[Congressional Record Volume 155, Number 64 (Wednesday, April 29, 2009)]
[House]
[Pages H4960-H4969]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




             CREDIT CARDHOLDERS' BILL OF RIGHTS ACT OF 2009

  The SPEAKER pro tempore (Mr. Al Green of Texas). Pursuant to the 
order of the House of Tuesday, April 28, 2009, the Chair declares the 
House in the Committee of the Whole House on the state of the Union for 
the consideration of the bill, H.R. 627.

                              {time}  1709


                     In the Committee of the Whole

  Accordingly, the House resolved itself into the Committee of the 
Whole House on the State of the Union for the consideration of the bill 
(H.R. 627) to amend the Truth in Lending Act to establish fair and 
transparent practices relating to the extension of credit under an open 
end consumer credit plan, and for other purposes, with Mr. Cuellar in 
the chair.

[[Page H4961]]

  The Clerk read the title of the bill.
  The CHAIR. Pursuant to the order of the House of Tuesday, April 28, 
2009, the bill is considered read the first time.
  General debate shall not exceed 1 hour, equally divided and 
controlled by the Chair and ranking member of the Committee on 
Financial Services.
  The gentleman from Illinois (Mr. Gutierrez) and the gentleman from 
Alabama (Mr. Bachus) each will control 30 minutes.
  The Chair recognizes the gentleman from Illinois.
  Mr. GUTIERREZ. Mr. Chairman, I would like to yield at this moment 
2\1/2\ minutes to the chief architect, promoter, the person who really 
brought this bill to fruition here on the House floor not once but for 
the second time, the gentlewoman from New York, Congresswoman Maloney.
  Mrs. MALONEY. Mr. Chairman, I rise in strong support of the Credit 
Cardholders' Bill of Rights, and I thank the Democratic leadership, 
Chairman Frank, Chairman Gutierrez, and my Democratic colleagues for 
their support of this important legislation.
  The House bill would provide consumers protection from credit card 
fraud and deception. Today's action builds on the vote that we had last 
year when the bill passed by 312-112. We held numerous hearings and 
meetings, and came forward with a set of gold principles that many 
issuers have voluntarily followed. Today's bill is another step forward 
towards making these protections permanent, and importantly, we expand 
upon them in a number of key areas to provide consumers with additional 
protections.
  The bill targets specific abusive practices--retroactive rate 
increases that can trap cardholders in a downward spiral of unexpected 
debt, double-cycle billing that charges interest on balances that have 
already been paid, payment allocation rules that deny cardholders the 
right to pay down their high interest rate balances first, due date 
gimmicks that trick people into paying their bills late and then 
hitting them with retroactive rate increases, penalty interest rates, 
late fees, multiple over-limit fees for one over-limit transaction, and 
subprime cards of which the annual fees alone eat up most of the credit 
line before a single charge is ever made. It gives consumers more tools 
to better manage their own credit, such as setting their own credit 
limit.
  This is not a bill that takes away consumer choice or that infringes 
on anyone's rights. It simply says it is not right to be deceptive, to 
be unfair or to engage in anticompetitive practices.
  The bill has been endorsed by consumer groups, labor unions and civil 
rights organizations that have made the passage of this bill a top 
priority because these unfair practices affect so many people every 
single day of the year. There have been more than 54 editorials and op-
eds endorsing the need for credit card reform across our Nation. Just 
last week, President Obama called to the White House the top executives 
from the credit card industry to tell them that the days of any time/
any reason increases must come to an end.
  This is an important bill that affects many people. It is hard for me 
to come to the floor of Congress or to walk down the street without 
hearing some story of some type of credit card abuse. This would end 
the tricks and traps, and it builds also on the Federal rule that came 
out after our bill passed that resembles strongly our bill. Sixty-six 
thousand comments were written in support of the Federal rule which we 
are supporting today, too.
  I urge a ``yes'' vote on this important legislation. It will help 
millions of people in America. We have done a great deal to help our 
banks shore up their capital requirements and allow them to provide 
more loans. This will allow consumers to protect their interest rates, 
to keep them lower so that they have more money, their own money, to 
invest in our economy. It's fair to all concerned. I urge a ``yes'' 
vote.
  Mr. BACHUS. Mr. Chairman, let me start out by saying that I know the 
Members on the other side and I think there is one thing that we all 
share--most of the Members if not all of the Members--and that is that 
we want to protect consumers from unfair and deceptive credit card 
practices and ensure that they receive useful, complete, fair 
disclosures as they enter these agreements and, once they enter these 
agreements, that the terms and conditions are met and that they're not 
abused.

                              {time}  1715

  Like many of my colleagues, I have received calls from constituents 
about credit card practices that certainly don't seem to be fair. In 
fact, many times they are not fair. And I don't defend them. That's why 
I don't question the motivation or the sincerity of those who want to 
address this practice with this bill.
  Having said that, I don't believe that this bill is the right 
solution. But there is an alternative, and I want to discuss an 
alternative that I think has been taken. Because in going in and over-
restricting the offering of credit and overly restricting credit card 
companies' ability to price and by over-restricting terms and 
conditions, you do affect the availability of credit. In fact, the 
Small Business Administration has testified--not about this bill, so I 
don't want to mislead anybody; it is not about this bill--that they 
have said that with small businesses, availability of credit is their 
greatest concern, restrictions on credit are their second greatest, and 
only third is the terms and conditions. And that there has to be a 
balance between the government--they didn't say this; this is what I am 
saying--if we over-restrict what companies or people offering credit, 
what they can do or offer, you do--and I think we all agree--you do, 
whether you unconsciously do it or intentionally do it, you do restrict 
the offering of credit.
  This bill will do that. I mean, there will be people who can have a 
credit card today at a higher interest rate, or if they don't pay on a 
timely manner at a rate that escalates, that if this bill passes, will 
not get credit at all. Now some people might say, well, that's good.
  But today, you have got to have a credit card. And we have to take, I 
believe, in offering rates and in changing rates from time to time, the 
payment history of the person, of the credit card holder, we've got to 
take into consideration whether they have met the obligations.
  Now, the sponsor of this bill--and I have agreed for some time that 
there are some practices that we ought to address. Double-cycle 
billing. You mentioned this bill addresses that. And it ought to be 
addressed. Mr. Gutierrez and I talked about them offering a rate and 
then coming back in 6 months and suddenly changing that rate without 
any notice, number one, and then changing it on the existing balance as 
far as going forward. We both think that they shouldn't do that unless 
there are unusual or extenuating circumstances.
  I think we also all agree that--and I have had complaints from other 
Members knowing that I am the ranking member of Financial Services--
that people get their credit card bill and they are out of town and all 
of a sudden they couldn't get it back and they didn't have time to pay 
it. The gentlewoman from New York says we're going to extend that to 21 
days. That's a good thing. But all three of those things, and several 
other things that we agree on, the Federal Reserve has acted.
  Now there is a disagreement among us. Mrs. Maloney has said, and 
others have said, that they ought to be able to do this in 30 days, or 
60 days. But the Fed has issued 1,200 pages of regulations--1,200 
pages--and we simply don't think that 30 days or 60 days, the credit 
card companies, the banks tell us--and these are not just the big 
banks; these are community banks, these are credit unions--they have 
all said, ``Look, we agree there were abuses,'' and the Fed and members 
of this committee on both sides have pushed them into making changes. 
But I honestly don't think they can do it in 30 days or 60 days. That's 
a fair argument.
  What I fear is, as I said, credit cards play a crucial role in the 
lives of everyday Americans and the overall economy. I mean, the 
availability of credit cards, credit card offers, they are essential. 
And any regulation or any legislation affecting credit card practices 
is going to have a profound effect on every American and every American 
family. Those effects can be good in cases. I think when you give 
people 21

