[Congressional Record Volume 155, Number 79 (Thursday, May 21, 2009)]
[Extensions of Remarks]
[Pages E1262-E1263]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




             CREDIT CARDHOLDERS' BILL OF RIGHTS ACT OF 2009

                                 ______
                                 

                               speech of

                        HON. SHEILA JACKSON-LEE

                                of texas

                    in the house of representatives

                        Wednesday, May 20, 2009

  Ms. JACKSON-LEE of Texas. Mr. Speaker, Americans are taught to work 
hard and make money and to buy a house, but we are never taught about 
financial literacy. In these tough economic times, it is imperative 
that Americans know about financial literacy; it is crucial to our 
survival. Americans need to be prepared to make informed financial 
choices. Indeed, we must learn how to effectively handle money, credit, 
debt, and risk. We must become better stewards over the things that we 
are entrusted. By becoming better stewards, Americans will become 
responsible workers, heads of households, investors, entrepreneurs, 
business leaders and citizens.
  I am reminded of how important this issue is to American society, as 
I was invited to attend a financial literacy roundtable panel at the 
New York Stock Exchange late last month. The panel was sponsored by the 
Hope Literacy Foundation. The panel was moderated by John Hope Bryant. 
I was surrounded by some of the great financial literacy experts in the 
nation. At the roundtable, I discussed the importance of financial 
literacy for college and university students. It is important that 
students be taught financial literacy. The facts about students and 
financial literacy are astounding.
  In 2008, 84 percent of undergraduates had at least one credit card. 
This figure is staggering. Young people who themselves might not even 
have a job are able to get credit cards. This is astounding because it 
begins the cycle of indebtedness.
  Recent studies have indicated that young people do not even know 
basic financial topics such as the impact of student loans on one's 
credit, how to balance a checkbook, and the impact of automobile loans 
on one's credit.
  Because of my concern that young people are not sufficiently informed 
about financial literacy, I have offered this amendment: To require 
financial literacy counseling for borrowers, and for other purposes.
  This amendment is important because approximately two-thirds of 
students borrow to pay for college according to the Center for Economic 
and Policy Research. Moreover, one in ten of student borrowers have 
loans more than $35,000. Passing this legislation will ensure that our 
nation's college students will be more prepared when incurring student 
loan debt and help them to avoid default as student loans severely 
impact one's credit score. Currently there is about $60 billion in 
defaulted student loan debt.
  Many students do not understand the reality of repaying student debt 
while taking out these loans. While most Americans have debt of some 
kind, student loan repayment is especially scary, as one cannot just 
declare bankruptcy and have their loans discharged. Due to the lack of 
financial literacy counseling for borrowers, student loan payments are 
often higher than expected. Recent grads are unable to afford the 
monthly payments resulting in them living paycheck to paycheck, 
acquiring credit card debt and in extreme cases, grads leaving the 
country in order to avoid repayment and debt collectors.
  Students and parents are not currently receiving the proper or any 
information of the burden that their student loans will have once they 
graduate. This is possibly a result of the relationship between student 
loan companies and universities, as some lenders offer universities 
incentives to steer borrowers their way.
  College campuses are one place that young Americans are introduced to 
credit and the possibility of living beyond their means. With proper 
loan and credit counseling the burden of debt incurred in college could 
be greatly reduced. Especially in this time of recession, financial 
literacy is one of the most important tools that we can give to our 
students in order to ensure their success in the future.
  This amendment will provide financial literacy training to students 
and will require a minimum of 4 hours of counseling including entrance 
and exit counseling. Counseling will include the fundamentals of basic 
checking and savings accounts, budgeting, types of credit and their 
appropriate uses, the different forms of student financial aid, 
repayment options, credit scores and ratings, as well as investing.
  I support the bill and urge my colleagues to do likewise.
  H.R. 627 prevents card companies from unfairly increasing interest 
rates on existing card balances--retroactive increases are permitted 
only if a cardholder is more than 30 days late,

