[Congressional Record Volume 155, Number 71 (Monday, May 11, 2009)]
[Senate]
[Pages S5313-S5321]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




             CREDIT CARDHOLDERS' BILL OF RIGHTS ACT OF 2009

  The ACTING PRESIDENT pro tempore. Under the previous order, the 
Senate will proceed to the consideration of H.R. 627, which the clerk 
will report.
  The assistant legislative clerk read as follows:

       A 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.

  The ACTING PRESIDENT pro tempore. The Senator from Connecticut is 
recognized.
  Mr. DODD. Mr. President, this is the Credit Card Accountability, 
Responsibility, and Disclosure Act. That is what we are going to talk 
about over the next few days, about credit cards, about interest rates, 
penalty fees, and other matters.
  Let me call up the amendment.


                           Amendment No. 1058

                (Purpose: In the nature of a substitute)

  The ACTING PRESIDENT pro tempore. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from Connecticut [Mr. Dodd], for himself and 
     Mr. Shelby, proposes an amendment numbered 1058.

  Mr. DODD. I ask unanimous consent the reading of the amendment be 
dispensed with.
  The ACTING PRESIDENT pro tempore. Without objection, it is so 
ordered.
  (The amendment is printed in today's Record under ``Text of 
Amendments.)
  Mr. DODD. For the purpose of my colleagues, this is the substitute 
amendment that Senator Shelby and I have worked on over the last number 
of days. I want to begin by expressing, first, my gratitude to the 
majority leader, Senator Reid, for his leadership and support in the 
effort to get this matter to the point we are this afternoon. Of course 
I express my gratitude to Senator Shelby and his staff as well as my 
own staff, who worked all through the weekend to try to resolve 
outstanding differences to bring us to the point where we have the 
bipartisan proposal to offer reform of the credit card laws in our 
country that most Americans do not need much of a speech about. Many 
times we are involved in a discussion and we are informing the public 
for the first time about a problem, or at least a very limited number 
of people are aware of it. In this case, the public is probably more 
aware than many about problems with interest rates and fees and 
penalties and the like. Every single day people go through this. This 
afternoon I want to talk about this bill. I want to tell my colleagues 
what is in this credit card reform bill.
  I thank the Presiding Officer, a member of the Banking Committee, 
along with other members of the committee who worked with us over the 
last number of weeks to try to complete a product here that can enjoy, 
I hope, as we go through this over the next day or two, broad 
bipartisan support.
  Let me take, if I can, the next few minutes and talk about the bill 
specifically, what the provisions are and why we have worked so hard to 
pull this bill together.
  This is not a new issue for me. I have been at credit card reform 
issues for actually more than 20 years. In the past I have not 
succeeded, candidly, reforming the credit card laws of our Nation. But 
in light of what has occurred over the last number of months and years, 
I think there is a greater indication of the need to step up and create

[[Page S5314]]

some real changes, given the conditions our constituents are living 
with, the number of people unemployed, the obvious problem of 
foreclosure rates, and the like.
  This issue is finding a tipping point. I believe we have a wonderful 
opportunity to create some meaningful reforms, and nothing would please 
me more than to have that kind of strong bipartisan support for these 
changes.
  I rise in strong support of the Credit Card Accountability, 
Responsibility, and Disclosure Act of 2009. The substitute amendment, I 
have offered on behalf of myself and Senator Shelby of Alabama, the 
former chairman of the Banking Committee. I thank him and his staff, 
and, of course, my own staff, who worked very hard on this issue--I 
will make specific reference to them during the debate--and who have 
done a terrific job in bringing this together in this bipartisan 
fashion.
  The bill before us addresses an issue of critical importance to 
millions of American consumers and their families and to the stability 
of our financial system; that is, the need to reform the practices of 
our Nation's credit card companies and provide a comprehensive regime 
of tough new protections for consumers.
  I begin by thanking Senator Shelby for his diligence throughout this 
process. I also acknowledge the hard work his staff has put in 
negotiating this important bill, along with my own staff who have 
worked very hard as well.
  Americans know they have a responsibility to live within their means 
and to pay what they owe. But they also have a right not to be 
deceived, misled, or ripped off by unfair and arbitrary practices that 
have become all too common within the credit card industry. Banning 
these practices is especially critical today.
  Since the recession began in December of 2007, 5.1 million jobs have 
been lost in our Nation, with almost two-thirds of those losses 
occurring in the last 5 months alone. It is clear the financial crisis 
is hitting American families very hard indeed. But precisely at a time 
when our economy is in crisis and consumers are struggling to live 
within their means, credit card companies too often are gouging them 
with hidden fees and sudden interest rate hikes that for many make the 
task nearly impossible.
  With the average outstanding credit card debt for households with a 
credit card now nearly $10,700, credit card companies are making an 
already difficult economic downturn suffocating for far too many 
millions of our American citizens.
  The range of abusive practices is as long as it is appalling: 
retroactive rate increases on existing balances; double-cycle billing 
that charges interest on balances the consumers have already paid; 
deceptive marketing to young people; changing the terms of the credit 
card agreement at any time, for any reason, on any balance; 
skyrocketing penalty interest rates, some as high as 32 percent.
  My colleague from New York, Senator Schumer, has called this ``trip-
wire pricing,'' saying the whole business model of the credit card 
industry is not designed to extend credit but to induce mistakes and 
trap consumers into debt. I think he is absolutely right, 
unfortunately. This is an industry that has been thriving on misleading 
its consumers and its customers.
  If you need any evidence of that, just look at how they even hike 
interest rates on consumers who pay on time and consistently meet the 
terms of their credit card agreements. Take Phil Sherwood of my State, 
who always paid his bills on time, who had a credit score in the 700s. 
He is an upstanding member of his community; in fact, a city councilman 
in New Britain, CT. One day recently he received a notice from his 
credit card company informing him that his interest rate was nearly 
doubling, and the associated fees on his account were going up as well. 
He had done nothing wrong, not been late, no changes whatsoever, just 
an arbitrary increase.
  A recent survey of the country's 12 largest credit card issuers by 
the Pew Charitable Trust found that Phil Sherwood was not alone. Pew 
reported that 93 percent of surveyed cards allowed the issuer to raise 
interest rates at any time, for any reason.
  Between March of 2007 and February of 2008, credit card companies 
raised interest rates on nearly one out of every four accounts, nearly 
70 million cardholders who were charged $10 billion in extra interest 
rates. That is within an 11-month period.
  That $10 billion is not paying for college tuition; it is not paying 
for groceries or for safe, affordable shelter in the midst of a housing 
crisis. It is going straight into the pockets of credit card companies; 
and they are doing it for one reason--because they can.
  Little wonder that we have seen a tenfold increase in the penalty 
fees customers have been charged in the last decade alone. Even the 
Federal financial regulators who dropped the ball terribly, in my view, 
during the subprime mortgage crisis have recognized the harm these 
sinister practices pose not only to consumers but also to our economy 
as a whole.
  Recently, in fact, the Federal Reserve, the Office of Thrift 
Supervision, and the National Credit Union Administration finalized 
rules aimed at curbing some of these practices. These rules are a good 
first step. I want to commend them for it. They deserve commendation 
for having stepped up and proposed these regulations. These rules made 
a difference already.
  But with our economy hanging in the balance, layoffs mounting, and 
consumers struggling to pay for basic necessities, I think the moment 
is right for more comprehensive reform, despite the good first step of 
the Federal Reserve and others.
  I first began waging this fight to reform credit card company 
practices more than 20 years ago. Back then it was difficult to get 
anyone to pay much attention to what was clearly becoming a slippery 
slope toward more abusive and deceptive practices by these card 
issuers. It was a lonely fight in those days.
  But today we have an American President, President Obama, on our 
side. He recognizes that credit card reform is not incidental to our 
economic recovery. As he has stated over and over again, it is 
essential to it. He has pledged to get credit card reform ``done in 
short order'' to quote him exactly, and said this weekend that he wants 
us to send him a bill by Memorial Day.
  I intend to do everything I can, and I am sure my colleagues will, to 
ensure we meet that challenge--not for the President, not for the White 
House, but for the consumers and customers out there who are waiting to 
see whether we will step up on this side of the ledger and do something 
on their behalf.
  We have spent a lot of time in this body, a lot of time over the past 
weeks and months, to help the financial institutions, to stabilize 
them, to get them on their feet, to get credit flowing again. I believe 
those decisions, by and large, we have made have been the right ones, 
although clearly we could have started earlier.
  But now it is time to do something for the other side of that ledger; 
that is, for consumers out there who deserve a break, particularly with 
practices, as I mentioned: 70 million accounts having their rates 
raised in the last year alone, and people such as Phil Sherwood having 
them raised for no reason whatsoever, solely because the issuer can do 
so.
  So it is time we do this--not for the President, not for the White 
House, not because the President would like it but, more importantly, 
because the American consumers deserve it in these times to get the 
help they need in this area.
  So today as the Senate takes up the credit card legislation, we stand 
up for the people in this country who want no more of these practices, 
no more tricking customers into taking on more debt than they agreed 
to, no more taking advantage of financially responsible credit card 
users, and no more abuse of consumers that goes unpunished.
  The time has come to insist on consumer protections that are strong 
and reliable, rules that are transparent and fair, and statements that 
are clear and informative. Those principles are the very essence of the 
Credit Card Act.
  Allow me to take, if I can, just a few minutes to explain how the 
provisions of this bill will work. First and foremost, this legislation 
prevents unfair and arbitrary increases in interest rates and changes 
in the terms of credit card contracts.