[[Page H4962]]

days, I think that's a good thing. I think when you say let's not 
change someone's interest rate on a balance, you ought to give them 
like you do, and we agreed and the Fed agreed, to give them 5 years, 
amortize it and give 5 years.
  I think it was a good thing to prohibit double-cycle billing. In 
fact, there are 12 or 14 things that the regulators have now told the 
banks they've got to do.
  But I believe there is always if you say one size fits all, yes, 
there will be people, if this bill passes, that will receive a lower 
interest rate or their interest rates won't go as high. But there are 
other people, I think a far greater universe, where the interest rates 
will go up on people that pay on time, people that have better credit, 
and that this is sort of a leveling, and I think you're going to see 
that interest rates are going to go up from 10 to 12 percent.
  Let me just simply stop there. I will give the lady a chance to 
respond. But I do want to say one thing and then I will quit.
  We're in the midst of a severe economic downturn. Unemployment is up. 
Hardworking Americans are facing unparalleled difficulties. Now, if a 
credit card company doesn't treat them right, they just add to those 
difficulties. But if we over-restrict these offers of credit, put too 
much conditions on it, we've been told that the credit limits are going 
to come down. Some people are going to be told, ``I'm sorry, we're 
pulling your lines of credit.'' That's already happened. And 
particularly, investors and people that invest and put capital behind 
credit card offerings are not going to be there. I do have all of those 
concerns.
  For that reason, I sincerely believe that H.R. 627 is going to do 
some good, a lot of it the Fed is doing anyway, but it's going to do 
some harm. And you weigh all of that out, and I am afraid that the 
consumers are not going to benefit. Some will, but I think most won't.
  At this time, I will reserve the balance of my time.
  Mr. GUTIERREZ. Mr. Chairman, I yield 1\1/2\ minutes to Mr. Pascrell 
from New Jersey.
  Mr. PASCRELL. Mr. Chairman, that was, to my good friend from Alabama, 
the best apologist presentation that I have heard in a long time.
  The very same people stood on the floor of this House and condemned 
folks trying to get a part of the American dream in buying a house and 
then finding out they couldn't afford it, condemned those people. Not 
the folks who loaned them the money, not the many unscrupulous people. 
I have heard it before and will hear it again, I am sure.
  There has to be a balance, and I would agree. The question is we've 
gone out of balance, and no one can deny looking at the data of the 
past 20 years that we have reduced our standards, there have been 
financial products that nobody has overseen, and I place the blame on 
both political parties. Neither party is privy to virtue on this. We'll 
stand for the consumer this time. Hopefully we'll get it past this 
House and we will get it past the Senate. That's necessary.
  We have before us here legislation which would give consumers 
protection against credit card abuses. That's what we are targeting 
here. And this is at a time when Americans are sick and tired of being 
the victims of a crafty and fatally opportunistic financial sector. You 
may defend that sector. You have all of the right to do it. Thank God 
we're in America.
  Americans are discovering that even if they pay their bills, their 
interest rates still get jacked through the roof. Even if you pay your 
bills. The credit card industry and some Members have been quick to 
condemn this legislation. But today, I ask those who have spoken 
against the legislation, what possible detriment is there in increasing 
transparency in the imposition of fees? How can we possibly be against 
empowering Americans for taking control of their credit card finances?
  Mr. BACHUS. Mr. Speaker, I yield to the gentleman from Texas (Mr. 
Hensarling) such time as he may consume.
  Mr. HENSARLING. I thank the ranking member for yielding.
  Before entering into the debate, I certainly want to acknowledge, as 
I have before throughout this debate, number one, the work of the 
subcommittee chairman with whom I have served, proud to serve as the 
ranking member, it has been a very open process, a very good debate. 
And I certainly want to congratulate the gentlelady from New York who I 
know has been quite passionate about this issue. And although we 
certainly disagree with the implications of her legislation, what I 
believe or I hope to believe are unintended consequences, I certainly 
share, at least, a number of the goals that she has.
  However, I do have great concerns about this legislation.
  First, if this was a debate on whether or not there are credit card 
companies in America that use misleading and deceptive practices, I 
think we could pass that legislation with unanimous consent.
  Now, Mr. Chairman, if this was legislation about whether or not the 
average consumer can understand their credit card agreement--the 
average one running 6,691 words, it would take the average American 
almost an hour to read, much less comprehend--my guess is we could pass 
that with unanimous consent as well since indeed most Americans cannot 
understand the provisions in their credit card agreements.
  But unfortunately, the legislation before us goes way beyond simply 
ending deceptive practices. It goes way beyond simply trying to 
effectuate effective disclosure for the consumer. And although the bill 
is entitled the Credit Card Bill of Rights, I have great fears that 
ultimately this will prove to be the Credit Card Bill of Wrongs.
  I believe that ultimately three things will happen if this 
legislation is passed: Number one, because of its prescriptive way in 
dealing with risk-based pricing, by essentially imposing a form of 
price controls on late fees, either, number one, the borrowers who do 
it right--now, Mr. Chairman, that's half of America; half of America 
either pays their bill off in full at the end of the month or does it 
almost every month. And then there is about a quarter who miss some. 
And then there is about a quarter who are always universally late.
  But what is going to happen, Mr. Chairman, is the people who are 
doing it right, who are working hard, trying to pay their bills, are 
going to be forced to bail out those who don't. This bill will take us 
back to a previous era, a bygone era where everybody paid higher 
interest rates, where a third fewer people had access to credit, and we 
had all of these dreaded annual card fees.

                              {time}  1730

  Now, that was a previous era before we had this thing called risk-
based pricing, Mr. Chairman, and what is that? It says, you know what, 
if you have a checkered credit past or maybe you have a lower income, 
maybe you're having trouble meeting your bills, well, risk-based 
pricing says you can still get access to credit if you're willing to 
pay more for the risk of the creditor. The option, of course, is not to 
have any credit at all, in which case if you lose your credit card, 
then you're looking at some other option. And in that respect there are 
provisions of this bill that maybe ought to be called the ``Pawn Shop 
Owners and Payday Advance Lenders Relief Act,'' because, Mr. Chairman, 
if you start to take away credit opportunities of those who have 
checkered credit pasts, those who are low income, they may be forced 
into options they don't like.
  Now, again, I want to make it very clear I think the payday lenders, 
the pawn shop operators, they serve a very vital function in our 
economy. Many people use them. That's not my point. My point is the 
consumer ought to be able to choose. So if you start taking that 
ability away to risk-based price, you're taking away credit, number 
one.
  Number two, you're going to be forced to this bygone era where the 
people who did it right have to bail out the people who did it wrong. I 
mean, does that sound like a fairly consistent theme out of this 
particular Congress: bailout, bailout, bailout? And that's what this 
is, Mr. Chairman. Unfortunately, it will force the good credit 
cardholders to bail out those who aren't.
  And you know what, Mr. Chairman. We have now seen out of this 
Democratic Congress a $700 billion bailout bill costing the average 
American family over $6,034. We have seen a $1.13

[[Page H4963]]

