased and unfairly applied, ate up most of 
her payments.
  Millard Glasshof of Milwaukee, Wisconsin, a retired senior citizen on 
a fixed income, incurred a debt of about $5,000 on his Chase credit 
card, closed the account, and faithfully paid down his debt with a 
regular monthly payment of $119 for years. In December 2006, Chase 
increased his interest rate from 15 percent to 17 percent, and in 
February 2007, hiked it again to 27 percent. Retroactive application of 
the 27 percent rate to Mr. Glasshof's existing debt meant that, out of 
his $119 payment, about $114 went to pay finance charges and only $5 
went to reducing his principal debt. Despite his making payments 
totaling $1,300 over twelve months, Mr. Glasshof found that, due to 
high interest rates and excessive fees, his credit card debt did not go 
down at all. Later, after the Subcommittee asked about his account, 
Chase suddenly lowered the interest rate to 6 percent. That meant, over 
a one year period, Chase had applied four different interest rates to 
his closed credit card account: 15 percent, 17 percent, 27 percent, and 
6 percent, which shows how arbitrary those rates are.
  Then there is Bonnie Rushing of Naples, Florida. For years, she had 
paid her Bank of America credit card on time, providing at least the 
minimum amount specified on her bills. Despite her record of on-time 
payments, in 2007, Bank of America nearly tripled her interest rate 
from 8 to 23 percent. The Bank said that it took this sudden action 
because Ms. Rushing's FICO credit score had dropped. When we looked 
into why it had dropped, it was apparently because she had opened 
Macy's and J. Jill credit cards to get discounts on purchases. Despite 
paying both bills on time and in full, the automated FICO system had 
lowered her credit rating, and Bank of America had followed suit by 
raising her interest rate by a factor of three. Ms. Rushing closed her 
account and complained to the Florida Attorney General, my 
Subcommittee, and her card sponsor, the American Automobile 
Association. Bank of America eventually restored the 8 percent rate on 
her closed account.
  In addition to these three consumers who testified at the hearing, 
the Subcommittee presented case histories for five other consumers who 
experienced substantial interest rate increases despite complying with 
their credit card agreements.
  I'd also like to note that, in each of these cases, the credit card 
issuer told our Subcommittee that the cardholder had been given a 
chance to opt out of the increased interest rate by closing their 
account and paying off their debt at the prior rate. But each of these 
cardholders denied receiving an opt-out notice, and when several tried 
to close their account and pay their debt at the prior rate, they were 
told they had missed the opt-out deadline and had no choice but to pay 
the higher rate. Our Subcommittee examined copies of the opt-out 
notices and found that some were filled with legal jargon, were hard to 
understand, and contained procedures that were hard to follow. When we 
asked the major credit card issuers what percentage of persons offered 
an opt-out actually took it, they told the Subcommittee that 90 percent 
did not opt out of the higher interest rate--a percentage that is 
contrary to all logic and strong evidence that current opt-out 
procedures don't work.

  The case histories presented at our hearings illustrate only a small 
portion of the abusive credit card practices going on today. Since 
early 2007, the Subcommittee has received letters and emails from 
thousands of credit card cardholders describing unfair credit card 
practices and asking for help to stop them, more complaints than I have 
received in any investigation I've conducted in more than 25 years in 
Congress. The complaints stretch across all income levels, all ages, 
and all areas of the country. The bottom line is that these abuses have 
gone on for too long. In fact, these practices have been around for so 
many years that they have in many cases become the industry norm, and 
our investigation has shown that many of the practices are too 
entrenched, too profitable, and too immune to consumer pressure for the 
companies to change them on their own.
  For these reasons, I urge my colleagues to support enactment of the 
Dodd-Levin Credit CARD Act this year. Congress has already gone to bat 
for the banks that engage in abusive credit card practices; it's time 
we go to bat for the American family.
                                 ______