[[Page S5315]]

  Why is this so important? I recently met Kristina Jorgensen, a 
graphic designer from Southbury, CT. She transferred her student loans 
to a credit card to take advantage of the low ``fixed rate'' offer, 
only to have the interest rates on that debt increase from 5 percent to 
24 percent.
  Her monthly payments increased by $260. She had to cash in her 
retirement IRAs to pay off the credit card debt, all because she paid 1 
day late by phone. Let me repeat that: never in trouble before, saw an 
opportunity to pay off her student loans, she sent out, with that 5-
percent rate she had because of her good record over the years, and all 
of a sudden, because she is 2 days late--one of them a Sunday, by the 
way, because she paid by phone, not through the mail--her rates went 
from 5 percent to 24 percent, thereby crippling her ability, draining 
off that IRA. She did not graduate from college a year or two ago. I 
will tell you she is far closer to my age than a high school senior or 
a college graduate's normal age.
  So here she is at a point of retirement in her life where her IRA, 
her individual retirement account, now has been drained of a good part 
of its value because her rates went from 5 to 24 percent.
  What happened to Ms. Jorgensen is wrong. Having one's retirement 
security wiped out is frightening under any circumstances. But it is 
positively terrifying in a recession.
  Samantha Moore and her husband, a small business operator--Samantha 
is a paralegal from Guilford, CT--experienced a similar situation. She 
had her credit card interest rate raised from 12 percent to 27 percent. 
Why? Because she was 3 days late on a credit card payment for the first 
time in 18 years. She and her husband, who own a small business, saw 
their credit card limit drop from $31,000 to just over $4,000--the 
credit limits from $31,000 to just over $4,000, a small business, 3 
days late, first time in 18 years, and they watched the rate jump to 27 
percent, and their credit limits plummet to a point which pushes that 
business into jeopardy.
  So I would ask my colleagues: What is a family in this economy 
supposed to do if they are counting on that credit card to help them 
through a medical crisis. That one patently unfair decision could mean 
the difference between scraping by during a recession and a financial 
catastrophe.
  The legislation Senator Shelby and I have put together prevents 
credit card companies from unjustifiable ``anytime, any reason'' rate 
increases on existing balances for people such as Samantha and 
Kristina.
  Our bill also prohibits credit card issuers from increasing rates on 
a cardholder in the first year after a credit card account is opened 
and requires promotional rates to last at least 6 months.
  Our bill prohibits issuers from changing the terms governing the 
repayment of an outstanding balance. For the first time ever we put 
provisions in place that ensure that risk-based pricing will not always 
work against the consumer and drive up rates.
  This legislation says, if your issuer has raised your rate since the 
beginning of the year, they have to review your account within 6 months 
and bring the rate back down if the review warrants it, thus putting an 
end to the kind of risk-based pricing that always costs the consumer 
more and never less.
  Secondly, our bill puts an end to the exorbitant and unnecessary fees 
that drive families further into debt. Not that long ago, if you were 
over your credit card limit, your card was declined at the store. I am 
old enough to remember when that could happen--it happened to me--that 
awkward moment when you have gone to purchase something, and you are 
standing in line, and all of a sudden that clerk says, ``I am sorry, 
but you have been rejected.''
  That is always an awkward moment, particularly if people are standing 
behind you in that line, and you take your purchases and sheepishly 
walk away and put them back on the shelf because you went over your 
limit.
  It was not comfortable, but it protected you against going over the 
limit. In those days you did not have to ask for it, it happened 
automatically. Well, that has all changed, of course, in recent days. 
In fact, the issuers enjoy that moment because when you walk up and 
purchase something, despite the fact that you may want a fixed limit, 
at that point you go over, of course, then the penalty fees and other 
charges pour in. Of course, that becomes a bonanza on additional 
penalties collected.
  Now, I am not suggesting the consumer does not bear a responsibility. 
But in the past there was a responsibility exercised on both sides of 
that equation, a borrower and lender. Here lately, of course, that 
equation has been disrupted. Today we have repeatedly heard about 
cardholders being charged enormous fees for unknowingly going a few 
dollars over their credit limit.
  Our bill prohibits issuers from charging hidden over-the-limit fees. 
It says if cardholders want to go over their card limit, they have to 
``opt in'' with their issuer, putting the choice of going over the 
credit card limit and paying extra fees squarely in the hands of 
consumers, not the banks.
  Our bill also requires penalty fees to be reasonable and proportional 
to the violation. Further, our bill prevents companies from charging 
fees for customers making payments by mail, telephone, or 
electronically, and strengthens protections against excessive fees on 
low-credit, high-fee credit cards. The days of issuers unreasonably 
jacking up these fees to unreasonably high levels to make money on the 
backs of consumers will be over.
  Third, our bill protects the rights of financially responsible credit 
card users. Say last month, for instance, you had a credit card debt of 
$1,000, and since then you have paid $900 of that debt off. It is not 
uncommon for some credit card companies to keep charging interest not 
on the remaining $100 of debt but on the full previous $1,000 of debt. 
Our bill puts an end to this so-called ``double-cycle billing,'' and 
says if the credit card company delayed crediting your payment, you 
will not be charged for their mistake.
  Our bill also requires the credit card statement to be mailed 21 days 
before the bill is due rather than the current 14. The bill also 
encourages transparency in credit card pricing, requiring the 
Government Accountability Office to study the effect that interchange 
fees have on our merchants and consumers.
  I thank a number of my colleagues who expressed a strong interest in 
that subject matter. There will be a study done on this issue. It is a 
complicated area, the interchange fees, but a lot of retail stores are 
deeply concerned about these fees, the excessive charges they believe 
exist. They would like to see some changes.
  I have promised my colleagues who expressed an interest that we will 
take this up. I believe it is Senator Corker of Tennessee who has 
written a stronger study provision than the one we had originally 
crafted. I thank him. I know he has a strong interest in this subject, 
as do other Members. We will get to the interchange fees at a later 
date. Certainly, a study would give us a better framework in which to 
consider legislation.
  Fourth, our bill provides far better disclosure of card terms and 
conditions. One member of the credit card industry recently told Time 
magazine, ``The American people cannot manage their credit.'' Well, it 
is not hard to understand why. A quarter of a century ago, a typical 
credit card contract was about a page in length. Today, it is 30 times 
as long and 100 times more incomprehensible. You practically need a 
microscope to read what it says and a law degree to understand what it 
means. If this financial crisis has taught us anything, it is that 
consumers can only make responsible decisions if they have all the 
necessary information. The American consumer should not have to live in 
fear that a clause buried in the fine print of their credit card 
contract might someday be their financial undoing.
  Our legislation also requires credit card issuers to provide far 
better disclosure of terms and conditions. The bill says cardholders 
must be given 45 days' notice of an interest rate increase. The bill 
mandates that issuers disclose to consumers when the card terms have 
changed, and it forces issuers to disclose how long it will take to pay 
off a card balance if you only make minimum payments, something our 
colleague from Hawaii, Senator