trillion, with a ``t,'' government stimulus plan, costing the average 
American household $9,810. We've now seen out of this Democratic 
Congress, Mr. Chairman, an omnibus spending bill $410 billion, costing 
the average American $3,534. And now just today, just today, a $3.6 
trillion budget, which is going to triple the national debt in 10 
years.
  I mean, Mr. Chairman, isn't it enough that this Congress has taken 
all the cash out of our wallets? Is it going to take the credit cards 
out of our wallets as well? I hope not. I don't believe that's the 
intent of the legislation, but I fear that will be the effect.
  Now, again, there are many problems in this credit card market. There 
are credit card companies, one in particular, that my wife and I 
absolutely refuse to do business with because we don't like their 
practices. But throughout this debate, and I challenge Members on the 
other side of the aisle to show to me, where is it that we don't have a 
competitive market? Where is it that the consumer doesn't have the 
choice? Now, up until the recent economic turmoil that we've had, I 
believe there were over 14,000 different credit card issuers in this 
Nation with a dizzying array of options for consumers to choose from. 
It's the competitive market that is the consumer's best friend.
  Now, if people don't understand their disclosures, and I believe, 
again, many of them don't, what we ought to do is not take away the 
economic opportunities, not take away consumer choice, but ensure that 
there is effective disclosure written in English, not voluminous 
disclosure written in legalese. Part of this is the fault of Congress 
and the regulators. When you disclose everything, you end up disclosing 
nothing. Part of it is an answer to an explosion of liability exposure 
to where some of these credit card companies feel, well, if we don't 
disclose this, we may get sued.
  And then last but not least but, again, there are misleading and 
deceptive practices of credit card companies. That should be stopped, 
and particularly under the Truth in Lending Act, under the Deceptive 
Trade Practices Act. Sometimes, Mr. Chairman, the answer is to enforce 
the laws that we have on the books.
  I don't see the gentlewoman from New York on the floor at the moment, 
but I want to commend her for that portion of the legislation that 
deals with disclosure. Now it roughly parallels that of the Fed regs 
that the ranking member spoke of, and I think a lot of good can be done 
here in informing consumers about what their rights and 
responsibilities are.
  But, again, ultimately I feel that if we enact this legislation, bad 
things are going to happen. And it's not just a theory that I have. 
It's not just me personally. I mean, let's listen to our own 
Congressional Research Service. They said: ``Credit card issuers could 
respond in a variety of ways,'' speaking of the legislation. They may 
``increase loan rates across the board on all borrowers, making it more 
expensive for both good and delinquent borrowers to use revolving 
credit. Issuers may also increase minimum monthly payments, reduce 
credit limits, or reduce the number of credit cards issued to people 
with impaired credit.'' So it's not my opinion. That's the opinion of 
the Congressional Research Service.
  Now, I'm sure that every Member here has a number of financial 
institutions throughout their congressional districts. I'm proud to 
represent a number of community banks in the Fifth District of Texas. 
It's an informal poll, but I went to three of them--First State Bank in 
Athens, Texas; East Texas National Bank in Palestine; First State Bank 
in Mesquite, Texas--and I asked them what's going to happen if this 
legislation is passed? And what they told me was, you know, at that 
point the cost of these cards to community banks just become so much to 
justify continuing the program, the card portfolio ends up getting sold 
to the big banks and the consumers lose their options in smaller 
markets. That's what we are hearing from community bankers.
  What do we hear from academics? Well, we heard testimony from 
Professor of Law Todd Zywicki at George Mason University: ``Increased 
use of credit cards has been a substitution for other types of consumer 
credit. If these individuals are unable to get access to credit cards, 
experience and empirical evidence indicates that they will turn 
elsewhere for credit such as pawn shops, payday lenders, rent-to-own, 
or even loan sharks.''
  And, indeed, Mr. Chairman, we see this happening in the marketplace 
now. Pick up the newspaper. Recently in the IndyStar, I read: ``More 
Middle Class Families Are Seeking Payday Loans As Financial Turmoil 
Mounts.'' The Boston Globe: ``Tight Credit Drives Consumers Towards 
Pawn Shops.'' As you begin to take away people's credit cards, you send 
them elsewhere.
  And perhaps the most relevant piece of data, Mr. Chairman, is what 
happened in the U.K., in Great Britain, when they passed a similar law. 
They decided credit card default fees were too high, and they ordered 
the credit card issuers to cut them or face legal action. What 
happened? You can look at the record. Two of the three largest issuers 
promptly imposed annual fees on their cardholders. Nineteen of the 
largest raised interest rates. And by one independent estimate, 60 
percent of new applicants were rejected. Those are what I assume to be 
the unintended consequences of this legislation.
  So, Mr. Chairman, as people shoot at credit card companies, and 
there's a number of them that need to be shot at, I hope they don't end 
up wounding hardworking, struggling American families who rely on these 
credit cards to finance their small businesses, to help them with their 
health care needs, to buy groceries. And I know people can go and high-
five each other and say, look, we beat up on the credit card companies 
today. But if you take away risk-based pricing, you're going to take 
credit opportunities away from the people who need it most. And if you 
impose this bill, what you're going to say is to half of America who 
pays their bill on time, well, folks, you're going to have to bail out 
somebody again. You know, we're reaching for your wallet. We're going 
to force you to bail out the people who don't do it right.
  That's not right, Mr. Chairman. It is not fair. And because of that, 
this legislation in its current form needs to be defeated. We need 
disclosure. People need an adequate amount of time to pay off their 
balances if their interest rates or terms change, but we cannot 
restrict in a competitive marketplace the options and opportunities of 
struggling Americans at a time of a great credit crunch when they 
desperately, desperately need access to those credit cards today.
  So I urge defeat of this legislation.
  Mr. GUTIERREZ. I thank Mr. Hensarling for his very kind words. I look 
forward to continue working with him.
  Mr. Chairman, I yield 2 minutes to the gentleman from Texas, a member 
of the subcommittee and of the full committee, a really dynamic member 
of Financial Services.
  Mr. AL GREEN of Texas. I thank the chairman of the full committee, 
Mr. Frank. I thank Mr. Gutierrez, our chairperson of the Financial 
Institutions Subcommittee. I would like to thank the ranking member, 
whom I have a great relationship with and I look forward to working 
with. And I would like to move quickly now to why I am supporting this 
legislation.
  Mr. Chairman, the right time to do right is right now. We do not want 
to allow ourselves to become victims of something known as the 
paralysis of analysis. We have analyzed this bill for years. It is now 
time for us to act.
  It is right for us to do something about retroactive rate increases. 
This bill does something about it. If you have a balance and the rate 
goes up, should the interest rate increase apply to your previous 
balance or should it apply to balances going forward? That's what this 
bill does. It does not allow it to apply to charges that you've already 
made.
  Should a person who is not emancipated, who is younger than 18 years 
of age receive a credit card? I don't think so. This bill prohibits 
this.
  Should persons have adequate notice to deal with rate increases? 
Forty-five days is really not unreasonable if you get a rate increase 
on your credit card. This bill accords 45 days' notice of rate 
increases.
  Should a person have the right to have the payment go to the lowest 
interest rate so as to pay off that rate

[[Page H4964]]

first as opposed to the highest interest rate? Well, I think that we 
ought to let people pay off the highest interest rate so that they can 
make sure that they are not going to have higher bills in the future.
  The right time to do right is right now. Let's not become a victim of 
what's known as the paralysis of analysis. Let's move forward. Let's 
pass this legislation.
  Mr. GUTIERREZ. Mr. Chairman, I now yield 2 minutes to the gentleman 
from Minnesota (Mr. Ellison), who came here to fight for our people 
here.
  Mr. ELLISON. Thank you, Mr. Chairman, for yielding.
  All appropriate thanks being given except for one person who deserves 
special thanks. I believe Congresswoman Maloney must feel like a mother 
giving birth. This bill is phenomenal. I am so incredibly proud to be a 
friend of hers.
  Let me say that I knew that we had a problem in America when my 19-
year-old son, who didn't have a job and was a college student, kept 
getting solicitations for credit cards; but I was quite convinced we 
had a real problem when my 13-year-old son, who did nothing more than 
apply for a Sports Illustrated subscription, started getting credit 
card solicitations.
  I hope some people don't have access to credit, namely my 13-year-old 
son. I hope some people don't get credit cards, people who cannot 
handle credit. But credit card companies have given credit card 
solicitations out all over the country to anyone, and so it's no doubt 
that some people have gotten credit cards who perhaps should not have 
them.
  This legislation is about keeping good credit card companies good. 
Not all credit card companies engage in some of these policies that 
even the Federal Reserve Bank found were deceptive and abusive. Some 
credit card companies didn't engage in universal default; some did.
  This bill sets a basis for an entire industry so that good credit 
card companies never have to be tempted to engage in some of these 
nefarious practices just to stay competitive with companies that do.
  I am happy that at least nine Republicans voted for this bill in 
committee. They understand the wedding of good policy and good 
politics.

                              {time}  1745

  My friends, this bill is popular because it makes sense for the 
American people. And so, from a partisan standpoint, I hope I do see a 
bunch of red up there from the other side of the aisle.
  The fact is that in 2008, credit card issuers imposed $19 billion in 
penalties and fees on families with credit cards. This year the credit 
card companies will break all previous records.
  I am proud to be associated with this legislation.
  Mr. GUTIERREZ. I am delighted to always see members of our leadership 
show up here.
  Congressman Van Hollen of Maryland is recognized for 2 minutes.
  Mr. VAN HOLLEN. Mr. Chairman, this is an opportunity for all of us on 
a bipartisan basis to stand up for consumers around this country.
  I want to recognize the terrific leadership of Congresswoman Carolyn 
Maloney, Barney Frank, Luis Gutierrez and the members of the Finance 
Committee who put this together.
  We all know we are facing uncertain times, and many Americans around 
this country are trying to figure out how they can save, how they can 
plan financially to get through this difficult period. And yet I have 
received lots of calls from constituents in my district who have talked 
about how the abusive and often unpredictable practices of some of the 
credit card companies have made it impossible for them to plan.
  A lot of them have played by the rules for years. They have used 
credit responsibly. Yet now they are being tripped up and surprised by 
unwarranted increases in their credit card fees and in their interest 
rates.
  We all know about the Pew Charitable Trusts report that 93 percent of 
credit cards allow the issuer to raise any interest rate at any time by 
simply changing the terms of the account without adequate notice.
  Other cards allowed the issuer to impose automatic penalty interest 
rate increases on all balances, even in cases when only a portion of 
the account was less than 30 days past due. In fact, 80 percent of the 
cards showed that happened.
  A constituent who called my office recently talked about how his card 
interest rate had been unfairly doubled and that it, quote, materially 
and adversely affected his family's ability to pay down their debt and 
borrow in the future.
  When they contacted the credit card issuer, all they got was no 
details as to why they had been downgraded in their credit, just it 
was, quote, made an adjustment based on economic conditions.
  Another constituent, somebody else who also had been on time and paid 
reliably, saw her interest rate jump from 9.5 percent to 16.99 percent. 
When she contacted the company, she was told ``the current financial 
conditions.'' That's what she was told, not why she saw her interest 
rates go up.
  We have heard reports of credit card companies moving around the due 
dates or holding a payment in order to trigger a late charge. Some 
credit card companies mailed out bill statements close to the due date 
to trip up their consumers.
  Those are the kinds of practices we have got to put an end to. This 
is our opportunity to say to the consumers, we're on their side.
  Mr. GUTIERREZ. I recognize the gentleman from New York, who I enjoy 
working with on Judiciary and also on Financial Services, Mr. Maffei, 
for 2 minutes.
  Mr. MAFFEI. I want to thank Chairman Gutierrez for yielding and for 
all his leadership. I want to thank the chairman of the full committee, 
Barney Frank, as well. And especially I want to thank the former 
chairwoman of the subcommittee, Carolyn Maloney, for her persistence on 
behalf of American families.
  Mr. Chairman, I rise to ask for support of this very important bill, 
because I feel strongly that we must stop the deceptive and unfair 
practices that have taken advantage of honest consumers.
  For too long, credit card issuers have buried important details in 
the fine print or never showed consumers the 30-plus pages contract 
they are signing onto. Credit card issuers then hit consumers with rate 
increases and fees, always with the excuse, well, it's in the contract.
  I am okay with needing a lawyer to close on a house, but regular 
people shouldn't need a lawyer just to get a credit card. We must make 
sure credit cards have fair rules.
  I hear time and again from people in my district who have seen their 
interest rates substantially increased on their credit cards or the 
limits decreased for arbitrary reasons or no reason at all. This is an 
issue that crosses into every part of my district.
  Without fail, someone shares some story each time I am at home. One, 
for instance, is Reverend Aaron Overton of the Temple Baptist Church 
Baldwinsville, New York. He saw his credit card company raise the rate 
on his church's existing balance to more than 36 percent, even though 
he had evidence that his bill was always paid on time. And, believe me, 
this Baptist church showed no risk of default or of running away.
  The Credit Cardholders' Bill of Rights takes important steps to level 
the playing field. It provides that customers receive 45 days' notice 
of an interest rate increase. It institutes commonsense changes, such 
as requiring that every statement display a clear due date.
  Finally, and most important to my constituents, the Credit 
Cardholders' Bill of Rights ensures that companies cannot raise rates 
retroactively on existing balances. Raising rates on preexisting 
balances means that issuers are raising rates on funds already 
disbursed to customers, and that's simply unfair.
  The credit card issuers have taken advantage of American families, 
small businesses and even churches that are too responsible to run away 
or default but too financially strapped to pay off their balance. This 
is unfair at any time. But during a time of recession, it is 
unconscionable.
  This bill of rights for credit cardholders will restore fairness to 
the consumers.
  Mr. GUTIERREZ. If I could inquire of the Chair how much time is 
remaining on each side?