[[Page E1263]]

if a promotional rate expires, if the rate adjusts as part of a 
variable rate, or if the cardholder fails to comply with a workout 
agreement.
  The bill requires card companies to give 45 days notice of all 
interest rate increases or significant contract changes (e.g. fees).
  Requires companies to let consumers set their own fixed credit limit 
that cannot be exceeded.
  Prevents companies from charging ``over-the-limit'' fees when a 
cardholder has set a limit, or when a preauthorized credit ``hold'' 
pushes a consumer over their limit.
  Limits (to 3) the number of over-the-limit fees companies can charge 
for the same transaction--some issuers now charge virtually unlimited 
fees for a single violation.
  Ends unfair ``double cycle'' billing--card companies couldn't charge 
interest on debt consumers have already paid on time.
  If a cardholder pays on time and in full, the bill prevents card 
companies from piling additional fees on balances consisting solely of 
left-over interest.
  Prohibits card companies from charging a fee when customers pay their 
bill.
  Many companies credit payments to a cardholder's lowest interest rate 
balances first, making it impossible for the consumer to pay off high-
rate debt. The bill bans this practice, requiring payments made in 
excess of the minimum to be allocated proportionally or to the balance 
with the highest interest rate. Protects Cardholders from Due Date 
Gimmicks.
  Requires card companies to mail billing statements 21 calendar days 
before the due date (up from the current 14 days), and to credit as 
``on time'' payments made before 5 p.m. local time on the due date.
  Extends the due date to next business day for mailed payments when 
the due date falls on a day a card company does not accept or receive 
mail (i.e. Sundays and holidays).
  Establishes standard definitions of terms like ``fixed rate'' and 
``prime rate'' so companies can't mislead or deceive consumers in 
marketing and advertising.
  Gives consumers who are pre-approved for a card the right to reject 
that card prior to activation without negatively affecting their credit 
scores.
  Prohibits issuers of subprime cards (where total yearly fixed fees 
exceed 25 percent of the credit limit) from charging those fees to the 
card itself. These cards are generally targeted to low-income consumers 
with weak credit histories.
  Prohibits card companies from knowingly issuing cards to individuals 
under 18 who are not emancipated.
  Requires reports to Congress by the Federal Reserve on credit card 
industry practices to enhance congressional oversight.
  Requires card companies to send out 45-day notice of interest rate 
increases 90-days after the bill is signed into law; the remainder of 
the bill takes effect 12 months after enactment.


  82 percent of credit cards allowed unlimited penalty rate increases

  When credit card accounts become past due, companies frequently 
impose penalty interest rate increases on outstanding balances, on top 
of late fees averaging $39. The penalty interest rate can lead to a 
significant increase in the cardholder's level of debt, and may 
continue to apply long after the cardholder has reestablished a track 
record of responsible payment behavior.
  The Pew Health Group studied all credit cards offered online by the 
largest 12 issuers, which control nearly 90 percent of outstanding 
credit card debt in America. The study included more than 400 credit 
card products. Based on a new analysis of this data, we found that 82 
percent of credit cards allowed issuers to impose penalty interest rate 
hikes that could last indefinitely, giving responsible cardholders no 
right to return to the originally agreed interest rate.


``cure period'' provision would help curb penalties averaging $500 per 
                                  year

  The median allowable penalty interest rate was 28 percent per year, 
adding nearly 14 percentage points to the average non-penalty interest 
rate. This penalty would cost $140 annually for every $1,000 in credit 
card debt, or nearly $500 per year for a typical repriced account. In 
most cases, these added costs can continue as long as the account is 
open, regardless of the cardholder's subsequent payment behavior.
  The Federal Reserve has announced rules to help limit penalties it 
deems ``unfair and deceptive.'' But even under those rules, Americans 
will be on track to pay credit card companies more than $7 billion per 
year in penalty interest charges--unless congressional leaders adopt an 
important new Senate proposal.
  The proposal, often called a ``cure period'' or ``pathway back,'' 
enables consumers to reverse penalty interest rates by making on-time 
payments for six months. Cardholders who pay on-time during the cure 
period can reduce penalty interest charges by half or more.
  Mr. Speaker, I support this legislation. I urge my colleagues to do 
the same.

                          ____________________