[[Page S5316]]

Dan Akaka, has led the fight for over many years.
  The bill also requires the Federal Reserve Board to post consumer 
credit card agreements on its Web site.
  Fifth, our bill insists on a fair allocation of payments. Many 
cardholders hold multiple credit card balances with multiple interest 
rates. If you send an extra thousand dollars along, for example, with 
your minimum payment, that amount should be credited to the account 
with the highest interest rate first. Our legislation ensures that it 
will be.
  Our bill also prohibits issuers from setting early-morning deadlines 
for credit card payments. We all understand that we have to pay our 
credit card bills on a specific date, but what too many card companies 
don't tell you is that it isn't just the date the payment is due but 
often a specific time in the day. In too many cases, it is in the 
morning rather than at the end of business for that day. So, for 
example, if you pay your bill--call the company or make an online 
payment--before the close of business on the due date, sometimes you 
will get penalized for a late payment because the credit card deadline, 
unbeknownst to the cardholder, was at 10 a.m. that morning on the due 
date. This legislation puts a stop to that as well.
  I should add that for the very first time the Federal Government will 
provide new protections for recipients of gift cards, and we thank our 
colleague from New York, Senator Schumer, for his leadership on this 
issue. This legislation will make it easier for recipients of gift 
cards to cash them in. Under the Schumer provision, if you receive a 
gift card, your balance won't disappear before you have a chance to 
spend it.
  Sixth, this legislation includes robust protections for young people 
and students. Recently, my 7-year-old daughter received a credit card 
solicitation in the mail. We laughed it off, but it brings up a serious 
point. Young people--and ultimately their parents--are faced with an 
onslaught of credit card offers, often years before they turn 18, 
usually as soon as they set one foot on a college campus. Just as we 
saw in the mortgage crisis with lenders and borrowers, too often 
issuers offer cards to young people without verifying any ability to 
repay whatsoever. This is particularly true for students. According to 
Sallie Mae, college students graduate with an average credit card debt 
of more than $4,000. That is up from $2,900 just 4 years ago. Nearly 20 
percent of college students have credit card balances of over $7,000.
  Our bill requires issuers soliciting anyone under the age of 21 to 
obtain the signature of a parent or guardian or someone else who will 
take responsibility for the debt or proof that the applicant, as many 
are capable of doing under the age of 21, has some independent means of 
repayment. It prohibits increases in credit card limits unless that 
person who is a cosponsor or is jointly liable approves of the increase 
in writing. Our bill limits the kinds of prescreened offers that get so 
many young people into trouble.
  I thank our colleague from New Jersey, Senator Menendez, for his 
leadership on this issue. It is time to insist that credit card 
companies take into account a young person's ability to repay before 
allowing them to take on what is all too often a lifetime worth of 
debt. Very little we do in our legislation will be more important than 
these provisions. Many of my colleagues on the Banking Committee 
expressed a strong interest in these provisions. I don't have the 
statistics in front of me, but a significantly high percentage of 
students drop out of school because of the debt they have incurred. A 
lot of it is credit card debt, not just the student loans but the 
credit card debt.
  That is also why the final component of our bill is so critical as 
well. That involves tougher penalties and enforcement. Credit card 
companies need to understand that if they violate the terms of an 
agreement with a cardholder, there will be serious consequences.
  With this legislation, if your credit card company wrongly raises 
your rate, the company could pay as much as $5,000 per violation--even 
higher if the company is found to engage in a pattern or practice of 
violations. Our goal is not to be punitive, although I can understand 
why someone might want to be, given some of the practices that have 
gone on over the last number of years. Rather, we need to put in place 
strong incentives that will encourage these companies to act more 
responsibly in the first place.
  Every one of these provisions I have mentioned is rooted in simple 
common sense; no more tricks, no more strings attached. Over and over, 
we have heard that consumers should act responsibly when it comes to 
credit cards. I agree completely. We all need to act more responsibly. 
But it is time the credit card companies were held to that same 
standard, and with this legislation they will be.
  I thank Senators Schumer, Akaka, Menendez, Tester, and Kohl on the 
committee, who have strongly supported the fight to protect consumers 
against predatory credit card practices. Senator Carl Levin of Michigan 
has been a champion of credit card protections for many years as well 
and generated some important ideas that are included in the bill 
Senator Shelby and I are offering. For decades, their efforts have 
fallen on deaf ears but not this time.
  Today, with practices so brazen and widespread, as our economy quite 
literally hangs in the balance, one thing is clear: This is the moment 
for credit card reform. Our economy will not recover if we allow 
practices such as those I am talking about today that drive so many 
families deeper and deeper into debt. Americans do not deserve and 
cannot afford to be pushed down this economic ladder by credit card 
issuers any longer. This is a once-in-a-generation opportunity. In my 
view, we will never have a better opportunity to protect consumers than 
we do today with what we propose.
  This legislation has been worked on extensively over the last number 
of weeks. We listened to a lot of people, including the issuers, to 
make sure what we are doing is fair and balanced and gets to the heart 
of the matter; that is, to cut out these excessive increases, without 
warrant, in rates and fees and penalties that I have mentioned.
  Forty-six years ago, President John Kennedy delivered his special 
message to Congress on protecting consumer interest. In that speech, he 
established four very simple rights: the right to safety, the right to 
be informed, the right to choose, and, above all, the right to be 
heard, to be assured that consumer interests would receive full and 
sympathetic consideration in the formulation of Government policy. I 
cannot think of a single issue or moment where the need to act on 
principles articulated nearly half a century ago--and embraced by our 
current President and many in this Chamber of both political parties--
was clearer or more urgently needed than those articulated by President 
Kennedy more than four decades ago.