[[Page H4965]]

  The CHAIR. The gentleman from Illinois has 18 minutes remaining. The 
gentleman from Alabama has 8 minutes remaining.
  Mr. GUTIERREZ. I would like to yield 1\1/2\ minutes to someone who 
has a great history of protecting, came here to continue to expand 
protection of consumers, the gentleman from Vermont (Mr. Welch).
  Mr. WELCH. I thank you, Mr. Manager of the bill. I thank Carolyn 
Maloney, the Representative who has provided leadership on this from 
the Financial Services Committee.
  The legislation that is before us is overdue. It does provide basic 
transparency and protection to consumers who had no rights to anything.
  But there are two things that I hope will be part of the future 
debate about protecting consumers. Not in this bill. This bill on its 
own deserves to be passed.
  But those two issues are, one, is it time to consider a cap on 
interest rates? And, number two, is it time to provide protection to 
the merchants, the small businesses?
  I believe it is time to have an interest rate cap. We have 
historically had it until the Supreme Court took those away, but we 
have had caps on interest as far back as the Babylonian times. Commerce 
has succeeded when there have been reasonable interest rate caps.
  It's one thing if somebody gets notice that their interest rate is 
going to go from 8 percent to 38 percent. But it probably shouldn't go 
up to 38 percent and we ought to have a lid.
  Second, there's an argument that the banks are making that this will 
compress credit, making it more difficult to get. The reality is that 
credit is shrinking already because of practices that have been 
excessive.
  Over 8 billion solicitations go out, not just to consumers, but 
sometimes to their pets. There is an alarming parallel between what is 
being done here in credit cards, or what has been done, and what 
happened in the subprime crisis.
  Credit card issuers securitize and pass off their risk to the 
secondary market, pass on the losses by increasing fees on responsible 
users of credit, and they fail to exercise reasonable underwriting 
standards. We have got to change the business model so there is 
responsibility on both sides.
  Mr. GUTIERREZ. I yield an additional 2 minutes to the chief architect 
and sponsor of this bill, the gentlelady from New York (Mrs. Maloney).
  Mrs. MALONEY. I thank the chairman for yielding and for his 
leadership on this important bill in so many areas.
  I would like this time to respond to my good friend and colleague on 
the other side of the aisle, Mr. Bachus, where he pointed out that the 
bill may cause interest rates to rise and credit lines to be cut.
  But what we are hearing now, interest rates are rising and credit 
lines are being cut, and we don't have the bill in place. In fact, what 
we are hearing from many people on this floor, and what we hear when we 
go home to our districts, that oftentimes when you pay on time and do 
not go over your limit, interest rates can go up, and it's totally 
legal.
  I have talked to constituents and others who have told me that their 
rates have doubled. They have called the issuers, and they don't even 
have to give them a reason. Because, now, in the very fine print, they 
can raise the rates any time, any reason, retroactively on existing 
balances.
  One astonishing hearing was when the head of Freddie Mac, Syron, 
testified before our Financial Services Committee, and he said that he 
and his wife read the credit card contract fine print for hours and 
could not figure out what it said. The Federal Reserve also came 
forward and said that Reg Z or disclosure was not enough. They said the 
practices were unfair and deceptive and misleading, that the average 
citizen, like the chairman of Freddie Mac, could not even understand 
what was in the fine print.
  This bill really is very balanced and fair and allows consumers to 
have notice when interest rates are going up. They have 45 days' 
notice, so they can decide whether they want to opt into this higher 
rate or go to another card that has a lower rate and pay off their 
balance. This will put competition into the system, and, I believe, 
lower rates.
  I wanted to respond to the gentleman on the other side of the aisle. 
In good times and in bad times, the issuers have been opposed to this 
legislation, and we need it now. We are in bad times. Consumers need 
protection.
  Mr. GUTIERREZ. Mr. Chairman, in continuing our agreement, I am going 
to yield myself 5 minutes. That will put us at about the same amount of 
time on each side of the aisle.
  Mr. Chairman, first of all, let me rise in strong support of H.R. 
627, the Credit Cardholders' Bill of Rights Act of 2009.
  Let me once again thank the gentlelady from New York, Congresswoman 
Maloney, for her tireless effort and work on defending consumers. I 
can't think of a better legislative product that I could have as 
chairman of the Subcommittee on Financial Institutions to bring before 
this House of Representatives than the bill that the gentlelady has 
worked so tirelessly on over many, many years. I am delighted that I 
got this opportunity and it's, indeed, a great privilege.
  We have more than 640 million credit cards in circulation that 
account for an estimated $1.5 trillion of consumer spending. Clearly 
the U.S. economy has gone plastic.
  I mean, you have been around. Nobody takes out a checking account 
anymore. Nobody sticks their hand in their pocket and brings out cash. 
We have become a credit card economy and society.
  But America's love affair with credit cards comes with a hefty price. 
The average credit card debt among American households has more than 
doubled during the last 10 years. Today the average family owes roughly 
$8,000, Mr. Chairman, on credit cards. The debt has helped generate 
record profits for the credit card industry.
  Unfortunately, a growing share of the industry's revenues don't come 
because you took $200 at 10 percent, but come because the industry's 
revenues come from deceptive practices such as universal default terms 
spelled out in very fine print.
  As a matter of fact, we now know that even the Federal Reserve Board 
when they evaluated this situation said, listen. I want the American 
people to understand that it isn't that they aren't smart, it isn't 
they can't read, it isn't that somehow they didn't get schooled well. 
Look, these things are designed to be deceptive. They are designed to 
trick you.
  And so you get tricked, you get fooled. That's what we are here for, 
to make sure it no longer happens. And that has been independently 
confirmed. That's the way they do it. That's the magic of what they do. 
And kind of the recipe here is to make sure there is a level playing 
field, and that's what this thing does.
  The terms and conditions can be changed. Not only is there fine 
print, but then they can change it with 15 days' notice at any time for 
any reason.
  According to a recent Pew study, 100 percent of 400 types of credit 
cards that they reviewed contained in its terms at least one practice 
that has been found, not by the Democrats, not by the Republicans, not 
by the Obama administration, but by the Federal Reserve to be unfair 
and deceptive. And 93 percent of the cards studied allowed for any 
time, any reason, repricing, allowing an issuer to hike the APR on a 
consumer's credit card even if they never missed a payment.
  So I wanted everybody to understand we are not talking about people 
who are late with their credit card bills, not paying late. They are 
not somehow scofflaws. These are people who every month paid on time, 
get it in to the credit card company, and they are still increasing 
their interest rate.
  In 2008, the House passed the Credit Cardholders' Bill of Rights by a 
vote of 312-112, but it was unfortunately not signed into law. This 
year, once again, under the leadership of Representative Carolyn 
Maloney, we have taken up H.R. 627, which appropriately carries the 
name of its predecessor, and it has moved swiftly to the floor for 
final passage.

                              {time}  1800

  We must pass this legislation once again. Americans are suffering 
from rising unemployment rates, dramatically falling household wealth 
and declining real wages. I want to say that again. Americans are 
suffering from rising unemployment rates, dramatically falling 
household wealth and declining real wages, all of which makes

[[Page H4966]]

it harder for them to pay off their credit card debt. It makes it 
harder, more difficult.
  If there was ever a time for the Congress of the United States to 
step up and defend consumers, it is now. We are in an economic crisis 
and meltdown. Unemployment, millions of people are unemployed, and 
probably hundreds of thousands more will continue to be unemployed.
  Look, all we are saying is we did a lot for the banks. Everybody 
knows that. When they were in tough shape, we did a lot for them. Can't 
we do a little bit for the consumer, for the person who has to 
tirelessly work at these jobs, and their wages are going down and their 
health care benefits are going down and everything around them seems to 
be just causing more and more anguish and suffering? That is what I 
hear from the American people.
  The CHAIRMAN. The time of the gentleman has expired.
  Mr. GUTIERREZ. I yield myself an additional minute, Mr. Chairman.
  So we have to pass this.
  Let me just end with this. Look, I understand that we don't want to 
restrict credit. We want people to have it. But, golly, if I go take a 
loan at 10 percent, and then all of a sudden they charge me 20 percent 
on the same money I took at 10 percent, that is wrong. That is just 
wrong. Nobody should be able to change the terms.
  This is America, right? You shake hands, you make an agreement, you 
say this is how much you are going to pay on that $100. But we know the 
credit card companies are not doing that. As a matter of fact, what 
they do is they say, you know, Luis, that $1,000 you took at 10 
percent? I am not only going to charge you 20 percent on it, but, you 
know what? I am going to go back two or three months retroactively and 
charge you the 20 percent on that money.
  That is wrong. And it is wrong when you pick up a telephone and you 
say, listen, I just got my bill, but it is 3 days before it is due. Can 
I pay you over the phone? And they tell you yes, for 15 or 20 bucks.
  The CHAIRMAN. The time of the gentleman has again expired.
  Mr. GUTIERREZ. I yield myself 30 additional seconds.
  I will end with this. How many people in America haven't picked up 
the phone to complain to a credit card company, and if you get a little 
testy with them, which I have because they angered me, and I say, can 
you please explain this to me, they go click.
  Well, you know what we are doing today? We are going ``click'' right 
back to the credit card companies, except this time we are hanging up 
the phone on abusive practices here in America against the American 
consumer.
  Mr. Chairman, I rise in strong support of H.R. 627, the ``Credit 
Cardholders' Bill of Rights Act of 2009.''
  With more than 640 million credit cards in circulation that account 
for an estimated $1.5 trillion of consumer spending, the U.S. economy 
has clearly gone plastic. But America's love affair with credit cards 
comes with a hefty price. The average credit card debt among American 
households has more than doubled over the past decade. Today, the 
average family owes roughly $8,000 on their credit cards. This debt has 
helped generate record profits for the credit card industry.
  Unfortunately, a growing share of the industry's revenues come from 
deceptive tactics, such as universal default terms spelled out in the 
fine print of cardholder agreements--the terms and conditions of which 
can be changed at any time for any reason with 15 days' notice or less.
  According to a recent Pew study, 100 percent of the 400 types of 
credit cards they reviewed contained in its terms at least one of the 
practices that have been found by the Federal Reserve to be unfair and 
deceptive. And 93 percent of the cards studied by Pew allowed for any-
time, any-reason repricing, allowing an issuer to hike up the APR on a 
consumer's credit card even if they've never missed a payment.
  In 2008, the House passed the Credit Cardholders' Bill of Rights by a 
vote of 312-112 but it unfortunately was not signed into law. This 
year, once again under the leadership of Representative Carolyn 
Maloney, we have taken up H.R. 627, which appropriately carries the 
name of its predecessor, and moved it swiftly to the floor for final 
passage.
  We must pass this legislation once again. Today, Americans are 
suffering from rising unemployment rates, dramatically falling 
household wealth and declining real wages, all of which make it harder 
for consumers to pay off credit card debt. In fact, in 2008, we saw the 
percentage of accounts 30 days past due rise to an all-time high of 5.6 
percent. On average, American families owe 24 percent of their income 
in credit card debt.
  These are daunting figures in an unstable time, but Congress can and 
must do something about it, by making sure that unfair credit card 
practices and fees do not deter consumers from paying down their debt. 
The Federal Reserve has mandated new regulations that mirror many of 
the protections included in H.R. 627. I applaud the Board for its work 
on the UDAP and Regulation Z changes, but I believe that this Congress 
should codify these important consumer protections to send the message 
to the industry and consumers that Congress is serious about standing 
up for consumer rights.
  H.R. 627 would level the playing field between card issuers and 
cardholders by applying commonsense regulations that would ban 
retroactive interest rate hikes on existing balances, double-cycle 
billing, and due-date gimmicks. It would also increase the advance 
notice of impending rate hikes, giving cardholders the information and 
rights they need to make decisions about their financial lives.
  I urge my colleagues to support this important consumer protection 
bill.
  Mr. BACHUS. Mr. Chairman, at this time I yield 4 minutes to the 
gentleman from Texas (Mr. Hensarling).
  Mr. HENSARLING. Mr. Chairman, I was listening very carefully to my 
colleagues on the other side of the aisle, and, again, I want to say I 
believe every person in this Chamber would agree that there are 
misleading and deceptive practices with credit card companies. I have 
congratulated the gentlelady from New York for that title in her bill 
that would provide effective disclosure. Consumers need it, they demand 
it, and they are not receiving it.
  But in taking one step forward, her legislation, unfortunately, 
probably takes 10 steps backwards. And ultimately what is unfair, what 
is unfair, Mr. Chairman, is in a time of a credit contraction to reach 
into people's wallets and take their credit cards away. Ultimately, 
that is what this legislation will do. Regardless of its noble 
intentions, that is what the legislation will do.
  It is not just theory I have. It is history. We have seen similar 
legislation enacted in Great Britain, and that was the impact.
  Now, I have heard in the context of the debate on the budget 
colleague after colleague on the Democratic side of the aisle decry 
budget deficits. ``The budget deficit is horrible.'' Well, it was $160 
billion when they took it over, and now it is going to $1.8 trillion. 
They increased it 10-fold.
  Now I hear Democratic colleague after Democratic colleague lament the 
credit contraction. Yes, there is a credit contraction. Why do you want 
to worsen it? Why do you want to exacerbate it? And when you engage in 
forms of price controls, and you may come up with all kinds of 
different names for it, but if you are going to restrict fees for 
people who pay their bills late--they need to be disclosed, people need 
an opportunity to pay off their bills--but ultimately in a free market, 
people ought to have consumer choice and they ought to be able even 
with a checkered credit past to get credit.
  People are counting on these credit cards. Risk-based pricing. You 
are taking tools away from those who use it and you are leading to two 
consequences. Either, number one, half of America is paying their bill 
on time and you are going to force them through this legislation to 
bail out the portion of America that doesn't; and for those who are 
struggling, you are going to deny them credit card options.
  People need these credit cards for their small business. They need it 
for personal items. I hear from the people in my district. I hear from 
the Vehon family of Rowlett, who said, ``We were laid off from our jobs 
at the same time,'' the gentleman talking about himself and his wife. 
``We moved into our first home together in July of that year. Needless 
to say, the layoff was quite a shock, and without access to our credit 
cards at the time, frankly, I don't know what we would have done.'' And 
yet the legislation before us could take away the credit cards of the 
Vehon family of Rowlett.
  I heard from the Howard family of Canton. ``My wife and I use our 
credit cards, at times, to pay for medical-related bills. My wife has a 
heart condition, which between her medical bills and mine we spend out-
of-pocket

[[Page H4967]]