  I urge my colleagues to support this legislation, to stand up for 
American families who are already facing tremendous difficulties on a 
daily basis, with rising costs in energy and health care, the 
difficulty of holding on to their homes. All of these issues are 
confronting them. At the very least, having spent as much time as we 
have on dealing with stabilizing financial institutions, to take out a 
few days in all of the debate and stabilize American families by 
reducing outrageous and egregious practices that have added so many 
financial burdens to them is long overdue.
  Senator Shelby and I are proud of this substitute. We thank our 
colleagues who helped us work on it. We look forward to the debate on 
amendments that may be offered. Some may strengthen what we have 
suggested. Others may try to undo it. But we need to have a full and 
open debate. Then my hope is that, by an overwhelming vote, my 
colleagues will support this legislation.
  The House has already acted--I commend them--under the leadership of 
Barney Frank and others on the Financial Services Committee in that 
Chamber. Our intention is to follow with this legislation. 
Congresswoman Carolyn Maloney deserves credit, having authored the 
legislation in the House.
  We think we have a good bill, a strong bill. We think we have made 
some improvements on what the House recommended. I look forward to the 
debate that is forthcoming.
  Amy Friend and Lynsey Graham, who are sitting here next to me, did a

[[Page S5317]]

remarkable job in negotiating, working with other Members, with outside 
interests, including the issuers and consumer groups, on putting this 
bill together. Charles Yi, as well, worked on this, and Colin McGinnis. 
A lot of people worked on this. But these three--Charles Yi, Lynsey 
Graham, and Amy Friend--did a great job.
  Our staffs do so much hard work and don't get the credit they deserve 
for the work they do. I am deeply grateful to them for their tremendous 
leadership as well.
  I suggest the absence of a quorum.
  The PRESIDING OFFICER (Mrs. Hagan). The clerk will call the roll.
  The bill clerk proceeded to call the roll.
  Mr. SANDERS. Madam President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                75th Birthday of Senator James Jeffords

  Mr. SANDERS. Madam President, today we celebrate the 75th birthday of 
Senator James Merrill Jeffords of Vermont, who was born in Rutland, VT, 
on May 11, 1934.
  He is the son of Marion Hausman and Olin Jeffords. His father served 
as chief justice of the Vermont Supreme Court.
  Jim Jeffords went to college at Yale University and thereafter got a 
law degree from Harvard Law School. He served 3 years of Active Duty in 
the U.S. Navy and was in the Naval Reserves until he retired as captain 
in 1990.
  In 1966, he entered the political world and was elected to the 
Vermont State Senate. Two years later, he ran for Vermont attorney 
general and was elected to that position. In 1974, he ran for Vermont's 
seat in the U.S. House of Representatives and served for 14 years. In 
1988, Jim Jeffords was elected to the Senate of the United States. He 
was reelected in 1994 and 2000. In 2006, he retired from public life.
  Jim Jeffords' mother was a music teacher. Her work had a profound 
impact on his life. While in Congress, he cofounded the Congressional 
Arts Caucus. He also began the Congressional High School Art 
Competition, a bipartisan program that celebrates the talents of local 
high school students in congressional districts all across America. 
That program still exists and flourishes.
  Jim Jeffords' work in both the House and the Senate was centered on 
education, on job training, and on individuals with disabilities, 
culminating in his strong support for the Individuals with Disabilities 
Education Act. He will be long remembered as a champion of education, 
and especially for providing new and rich educational opportunities for 
those millions of Americans with disabilities who in too many instances 
were ignored by our schools.
  Jim Jeffords continued a long Vermont tradition, in the footsteps of 
his predecessors Senator Robert Stafford and Senator George Aiken, of 
serving on the Environment and Public Works Committee. When he assumed 
the chair of that committee, he provided early and courageous 
leadership on an emergent problem, which today we recognize as the 
central environmental issue of our time: global warming.
  Early on, Jim Jeffords recognized that the buildup of greenhouse 
gases would change the climate of our entire planet. He said about it:

       The climate is warming, it is due to human activity, and 
     only a change in human behavior will ensure that my grandson, 
     Patton Henry Jeffords, will not suffer the consequences.

  But he not only recognized the problem, he set about finding a 
solution, drafting far-reaching cap-and-trade legislation which even 
today represents the single most important Federal route to reducing 
greenhouse gases and to lessening and hopefully reversing global 
warming. As we consider cap-and-trade legislation in this session, we 
will be continuing the work Jim Jeffords helped begin and which his 
foresight set on the national agenda.
  In 2001, Jim Jeffords, in a move of great courage, left the 
Republican Party and became an Independent. This action changed control 
of the Senate, won widespread support in Vermont, and thrust this 
normally reserved and quiet man into the national spotlight.
  On October 1, 2002, Jim Jeffords was 1 of 23 Senators to vote against 
authorizing the use of military force in Iraq.
  I, personally, have known Jim Jeffords for 37 years, and I can attest 
to the warmth and affection with which he is held to this day in the 
State of Vermont. Unassuming, straightforward, and honest, he is 
respected not only by those who agreed with his views but by those who 
disagreed. His service has been a beacon of Vermont independence and 
vision, and so I join the rest of my fellow citizens in Vermont and the 
Senators in this body in wishing Jim a very happy 75th birthday.
  Madam President, I yield the floor.
  I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. LEVIN. Madam President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. LEVIN. Madam President, I understand there is a unanimous consent 
agreement that needs to be propounded, and I yield for that purpose.
  The PRESIDING OFFICER. The Senator from Arizona.


                  Unanimous Consent Requests--H.R. 131

  Mr. KYL. Madam President, I appreciate the courtesy of my colleague 
from Michigan.
  I ask unanimous consent that the Senate proceed to the immediate 
consideration of H.R. 131, the Ronald Reagan Centennial Commission Act. 
I ask unanimous consent that the bill be read a third time and passed, 
the motion to reconsider be laid upon the table, and any statements 
relating to the bill be printed in the Record.
  The PRESIDING OFFICER. Is there objection?
  Mr. DODD. Madam President, I object.
  The PRESIDING OFFICER. Objection is heard.
  The Senator from Connecticut.
  Mr. DODD. Madam President, as a counter to that proposal, I ask 
unanimous consent that the Senate proceed to the immediate 
consideration of Calendar No. 49, H.R. 131, the Reagan Commission bill; 
that a Feingold amendment, which is at the desk--the text of S. 564, 
the Wartime Treaty Study Act--be agreed to; the bill, as amended, be 
read a third time and passed; and the motions to reconsider be laid 
upon the table with no intervening action or debate.
  The PRESIDING OFFICER. Is there objection?
  Mr. KYL. I object.
  The PRESIDING OFFICER. Objection is heard.
  Mr. DODD. Madam President, I would note that the objection I 
registered was on behalf of Senator Feingold, and I wish the Record to 
reflect that.
  The PRESIDING OFFICER. The Record will so reflect.
  The Senator from Michigan.
  Mr. LEVIN. Madam President, I am here today to strongly support the 
Dodd-Shelby substitute to the House bill on credit card reform. Before 
I proceed with my statement, I wish to say how appreciative I am, and 
the country will be, for the efforts of Chris Dodd and Senator Shelby. 
This has been an effort on the part of Senator Dodd which has been 
ongoing for a long time. It is a very difficult, complex effort that he 
has taken under his wing and mastered. When we can get this passed--and 
hopefully we will by the end of May, as the President has requested--
there will be a very strong feeling across this country that, 
hallelujah, the Congress has finally acted to correct some of the 
abuses which have cost our consumers so many hundreds of billions of 
dollars in unfair charges by some credit card companies.
  Millions of Americans today are facing the worst economic crisis of 
their lifetime. Their hardship is being compounded by unfair credit 
card fees and interest charges. It is long past time for us to do 
something about it. The Credit Cart Accountability, Responsibility, and 
Disclosure Act of 2009, which is 414, introduced earlier this year by 
Senator Dodd, myself, and a number of our colleagues to combat credit 
card abuses, is the best chance we have to do just that. With this 
substitute, we are going to be able, I believe, on a bipartisan basis, 
with hopefully enough support in the Senate, to accomplish our goal.
  With home prices falling and unemployment rising, millions of 
Americans

[[Page S5318]]

who are still managing to pay their credit card bills on time have 
nonetheless been subjected to hiked interest rates. They have been hit 
with a double whammy--hard economic times and abusive credit card 
interest rates and fees. It is simply wrong for America's banking 
giants to try to dig themselves out of the hole they put themselves in 
by putting American families into a deeper hole with fees and sky-high 
interest charges that are often retroactively applied. Even as the 
prime rate of interest has gone down, some credit card companies have 
hiked interest rates on millions of customers who play by the rules. To 
add insult to injury, banks that received bailouts are frequently the 
ones that are punishing the very taxpayers they came to for financial 
rescue.
  Credit card companies have used a host of unfair practices. They 
unilaterally hike the interest rates of cardholders who pay on time and 
comply with the credit card agreements they entered into. They impose 
interest rates as high as 32 percent, and they apply higher interest 
rates retroactively to existing credit card debt. They pile on 
excessive fees and then charge interest on those fees, and they engage 
in a number of other unfair practices that are burying American 
consumers in a mountain of debt.
  I have received thousands of letters from people who have been 
treated unfairly by their credit card companies and feel they are 
powerless to do anything about it. The letters come from people from 
all over the country, from all walks of life; letter after letter, each 
more poignant than the next.
  The President has also heard those voices. He has made clear his 
support for ending abusive practices which cause so much pain and 
financial damage to American families, and he has called on Congress to 
send him a bill by the end of this month.
  We can and we should meet that deadline. The House has acted. Their 
version of this bill passed the House on April 30 by a vote of 357 to 
70, garnering support from a majority from both parties. A similar vote 
in the Senate on the CARD Act will send a strong message that standing 
up for the American taxpayer and consumer is a bipartisan priority.
  Under this bill, card issuers will no longer be able to engage in the 
abusive business practice of first extending credit at one interest 
rate, and then unilaterally jacking up the interest rate after the 
money is owing. Our bill doesn't restrict fair lending; it only affects 
credit card companies that engage in irresponsible lending practices 
that bury people unfairly in debt, the sort of debt that the companies 
often don't even expect to fully recover, but profit from nonetheless, 
through the extraction of fees and interest.
  Some argue that it is the role of regulators, not Congress, to combat 
unfair lending practices. But for years Federal regulators have not 
taken up that task. Instead, they stood largely by silently while 
deceptive and unfair practices became entrenched in the credit card 
industry. The Federal Reserve, in particular, charged with issuing 
credit card regulations, failed to take action until congressional 
hearings and public outrage forced attention on credit card abusers.
  Six months ago, the Federal Reserve and other bank regulators finally 
acted, issuing a regulation last December to stop some of the unfair 
practices. For example, the new regulation prohibits banks from 
retroactively raising interest rates on cardholders who meet their 
obligations, requires banks to mail credit card bills at least 21 days 
before the payment due date, and forces banks to more fairly apply 
consumer payments.
  But the regulation, regrettably, leaves in place blatantly unfair 
credit card practices that mire families in debt. It fails to stop, for 
example, abuses such as charging interest on debt that was paid on 
time, charging people a fee simply to pay their bills, and hiking 
interest rates on a credit card because of a misstep on another 
unrelated debt, a practice known as universal default. It doesn't stop 
the charging of interest on fees. Legislation is needed not only to end 
those abusive practices that are not prohibited by the Federal Reserve 
regulation, but also to provide a statutory foundation for the new 
credit card regulation so that it cannot be weakened or withdrawn in 
the future.
  The Dodd-Levin bill, as introduced, banned each of these unfair 
practices that were still allowed by the Federal Reserve rules. The 
substitute introduced today would not go as far as the Dodd-Levin bill, 
but offers a good compromise with strong consumer protections that 
ought to attract widespread support in the Senate. The substitute 
remains stronger, for example, than both the Federal Reserve credit 
card regulations and the House credit card bill in a number of ways. 
For example, it would prohibit retroactive interest hikes for 
cardholders who pay their bills on time and would allow them only for 
those who pay more than 60 days late. Even then, if would require banks 
to restore a lower interest rate for persons who had paid 60 days late 
but then made 6 months of on-time payments. The bill would also 
prohibit interest charges for debt that is paid on time, a key consumer 
protection for which I have been fighting for years. In addition, the 
bill would put its consumer protections in place 9 months from now 
instead of the longer regulatory deadline of July 2010 or the 1-year 
delay in the House bill.
  The bill, of course, will not only help protect consumers and ensure 
their fair treatment, but it will also make certain that credit card 
companies that are willing to do the right thing are not put at a 
competitive disadvantage by companies continuing unfair practices.
  In 2006, Americans used 700 million credit cards to buy about $2 
trillion in goods and services. The average family has five credit 
cards. Credit cards are being used to pay for groceries, mortgage 
payments, and even taxes. And they are saddling U.S. consumers, from 
college students to seniors, with a mountain of debt. The latest 
figures show that U.S. credit card debt is now approaching a trillion 
dollars. Credit cardholders are routinely being subjected to unfair 
practices that squeeze them for ever more money, sinking them further 
and further into debt.
  I strongly commend Senator Dodd, chairman of the Banking Committee, 
for taking action to move our credit card bill through the committee, 
despite some opposition. I also commend Senator Shelby for joining him 
in this substitute. Now is the time for the full Senate to act so that 
we can then resolve any differences with the House, and send the bill 
to President Obama, who has said he is ready to sign credit card 
legislation.
  For years now, we have been combating abusive credit card practices 
on our Permanent Subcommittee on Investigations, which I chair. The 
subcommittee held two investigative hearings in 2007, exposing those 
practices. I introduced legislation that same year, S. 1395, the Stop 
Unfair Credit Practices in Credit Cards Act. I am pleased that at that 
time we had so many cosponsors, including Senators McCaskill, Leahy, 
Durbin, Bingaman, Cantwell, Whitehouse, Kohl, Brown, Kennedy, and 
Sanders. We followed that by introducing the Dodd-Levin bill in this 
Congress. It incorporated much of the previous Senate bill that I 
referred to, and it added other important protections as well. The 
Dodd-Levin bill then provided the foundation for the Dodd-Shelby 
substitute.
  Senator Dodd already outlined most of the important provisions in the 
CARD Act. I want to highlight three provisions that I believe are 
critical to delivering relief to American families and returning common 
sense to the credit card business.
  First, the bill will prohibit interest charges on any portion of a 
credit card debt which the cardholder paid on time during a grace 
period. Virtually all credit cards provide a grace period, so called, 
in which a credit card debt can be repaid without incurring interest 
charges. But what most people don't realize is that the credit card 
industry restricts this grace period to people who pay off their entire 
balance in full. If a cardholder repays only part of the balance during 
the grace period, even though it is more than the minimum amount, the 
issuer charges interest on the entire balance--even the portion that 
was repaid on time.
  If I charge $5,000 in a month and pay off $2,500 by the due date--
again, an amount far more than the minimum payment required--I will 
still be charged interest on the full $5,000 balance, starting with the 
first day of the