$18,000. And yes we had to put some of that cost on credit cards.''
  I heard from the Juarez family in Mesquite. ``I oppose this 
legislation. I have utilized my credit cards to pay for some costly 
oral surgeries. I don't want to get penalized by this legislation for 
making my payments on time.''
  Let's not penalize the people that are doing it right. Let's not 
penalize the people who desperately need credit in a credit 
contraction. We need disclosure. We need adequate time to pay off 
bills. But don't take away credit in a credit contraction.
  Mr. GUTIERREZ. Mr. Chairman, I yield 2 minutes to the gentleman from 
Minnesota (Mr. Ellison).
  Mr. ELLISON. Mr. Chairman, don't believe that unless this Congress 
allows some credit card companies to abuse consumers, that no one will 
have credit. It is just not true. Don't believe that if we say no to 
double cycle billing, no to switching due dates around at random and 
arbitrary times, no to giving credit cards to minors, if we say no to 
these kind of practices, it will not drive out credit in America. It is 
nothing but fear-based stuff that will allow credit card companies, 
that have made record profits, to continue to take advantage of 
American consumers.
  The Democrats, and many Republicans as well, are joining together to 
say we are on the side of the American consumer. Vote no to this bill 
at your own peril. The fact is that with the confusing disclosures that 
the gentleman from Texas has accurately said are present, this bill 
says those things are wrong. We ask everyone to join with us to say the 
provisions that allow these confusing disclosures should be stopped. We 
ask everyone in this Chamber to say no to this.
  The fact is, Mr. Chairman, if we don't do something to protect the 
American consumer, we are abdicating our responsibility as stewards of 
this sacred trust of being a Member of Congress. This is the time to do 
something for the American consumer.
  Mr. GUTIERREZ. I yield 2 additional minutes to the gentlelady from 
New York (Mrs. Maloney).
  Mrs. MALONEY. Mr. Chairman, I thank the gentleman for yielding and 
would like to respond to some of the statements that my good friend on 
the other side of the aisle made.
  He mentioned the Great Britain example, but in the Great Britain 
example there were fee caps and interest rate caps. The Credit Card 
Bill of Rights does not have any caps on fees or interest rates. It 
merely gives information to consumers to better manage their credit and 
make decisions of how they would better manage their credit.
  He gave the example that he did not want interest going up on 
consumers who are paying their cards on time and not going over the 
limit. Precisely what this bill does is protect those consumers from 
rate increases, any time, any reason, even when they have done 
everything right. It is totally, totally unfair.
  And there is absolutely no penalty in this bill for anyone doing the 
right thing. If anything, it protects them from unfair and deceptive 
practices that could hinder and raise their interest rates.
  He mentioned that he would like more choice, but that is basically 
one of the main goals of the bill. This bill is not a bill that takes 
away consumer choice or infringes on anyone's rights. It simply says it 
is not right to be deceptive, to be unfair or to engage in anti-
competitive practices.
  I would caution my friends on the other side of the aisle that voting 
against this bill is a rare opportunity to vote against the Federal 
Reserve, the body with the responsibility of safety and soundness in 
our financial institutions. They have come out in support of this bill 
with a rule that mirrors it to a great degree. The major points of this 
bill are encompassed in the Federal rule.
  This is a bill that protects our consumers and has been endorsed by 
many editorial boards and consumer groups across the country.
  Mr. BACHUS. Mr. Chairman, I yield myself the balance of my time.
  Let me be very clear again. This bill, we requested the Congressional 
Research Service to analyze the bill, and they came out, and I am going 
to introduce this, with about 18 things that this bill does. Fifteen of 
those things, including probably what we spent 90 percent of our time 
on here today, the Federal Reserve required in their announcement. 
There are four provisions in this bill that are not in the Federal 
Reserve bill.
  Let me tell you, raising interest rates, we are all against that. The 
Fed says you can't do it without good reason, and it strictly defines 
the reason. There is something you hadn't mentioned that the Fed does. 
It says if you have got a higher interest rate on certain payments and 
a lower interest rate on another, you have to either direct the payment 
at the higher interest rate, and your bill does too, or prorate it, 
which is fair.
  Look, the American people are upset. You are absolutely right. Credit 
card companies haven't played by the rules. A lot of them have. Some of 
them haven't. But that is really not a difference of opinion, because 
we have the Federal Reserve saying you can't do it.
  Now, here are the things that the Federal Reserve doesn't do that 
your bill does. Your bill says if the outstanding balance on the credit 
card consists only of accrued interest, and it could be several hundred 
dollars, then no fee may be imposed in connection with such balance, 
and the failure to make timely repayments on the balance shall not 
constitute a default.
  Now, I don't understand that. Somebody owes $600 or $700, they are 
not paying on the bill, but it is not considered a default? Well, what 
is it? What is it?

                              {time}  1815

  Here's another one. And I think there is a real difference of opinion 
about this because we have gone round and round on this one. It 
prohibits a creditor from informing a credit bureau that they've opened 
a credit card with a, say, $10,000 limit on a customer until such time 
as the customer uses that credit card, makes a charge against it.
  Now, let me tell you what I have a real problem with. What if 
somebody goes out and, hey, we've seen outrageous schemes perpetrated 
on the American people by some real crafty individuals, as well as 
firms? What if you went out and you got 10 credit cards for $10,000 
apiece, you didn't draw against any of them, you kept getting them, and 
I'm a community bank and I give you a 5 or $10,000 line of credit, and 
I have no idea that you've opened up 10 just like it? You borrow the 
money, and you walk away with $100,000. Now, that can happen. That's 
why the Fed looked at this and said, whoa, no way.
  Now, here's the third one. Look, I've got five children, and I am 
just like the gentleman from Chicago. These credit card offers amaze 
me. But honest difference of opinion. What you say here is if you're 
under 18 years old, unless you've been emancipated by the State you're 
a resident of, you can't get a credit card. I don't think that's the 
right way to do it. I don't think that's right, because, let me tell 
you, there are 16- and 17-year-olds in this country that they've been 
cut off by their parents. They've been abused by their parents. They're 
out there working, and they're going to need this.
  So those are some differences of opinions we have. But I will tell 
you this: Most of what you do, and I commend you, what you have been 
proposing for years, and some of us on our side, is that the Federal 
Reserve is addressed.
  But as I said to start with, I never imply that we don't have sincere 
differences on some of these points.


                               Congressional Research Service,

                                   Washington, DC, March 26, 2009.


                              memordandum

     To: House Financial Services Committee
     From: Mark Jickling, Specialist in Financial Economics, 7-
         7784.
     Subject: Comparison of H.R. 627 and the Federal Reserve's 
         Credit Card Regulations.

       This memorandum provides the comparison you requested 
     between H.R. 627, the Credit Cardholders' Bill of Rights Act 
     of 2009, and the credit card regulations adopted by the 
     Federal Reserve in December 2008. The table below sets out 
     the provisions of the bill and the comparable provisions in 
     the regulations.
       The Fed's credit card regulations involve amendments to its 
     Regulation AA (Unfair Acts or Practices) and Regulation Z 
     (Truth in Lending). The Fed also issued rules related to 
     overdrafts on deposit accounts and returned checks by 
     amending Regulation DD (Truth in Savings). The latter set of 
     rules do not apply specifically to credit cards and are not 
     included in the table. The texts of the final rules, as 
     printed in the Federal Register, are online: 
     [www.federalreserve.gov/newsevents/press/bcreg/
20081218a.htm]

[[Page H4968]]