[[Page S5319]]

billing period. That policy is unfair, counterintuitive, and it is 
unknown to a vast majority of cardholders who pay the added interest. 
The CARD Act will return a commonsense interpretation of the grace 
period and simply prohibit the charging of interest on debt that is 
paid on time.
  Another key provision would limit the circumstances under which a 
credit card company can hike the interest rate applicable to a 
cardholder's existing debt. Right now, credit cards are the only type 
of loan I know of whose terms can be unilaterally changed after the 
loan is incurred. Even in the toughest market conditions, for example, 
car companies cannot increase the interest rate on a car loan, even if 
a borrower pays late. The credit card companies can unilaterally hike a 
cardholder's interest rate at any time, for just about any reason, or 
no reason at all. This patently unfair practice violates accepted 
practice in the lending field outside of credit cards, and the bill 
will put an end to that. The substitute will ban retroactive rate hikes 
for existing balances except in limited circumstances, the most 
important of which is that it would ban such interest hikes for 
cardholders who pay on time and would allow them only for cardholders 
who pay more than 60 days late. Even then, it will require banks to 
restore the prior lower rate if the cardholder follows with 6 months of 
on-time payments. While our Dodd-Levin bill would have gone even 
further and banned retroactive rate hikes, period, the substitute 
offers a reasonable compromise that will provide greater protection in 
this area than the Federal Reserve regulation, or the House bill, both 
of which would allow retroactive interest rate hikes if a person paid 
more than 30 days late.
  Finally, while the substitute before us does not go as far as our 
Dodd-Levin bill did to prohibit universal default, the substitute does 
place important limits on how card companies can raise rates when 
cardholders have met their obligations and pay their credit card bills 
on time. Right now, credit card companies can unilaterally hike a 
cardholder's interest rate if the company receives information 
indicating that the cardholder is an increased risk of not paying his 
or her debts, even if the cardholder has a years-long record of on-time 
payments and has never paid a bill late to that company. The companies 
can apply the new higher rate to the cardholder's existing debt, as 
well as future debt.
  The substitute would put an end to that practice as it applies to 
existing balances. It provides that if a cardholder meets the 
obligation of the card agreement by paying on time and staying under 
the credit limit, the credit card company must hold its end of the 
bargain and honor the terms of the agreement. In other words, it cannot 
raise the interest rate applicable to the cardholder's existing debt. 
The substitute would, however, allow the credit card company to 
increase the interest rate applicable to future debt--meaning debt not 
yet incurred. In addition, under the substitute, if a card company 
increased an interest rate on a cardholder because of credit risk, or 
market condition, the company would be required to review the increase 
after 6 months and reverse it if conditions warrant. While my 
preference would be to prohibit unilateral rate increases entirely, the 
compromise is a significant improvement over current law. It would ban 
unilateral interest rate hikes on existing debt for consumers who play 
by the rules.
  To understand why these protections are needed, here are some 
examples of the credit card abuses we uncovered and some of the stories 
that American consumers shared with us during the course of the 
inquiries carried out by my Permanent Subcommittee on Investigations.
  The first case history we examined illustrates the fact that major 
credit card issuers today impose a host of fees on their cardholders, 
including late fees and over-the-limit fees that are not only 
substantial in themselves but can contribute to years of debt for 
families unable to immediately pay them.
  Wesley Wannemacher of Lima, OH, testified at our March 2007 hearing. 
In 2001 and 2002, Mr. Wannemacher used a new credit card to pay for 
expenses mostly related to his wedding. He charged a total of about 
$3,200, which exceeded the card's credit limit by $200. He spent the 
next 6 years trying to pay off the debt, averaging payments of about 
$1,000 per year. As of February 2007, he had paid about $6,300 on his 
$3,200 debt, but his billing statement showed he still owed $4,400.
  How is it possible that a man pays $6,300 on a $3,200 credit card 
debt, but still owes $4,400? Here's how. On top of the $3,200 debt, Mr. 
Wannemacher was charged by the credit card issuer about $1,100 in late 
fees, $1,500 in over-the-limit fees, and about $4,900 in interest. He 
was hit 47 times with over-limit fees, even though he went over the 
limit only 3 times and exceeded the limit by only $200. Altogether, 
these fees and the interest charges added up to $7,500, which, on top 
of the original $3,200 credit card debt, produced total charges to him 
of $10,700.
  In other words, the interest charges and fees more than tripled the 
original $3,200 credit card debt, despite payments by the cardholder 
averaging $1,000 per year. Unfair? Clearly, but our investigation has 
shown that exhorbitant interest charges and fees are not uncommon in 
the credit card industry.
  The week before our March hearing, his credit card company decided to 
forgive the remaining debt on the Wannemacher account, and while that 
was great news for the Wannemacher family, that decision didn't begin 
to resolve the problem of excessive credit card fees and sky-high 
interest rates that trap too many hard-working families in a downward 
spiral of debt.
  These high fees are made worse by the industry-wide practice of 
including fees in a consumer's outstanding balance in a manner that 
would also incur interest charges. Those interest charges magnify the 
cost of the fees and can quickly drive a family's credit card debt far 
beyond the cost of their initial purchases. It is one thing for a bank 
to charge interest on funds lent to a consumer; charging interest on 
penalty fees goes too far.
  Another troubling case history involves Charles McClune, a 51-year-
old Michigan resident who is married with one child. Mr. McClune had a 
credit card account which he closed in 1998, and has been trying to pay 
off for more than 10 years. Due to excessive fees and interest rates, 
and despite paying more than four times his original credit card debt 
of less than $4,000, Mr. McClune still owes thousands on his credit 
card, with no end in sight.
  Mr. McClune first opened his credit card account while in college, in 
1986, through a student-targeted credit promotion at a Michigan bank. 
After leaving college, the credit limit on his card was increased to 
$4,000. By 1993, although he had not exceeded the credit limit through 
purchases, Mr. McClune had missed some payments and was assessed 
interest and fees that pushed his balance over the $4,000 limit. From 
1993 to 1996, he exceeded his limit again, on several occasions, due to 
interest and fee charges. He stopped making purchases on the credit 
card in 1995.
  In 1996, Mr. McClune's credit card account was purchased by Chase 
Bank. In 1998, Mr. McClune asked Chase to close the account, and Chase 
did so. Although he never made a single purchase on his credit card 
while the account was with Chase, Chase repeatedly increased the 
interest rate on his account, including after the account was closed. 
In 2002, for example, his interest rate was about 21 percent; by 
October 2005, it had climbed to 29.99 percent where it remained for 
more than two years until March 2008; it then dropped slightly to 29.24 
percent. The higher interest rates were applied retroactively to Mr. 
McClune's closed account balance, increasing the size of his minimum 
payments and his overall debt.
  Chase also assessed Mr. McClune repeated over-the-limit and late 
fees, which began at $29 and increased over time to $39 per fee. Chase 
cannot locate statements for Mr. McClune's account prior to February 
2001, so there is no record of all the fees he has paid. The records in 
existence show that, since February 2001, he has paid 64 over-the-limit 
fees totaling $2,200. Those fees stopped after the March 2007 hearing 
before my subcommittee, in which Chase promised to stop charging more 
than three over-the-limit fees for a single violation of a credit card 
limit. In addition to the 64 over-the-limit fees, since February 2001, 
Chase has charged Mr. McClune nearly $2,000 in late fees.

  The records also show that since 2001, Mr. McClune was contacted on 
several

[[Page S5320]]

occasions by Chase representatives seeking payment on his account. If 
he agreed to make a payment over the telephone, Chase charged him--
without notifying him at the time--a fee of $12 to $15 per telephone 
payment. When asked about these fees, Chase told the subcommittee that 
the fees were imposed, because on each occasion Mr. McClune had spoken 
with a ``live advisor.'' Since 2001, he has paid a total of $160 in 
these pay-to-pay fees.
  Altogether, since 2001, Mr. McClune has paid nearly $4,400 in fees on 
a debt of less than $4,000. If the more than 4 years of missing credit 
card bills were available from 1996 to 2000, this fee total would be 
even higher. In addition, each fee was added to Mr. McClune's 
outstanding credit card balance, and Chase charged him interest on the 
fee amounts, thereby increasing his debt by thousands of additional 
dollars.
  In February 2001, Chase records show that Mr. McClune's credit card 
debt totaled nearly $5,200. For the next 7 years, although he did not 
pay every month, Mr. McClune paid nearly $2,000 per year toward his 
credit card debt, but was unable to pay it off. At one time, he paid 
$150 every 2 weeks for several weeks. Those payments did not bring his 
debt under the $4,000 credit limit, or reduce his interest rate.
  In January 2007, Mr. McClune received a letter from Chase stating 
that if he made his next payment on time, he would receive a $50 credit 
on his debt. Mr. McClune cashed out his IRA and paid $4,000 on his 
credit card debt. Because he made this payment in February, however, he 
did not receive the $50 credit for an on-time payment. Instead, he was 
assessed a $39 late fee, a $39 over-the-limit fee, and a $14.95 payment 
fee for making the $4,000 payment over the telephone.
  Mr. McClune was never offered a payment plan or a reduced interest 
rate by Chase to help him pay down his debt. His credit card bills show 
that from February 2001 to June 2008, he paid Chase a total of $15,800. 
If the 4 years of missing credit card bills from 1996 to 2000 were 
available, his total payments would likely exceed $20,000. In June 
2008, his credit card bill showed he was charged 29 percent interest 
and a $39 late fee on a balance of $3,300.
  How could Mr. McClune pay $15,000 to $20,000 on credit card purchases 
of less than $4,000, and still owe $3,300? His credit card statements 
since 2001 show that he was socked with over $9,700 in interest 
charges, $2,200 in over-the-limit fees, $2,000 in late fees, and $160 
in pay-to-pay fees. All of these interest charges and fees were 
assessed by Chase while the account was closed and without a single 
purchase having been made since 1995. Despite his lack of purchases and 
payments totaling $15,800, Chase records show that, from February 2001 
until June 2008, Mr. McClune was able to reduce his credit card balance 
by only about $1,850.
  Mr. McClune is not trying to avoid his debt. He has made years of 
payments on a closed credit card account that he has not used to make a 
purchase in 13 years. He has paid thousands and thousands of dollars--
four and possibly five times what he originally owed--in an attempt to 
pay off his credit card account. He is still paying. But his thousands 
of dollars in payments are not enough for his credit card issuer which 
is squeezing him for every cent it can, fair or not, for years on end.