TABLE I.--COMPARISON OF H.R. 627 AND THE FEDERAL RESERVE'S DECEMBER 2008
                            CREDIT CARD RULES
------------------------------------------------------------------------
                                     H.R. 627--as       Federal Reserve
              Issue                   introduced          regulations
------------------------------------------------------------------------
Universal Default Clauses.......  Amends the Truth    See below
                                   in Lending Act      (``Increasing
                                   (TILA) to           Rates on
                                   prohibit            Outstanding
                                   creditors from      Balances'')
                                   raising interest
                                   rates on an
                                   existing balance
                                   of a credit card
                                   account except
                                   for specified
                                   causes (see
                                   below). Also
                                   prohibits
                                   imposition of
                                   fees in lieu of a
                                   rate increase on
                                   an existing
                                   balance. (Sec.
                                   2(a)).
Raising Interest Rates..........  Interest rates on   Requires banks, at
                                   existing credit     the time an
                                   card balances may   account is
                                   not be increased,   opened, to
                                   unless the          disclose all
                                   increase is         interest rates
                                   solely due to (1)   that will apply
                                   a change in a       to the account.
                                   published index     Banks may not
                                   not under the       increase those
                                   creditor's          rates, except
                                   control, (2) the    under certain
                                   expiration or       conditions: (1)
                                   loss of a           if a promotional
                                   promotional rate;   rate expires, the
                                   or (3) the          rate may rise to
                                   consumer's          a higher,
                                   minimum payment     previously-
                                   being at least 30   disclosed level;
                                   days overdue. In    (2) rates may
                                   the case of         rise in a
                                   expiration of a     variable rate
                                   promotional rate,   account if the
                                   the new rate may    rate is linked to
                                   not exceed the      an index; (3)
                                   rate that would     after one year,
                                   have applied        banks may raise
                                   under the terms     rates for new
                                   of the agreement    balances after
                                   after expiration    giving 45 days
                                   of the              advance notice;
                                   promotional rate.   and (4) rates may
                                   (Sec. 2(b)).        increase if a
                                                       minimum payment
                                                       is received more
                                                       than 30 days
                                                       after the due
                                                       date. (Reg. AA)
Repayment of Existing Balances..  If a creditor       When different
                                   raises rates, but   interest rates
                                   the higher rate     apply to
                                   does not apply to   different
                                   an existing         balances in a
                                   balance, the        credit card
                                   creditor must       account, banks
                                   offer a 5-year      must allocate
                                   amortization        payments in
                                   period for          excess of the
                                   repayment of the    monthly minimum
                                   existing balance,   to the balance
                                   and may not         with the highest
                                   increase the        rate, or divide
                                   percentage of the   the excess
                                   existing balance    payment among all
                                   included in the     balances on a pro
                                   minimum payment     rata basis. (Reg.
                                   by more than        AA)
                                   double. (Sec.
                                   2(a)).
Advance Notice of Credit Card     Requires creditors  Consumers must be
 Rate Increases.                   to provide          given written
                                   written notice at   notice of an
                                   least 45 days       interest rate
                                   before any rate     increase at least
                                   increase takes      45 days before
                                   effect. The         the higher rate
                                   notice must         takes effect.
                                   describe in a       This includes
                                   complete and        rate increases
                                   conspicuous         stemming from
                                   manner the change   default,
                                   in the rate and     delinquency, or a
                                   the extent to       penalty. Change-
                                   which such          in-terms or
                                   increase will       penalty rate
                                   apply to an         notices must
                                   existing balance.   include a summary
                                   (Sec. 2(c)).        table setting out
                                                       the key terms
                                                       being changed.
                                                       (Reg. Z)
Double-Cycle Billing............  Prohibits double-   Prohibits banks
                                   cycle billing, or   from imposing
                                   finance charges     interest charges
                                   on balances on a    using the ``two-
                                   credit card         cycle'' billing
                                   account that are    method. (Interest
                                   based on days in    charges may not
                                   billing cycles      be calculated
                                   preceding the       using the account
                                   most recent such    balance for days
                                   cycle. Exceptions   in the previous
                                   are provided for    billing cycle.)
                                   deferred interest   Exceptions are
                                   that may have       provided for
                                   accrued over        deferred interest
                                   several billing     that may have
                                   cycles, and for     accrued over
                                   adjustment of       several billing
                                   finance charges     cycles, and for
                                   following           adjustment of
                                   resolution of a     finance charges
                                   billing dispute.    following
                                   (Sec. 3(a)).        resolution of a
                                                       billing dispute.
                                                       (Reg. AA)
Account Balances Attributable     If the outstanding  No comparable
 Only to Accrued Interest.         balance on a        provision.
                                   credit card
                                   account consists
                                   only of accrued
                                   interest to
                                   previously-repaid
                                   credit, no fee
                                   may be imposed in
                                   connection with
                                   such a balance,
                                   and failure to
                                   make timely
                                   repayments on
                                   such a balance
                                   shall not
                                   constitute a
                                   default on the
                                   account. (Sec.
                                   3(b)).
Periodic Account Statement        Each periodic       Mandates new
 Disclosures.                      credit card         formats to
                                   account statement   clarify required
                                   shall contain a     disclosures, for
                                   telephone number,   example, by
                                   Internet address,   grouping fees and
                                   and web site at     charges together.
                                   which the           Both monthly and
                                   consumer may        year-to-date
                                   request the         totals for fees
                                   payoff balance on   and interest
                                   the account.        charges are
                                   (Sec. 3(c)).        required. The
                                                       effect of making
                                                       only the minimum
                                                       payment must also
                                                       be disclosed.
                                                       (Reg. Z)
Right to Cancel Account Before    Prohibits           No comparable
 First Notice of Open Account      creditors from      provision.
 Provided to Credit Bureau.        providing
                                   information about
                                   a credit card
                                   account to a
                                   consumer
                                   reporting agency
                                   (credit bureau)
                                   until the
                                   consumer has used
                                   or activated the
                                   card. Permits a
                                   creditor to
                                   furnish
                                   information about
                                   an application
                                   for a credit card
                                   account or any
                                   inquiry about
                                   such account to a
                                   consumer
                                   reporting agency.
                                   (Sec. 3(d)).
Use of Certain Terms Describing   Specifies the way   Advertising may
 Interest Rates.                   certain terms may   use the term
                                   be used. ``Fixed    ``fixed rate''
                                   rate'' may only     only if the rate
                                   refer to a rate     cannot be
                                   that may not        increased for any
                                   change for any      reason during a
                                   reason over a       specified time
                                   specified time      period. If no
                                   period. The term    time period is
                                   ``prime rate''      specified, the
                                   must not be used    rate may not
                                   to describe a       increase for any
                                   rate other than     reason as long as
                                   the rate            the account is
                                   published in        open. (Reg. Z)
                                   Federal Reserve
                                   statistical
                                   releases. (Sec.
                                   3(e)).
Due Dates and Timely Payments...  Payments received   Banks may not
                                   by 5 p.m. (local    treat a payment
                                   time) on the due    as late unless
                                   date must be        the consumer has
                                   considered          been given a
                                   timely;             reasonable amount
                                   electronic          of time to make
                                   payments received   that payment. The
                                   by 5 p.m. must be   ``reasonable''
                                   credited to the     standard will be
                                   consumer's          met if banks mail
                                   account the same    statements at
                                   day; and evidence   least 21 days
                                   that a payment      before payment is
                                   was mailed 7 days   due. (Reg. AA)
                                   before the due     Mailed payments
                                   date creates a      received by 5
                                   presumption of      p.m. shall be
                                   timely payment.     considered
                                   (Sec. 3(e)).        timely. If
                                                       payments are not
                                                       accepted on the
                                                       due date (if it
                                                       falls on a
                                                       weekend or
                                                       holiday), payment
                                                       received the next
                                                       business day must
                                                       be considered
                                                       timely. (Reg. Z)
Pro Rata Payment Allocations....  If the balance of   When different
                                   a credit card       interest rates
                                   account is          apply to
                                   charged 2 or more   different
                                   different           balances in a
                                   interest rates      credit card
                                   (e.g., separate     account, banks
                                   rates for cash      must allocate
                                   advances and        payments in
                                   purchases), the     excess of the
                                   creditor may not    monthly minimum
                                   allocate more       to the balance
                                   than a pro rata     with the highest
                                   share of a          rate, or divide
                                   consumer's          the excess
                                   payment to the      payment among all
                                   part of the         balances on a pro
                                   outstanding         rata basis. (Reg.
                                   balance carrying    AA)
                                   the lowest
                                   interest rate. In
                                   the case of an
                                   outstanding
                                   balance subject
                                   to a promotional
                                   rate, other
                                   balances must be
                                   paid in full
                                   before payment
                                   (in excess of the
                                   minimum payment)
                                   is allocated to
                                   that balance. In
                                   addition, a
                                   creditor may
                                   allocate the
                                   entire amount
                                   paid to a balance
                                   on which interest
                                   has been deferred
                                   for the past 2
                                   billing cycles.
                                   (Sec. 3(f)).
Prohibition on Restricted Grace   If a creditor       No comparable
 Periods.                          offers              provision.
                                   cardholders a
                                   grace period
                                   within which to
                                   pay in full and
                                   not incur finance
                                   charges, that
                                   grace period must
                                   be available to
                                   cardholders who
                                   receive a
                                   promotional rate
                                   or deferred
                                   interest plan.
                                   (Sec. 3(f)).
Timely Provision of Periodic      Creditors must      Banks may not
 Account Statements.               send consumers      treat a payment
                                   periodic account    as late unless
                                   statements not      the consumer has
                                   less than 25        been given a
                                   calendar days       reasonable amount
                                   before the due      of time to make
                                   date. (Under        that payment. The
                                   TILA, the current   ``reasonable''
                                   standard is 14      standard will be
                                   days.) (Sec.        met if banks mail
                                   3(g)).              statements at
                                                       least 21 days
                                                       before payment is
                                                       due. (Reg. AA)
Consumer Choice Regarding         If a credit card    No comparable
 Overthe-limit Transactions, and   plan has a credit   provisions. (A
 Limits on Related Fees.           limit, and fees     provision
                                   are charged for     regarding holds
                                   exceeding that      on accounts that
                                   limit, consumers    cause an account
                                   would be able to    to go over-the-
                                   prevent the         limit was part of
                                   creditor from       the proposed
                                   completing any      regulations, but
                                   transaction that    was not adopted
                                   would exceed the    in the final
                                   limit. (Federal     rules. See:
                                   Reserve would       Federal Register,
                                   issue regulations   Jan. 29, 2009, p.
                                   to provide for      5505.)
                                   certain de
                                   minimis
                                   exceptions.)
                                   Consumers must
                                   receive annual
                                   notification of
                                   their right to
                                   opt-out of such
                                   fee-incurring
                                   transactions.
                                   Over-the-limit
                                   fees may be
                                   imposed only once
                                   over the two
                                   billing cycles
                                   following the
                                   transaction that
                                   exceeded the
                                   credit limit. An
                                   over-the-limit
                                   fee due to a hold
                                   may not be
                                   imposed unless
                                   the actual
                                   transaction for
                                   which the hold
                                   was placed would
                                   have resulted in
                                   the consumer
                                   exceeding the
                                   credit limit.
                                   (Sec. 4).
Information Collection Regarding  Directs the         No comparable
 Credit Card Lending.              Federal Reserve     provision.
                                   to collect
                                   semiannual data
                                   on the types of
                                   transactions for
                                   which different
                                   rates are
                                   charged, the
                                   various types of
                                   fees, the number
                                   of cardholders
                                   who pay fees,
                                   finance charges,
                                   or interest, and
                                   other matters.
                                   The Fed shall
                                   report annually
                                   to Congress on
                                   the amount of
                                   credit card
                                   lenders' income
                                   derived from:
                                   interest paid at
                                   above and below
                                   25%; fees from
                                   cardholders and
                                   merchants; and
                                   other material
                                   sources of
                                   income. (Sec. 5).
Subprime or ``Fee Harvester''     For cards whose     Banks are
 Cards.                            annual fees         prohibited from
                                   exceed 25% of the   providing
                                   credit limit, no    financing for
                                   payment of any      security deposits
                                   fees (other than    and fees (such as
                                   late fees or over-  account-opening
                                   the-limit fees)     or membership
                                   may be made from    fees) if charges
                                   the credit made     during the first
                                   available by the    12 months would
                                   card. (Sec. 6).     exceed 50% of the
                                                       initial credit
                                                       limit. Such fees
                                                       and deposits
                                                       charged at the
                                                       time the account
                                                       is opened may not
                                                       exceed 25% of the
                                                       credit limit. Any
                                                       additional fees
                                                       (up to 50%) must
                                                       be spread over at
                                                       least 5 billing
                                                       periods. (Reg.
                                                       AA)
Underage Consumers..............  Prohibits the       No comparable
                                   issuing of credit   provision.
                                   cards to
                                   consumers less
                                   than 18 years
                                   old, except to
                                   consumers who are
                                   emancipated under
                                   applicable state
                                   law. (Sec. 7).
Applications and Solicitations..  No provision......  Modifies required
                                                       disclosures as to
                                                       format and
                                                       content. For
                                                       example, key
                                                       terms must be
                                                       more clearly
                                                       displayed, and
                                                       new disclosures
                                                       are required
                                                       about penalty
                                                       rates, grace
                                                       periods, and
                                                       variable rates.
                                                       (Reg. Z)
Effective Date..................  3 months after      July I, 2010
                                   enactment. (Sec.
                                   8).
------------------------------------------------------------------------