  Tragically, Mr. McClune and Mr. Wannemacher have a lot of company in 
their credit card experiences. The many case histories investigated by 
my subcommittee show that responsible cardholders across the country 
are being squeezed by unfair credit card lending practices involving 
excessive fee and interest charges. The current regulatory regime--even 
with the new Federal Reserve regulation--is insufficient to prevent 
these ongoing credit card abuses. Legislation is clearly needed.
  Another galling practice featured in our hearings involves the fact 
that credit card debt that is paid on time routinely accrues interest 
charges, and credit card bills that are paid on time and in full are 
routinely inflated with what I call ``trailing interest.'' Every single 
credit card issuer contacted by the Subcommittee engaged in both of 
these unfair practices which squeeze additional interest charges from 
responsible cardholders.
  Here's how it works. Suppose a consumer who usually pays his account 
in full, and owes no money on December 1st, makes a lot of purchases in 
December, and gets a January 1 credit card bill for $5,020. That bill 
is due January 15. Suppose the consumer pays that bill on time, but 
pays $5,000 instead of the full amount owed. What do you think the 
consumer owes on the next bill?
  If you thought the bill would be the $20 past due plus interest on 
the $20, you would be wrong. In fact, under industry practice today, 
the bill would likely be twice as much. That is because the consumer 
would have to pay interest, not just on the $20 that wasn't paid on 
time, but also on the $5,000 that was paid on time. In other words, the 
consumer would have to pay interest on the entire $5,020 from the first 
day of the new billing month, January 1, until the day the bill was 
paid on January 15, compounded daily. So much for a grace period! In 
addition, the consumer would have to pay the $20 past due, plus 
interest on the $20 from January 15 to January 31, again compounded 
daily. In this example, using an interest rate of 17.99 percent, which 
is the interest rate charged to Mr. Wannamacher, the $20 debt would, in 
1 month, rack up $35 in interest charges and balloon into a debt of 
$55.21.
  You might ask--hold on--why does the consumer have to pay any 
interest at all on the $5,000 that was paid on time? Why does anyone 
have to pay interest on the portion of a debt that was paid by the date 
specified in the bill--in other words, on time? The answer is, because 
that's how the credit card industry has operated for years, and they 
have gotten away with it.
  There is more. You might think that once the consumer gets gouged in 
February, paying $55.21 on a $20 debt, and pays that bill on time and 
in full, without making any new purchases, that would be the end of it. 
But you would be wrong again. It is not over.
  Even though, on February 15, the consumer paid the February bill in 
full and on time--all $55.21--the next bill has an additional interest 
charge on it, for what we call ``trailing interest.'' In this case, the 
trailing interest is the interest that accumulated on the $55.21 from 
February 1 to 15, which is the time period from the day when the bill 
was sent to the day when it was paid. The total is 38 cents. While some 
issuers will waive trailing interest if the next month's bill is less 
than $1, if a consumer makes a new purchase, a common industry practice 
is to fold the 38 cents into the end-of-month bill reflecting the new 
purchase.
  Now 38 cents isn't much in the big scheme of things. That may be why 
many consumers don't notice these types of extra interest charges or 
try to fight them. Even if someone had questions about the amount of 
interest on a bill, most consumers would be hard pressed to understand 
how the amount was calculated, much less whether it was incorrect. But 
by nickel and diming tens of millions of consumer accounts, credit card 
issuers reap large profits. I think it is indefensible to make 
consumers pay interest on debt which they pay on time. It is also just 
plain wrong to charge trailing interest when a bill is paid on time and 
in full.
  My subcommittee's hearings also focused on another set of unfair 
credit card practices involving fair interest rate increases. 
Cardholders who had years-long records of paying their credit card 
bills on time, staying below their credit limits, and paying at least 
the minimum amount due, were nevertheless socked with substantial 
interest rate increases. Some saw their credit card interest rates 
double or even triple. At the hearing, three consumers described this 
experience.
  Janet Hard of Freeland, MI, had accrued over $8,000 in debt on her 
Discover card. Although she made payments on time and paid at least the 
minimum due for over 2 years, Discover increased her interest rate from 
18 percent to 24 percent in 2006. At the same time, Discover applied 
the 24 percent rate retroactively to her existing credit card debt, 
increasing her minimum payments and increasing the amount that went to 
finance charges instead of the principal debt. The result was that, 
despite making steady payments totaling $2,400 in 12 months and keeping 
her purchases to less than $100 during that same year, Janet Hard's 
credit card debt went down by only $350. Sky-high interest charges,

[[Page S5321]]

inexplicably increased and unfairly applied, ate up most of her 
payments.
  Millard Glasshof of Milwaukee, WI, a retired senior citizen on a 
fixed income, incurred a debt of about $5,000 on his Chase credit card, 
closed the account, and faithfully paid down his debt with a regular 
monthly payment of $119 for years. In December 2006, Chase increased 
his interest rate from 15 percent to 17 percent and in February 2007, 
hiked it again to 27 percent. Retroactive application of the 27 percent 
rate to Mr. Glasshof's existing debt meant that, out of his $119 
payment, about $114 went to pay finance charges and only $5 went to 
reducing his principal debt. Despite his making payments totaling 
$1,300 over 12 months, Mr. Glasshof found that, due to high interest 
rates and excessive fees, his credit card debt did not go down at all. 
Later, after the subcommittee asked about his account, Chase suddenly 
lowered the interest rate to 6 percent. That meant, over a 1-year 
period, Chase had applied four different interest rates to his closed 
credit card account: 15 percent, 17 percent, 27 percent and 6 percent, 
which shows how arbitrary those rates are.

  Then there is Bonnie Rushing of Naples, FL. For years, she had paid 
her Bank of America credit card on time, providing at least the minimum 
amount specified on her bills. Despite her record of on-time payments, 
in 2007, Bank of America nearly tripled her interest rate from 8 to 23 
percent. The Bank said that it took this sudden action because Ms. 
Rushing's credit score had dropped. When we looked into why it had 
dropped, it was apparently because she had taken out Macy's and J. Jill 
credit cards to get discounts on purchases. Despite paying both bills 
on time and in full, the automated credit scoring system run by the 
Fair Issac Corporation had lowered her credit rating, and Bank of 
America had followed suit by raising her interest rate by a factor of 
three. Ms. Rushing closed her account and complained to the Florida 
attorney general, my Subcommittee, and her card sponsor, the American 
Automobile Association. Bank of America eventually restored the 8 
percent rate on her closed account.
  In addition to these three consumers who testified at the hearing, 
the Subcommittee presented case histories for five other consumers who 
experienced substantial interest rate increases despite complying with 
their credit card agreements.
  I would also like to note that, in each of these cases, the credit 
card issuer told our Subcommittee that the cardholder had been given a 
chance to opt out of the increased interest rate by closing their 
account and paying off their debt at the prior rate. But each of these 
cardholders denied receiving an opt-out notice, and when several tried 
to close their account and pay their debt at the prior rate, they were 
told they had missed the opt-out deadline and had no choice but to pay 
the higher rate. Our subcommittee examined copies of the opt-out 
notices that the companies claimed to have sent, and found that some 
were filled with legal jargon, were hard to understand, and contained 
procedures that were hard to follow. When we asked the major credit 
card issuers what percentage of persons offered an opt-out actually 
took it, they told the Subcommittee that 90 percent did not opt out of 
the higher interest rate--a percentage that is contrary to all logic 
and strong evidence that current opt-out procedures do not provide fair 
notice.
  The case histories presented at our hearings illustrate only a small 
portion of the abusive credit card practices going on today. Since 
early 2007, our subcommittee has received letters and emails from 
thousands of credit cardholders describing sometimes unbelievable 
credit card practices and asking for help to stop it. These are more 
complaints than I have received in any other investigation that we have 
conducted in that subcommittee, or an earlier subcommittee which I 
chaired, in more than 30 years now in Congress. The complaints stretch 
across all income levels, all ages, and all areas of the country.
  The bottom line is that these abuses have gone on for far too long. 
In fact, these practices have been around for so many years that they 
have, in many cases, become the industry norm. Our investigations have 
shown that many of the practices are too entrenched, too profitable, 
and too immune to consumer pressures for us to have confidence that the 
companies will change them on their own. For these reasons, I hope our 
colleagues will pass the substitute before us. It is time to return 
common sense, responsibility, and fairness to the credit card industry.
  With thanks and gratitude to the leaders in the Banking Committee, 
Senators Dodd and Shelby, for the initiative they have taken and the 
courage they are showing in taking on some very difficult and 
entrenched practices.
  With that, I yield the floor.
  I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. REID. Madam President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

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