  Mr. GUTIERREZ. I yield myself the balance of my time.
  Well, let me first of all say, I look forward to continuing working 
with the ranking member of the full committee, Spencer Bachus. We have, 
indeed a great, I think, friendship. And we have a difference of 
opinion. That's what it is. And in America you can do that. That's part 
of what makes this the best Nation in the world.
  And I look forward to continuing our discussion with Mr. Hensarling. 
We may not agree, but we will agree not to be disagreeable or attack 
each other personally or question our motives about what we do and why 
we do it because, for me, the bill does not equate to price controls. 
And I think a lot of America, listening to my friends on the other side 
of the aisle, think there's price controls here. There are none. There 
is no limit in this bill on the interest rate that you can charge. None 
whatsoever. Free market.
  Rather, what the bill does is it brings transparency. It brings 
openness to the credit card marketplace. What could be better than to 
shine daylight on any product? Because then the consumers know what 
they're getting and what they're not getting and they can say, no, I 
don't want that, or, yes, I do want that.
  Transparency promotes competitiveness in the marketplace, which will 
eventually bring prices down. If you know what the price of something 
is at Store X and Y and Z, you're going to go where you can get the 
best deal because that's what Americans do. That's what this bill 
really does.
  What this bill does is it tells the consumers and the credit card 
issuers,

[[Page H4969]]

honor your contract. Here's the contract. You told me it was 10, you 
told me it was 15, you told me it was 20 percent. You can't change it.
  Under existing law, issuers can change the contract terms in the 
middle of the game. And what do they leave consumers with? As we know, 
we have a constricting credit, with nothing but to pay the higher 
interest rate.
  You know, I want to tell the American people that right now, credit 
card companies can issue cards to 14-, 15-, 16-year-olds that are not 
emancipated. Now, who's going to pay those credit card bills? Mommy, 
Daddy, that's who's going to pay them. We all know that. Who's going to 
leave their kids out there? No one is. All good parents are going to 
say, well, that's my child, my son. I'm responsible for my daughter. 
I'm responsible. And the credit card companies know it. They know it. I 
don't know this to be a fact, but I'm sure they're checking into just 
what your credit ability is, and they say, well, Daddy can pay. Mother 
can pay. Let's give the child.
  And listen, I want to make one thing clear. Even though the bill says 
18, you know, emancipation, come on. In America, what 18-year-old is 
emancipated? You're not emancipated. They're 19, 20, 21, 22, and nobody 
throws their kids out of the house. Everybody keeps them and cherishes 
them and nurtures them and continues. Credit card companies know that, 
too, when they're issuing credit cards.
  College students, you're paying tuition. You're paying for their room 
and board. You're paying for their health care. You're paying for their 
clothes, and then they send them a credit card to undermine your 
ability to give your child a college education.
  And listen, everywhere you go in America, you want to buy clothes? 
Take a credit card. You want to fix your car? Got a credit card for 
you. Want to go buy a refrigerator? Take it on a credit card. Everybody 
offers you. So what we have is an economy that's on credit card basis. 
So all we're saying is, hey, since this has been promoted so much, 
let's make sure that we do this.
  And listen, I remember when I didn't make $174,000 as a Member of 
Congress. I remember when I lived paycheck to paycheck. I remember when 
the credit card companies would increase the interest rate or tell me, 
Mr. Gutierrez, through no fault of your own, we're not going to extend 
you any more credit. Pay down your bill at this credit interest rate 
higher than the one you took it out. I remember. Maybe we should all go 
back to remembering when things weren't so rosy in our own personal 
lives in terms of being Members of Congress and put ourselves in the 
position of people who live paycheck to paycheck. If we do that 
tomorrow, I think what we're going to do is we're going to stand on the 
side of consumers.
  As Mr. Bachus says, consumers are angry. The American public is 
frustrated. They're outraged by what credit card companies are doing.
  Ms. LINDA T. SANCHEZ of California. Mr. Chair, I rise in strong 
support of H.R. 627, the Credit Cardholders Bill of Rights Act.
  I'd like to thank Congresswoman Maloney for her work on this issue. 
She has been a longtime champion of credit card reform and I 
wholeheartedly support her efforts.
  The Credit Cardholders Bill of Rights Act could not be more timely. 
The constant stress of mounting bills in the face of skyrocketing 
unemployment and a foreclosure epidemic has American families caught 
between a rock and a bigger rock.
  More and more working families have been forced to rely on credit 
cards to cover basic living expenses. The least we can do is make sure 
the credit card issuers are fair, open, and honest about rates and 
terms.
  For decades, credit card companies have been allowed to operate under 
special rules that, under any other circumstances, would be considered 
outlandish.
  Take for instance the credit card industry's ability to raise an 
unsuspecting cardholder's interest rate because he was one day late 
paying a different card belonging to a different company. Where else 
can creditors suddenly change the rules in the middle of a game?
  It's like an umpire deciding that a batter hit by a pitch can take 
two bases instead of one in the middle of a baseball game. Consumers 
are playing an unfair ball game and there's no way to win.
  Cardholders continue to pay millions of dollars in hidden charges, 
outrageous late fees, and unpredictable interest rates.
  Despite the fact that most consumers make monthly payments that are 
more than the minimum required, cardholders cannot seem to make a dent 
on the average credit card debt of $8,600.
  There's a term for such one-sided contracts: UNCONSCIONABLE. And 
that's exactly what these credit card agreements are.
  In the midst of the worst economic crisis since the Great Depression, 
I am certain that the passage of the Credit Cardholders Bill of Rights 
Act is simply the ``right thing to do.''
  Provisions in the bill will level the playing field for consumers by 
barring credit card companies from raising interest rates without 
proper and timely notification.
  These much-needed changes are long overdue and will help struggling 
debtors from sinking deeper in a financial hole.
  I urge my colleagues, on both sides of the aisle, to join in fixing 
the inequities in the credit card industry by supporting this vital 
legislation.
  Mr. GUTIERREZ. I yield back the balance of my time.
  The CHAIR. All time for general debate has expired.
  Pursuant to the previous order of the House, the Committee rises.
  Accordingly, the Committee rose; and the Speaker pro tempore (Ms. 
Markey of Colorado) having assumed the chair, Mr. Cuellar, Chair of the 
Committee of the Whole House on the State of the Union, reported that 
that Committee, having had under consideration the bill (H.R. 627) to 
amend the Truth in Lending Act to establish fair and transparent 
practices relating to the extension of credit under an open end 
consumer credit plan, and for other purposes, had come to no resolution 
thereon.

                          ____________________