[Congressional Record (Bound Edition), Volume 153 (2007), Part 9]
[Senate]
[Pages 12540-12554]
[From the U.S. Government Publishing Office, www.gpo.gov]




          STATEMENT ON INTRODUCED BILLS AND JOINT RESOLUTIONS

      By Mr. NELSON of Nebraska (for himself and Mr. Durbin):
  S. 1391. A bill to amend the Elementary and Secondary Education Act 
of 1965 to authorize the Secretary of Education to award grants for the 
support of full-service community schools, and for other purposes; to 
the Committee on Health, Education, Labor and Pensions.
  Mr. NELSON of Nebraska. Mr. President, today I join House Majority 
Leader Steny Hoyer in introducing legislation seeking to strengthen our 
local communities through coordinated school-based efforts. The Full-
Service Community Schools Act establishes an important grant program 
supporting a variety of community services, ranging from early 
childhood education and family literacy efforts to job training and 
nutrition services. Our schools have long served as the bedrock of 
local communities; and in a time when Federal dollars have been used as 
an invasive hand, I believe additional resources should be allocated to 
local areas supporting enterprising instruction, public health, job 
training and overall community and parental engagement.
  The Full-Service Community Schools Act will direct the Department of 
Education to award grants to local educational agencies and one or more 
community-based organizations, nonprofit organizations, or other 
public/private entities. These full-service community school dollars 
will improve the coordination, delivery, effectiveness, and efficiency 
of services provided to our children and families. Funds will be 
awarded to those grantees coordinating at least 3 services at a school 
site, including early childhood programs; literacy and reading programs 
for youth and families; parenting education activities; community 
service; job training and career counseling services; nutrition 
services; primary health and dental care; and preventive mental health 
and treatment services.
  Priority will be given to grantees demonstrating a record of 
effectiveness and serving at least two schools in which at least 40 
percent of the children are from low-income families. These targeted 
efforts will support a more efficient use of Federal, State, local, and 
private-sector dollars serving the needs of children and families. A 
synergy of community engagement, parental enthusiasm, and local 
leadership is what America needs to address the growing challenges of 
our time; and I will continue working with my colleagues to ensure such 
efforts have the support of Congress. I encourage Senators to join me 
by cosponsoring the Full-Service Community Schools Act of 2007.
                                 ______
                                 
      By Mr. ALEXANDER (for himself, Mr. Cochran, and Mr. Cornyn):
  S. 1393. A bill to amend the Immigration and Nationality Act to 
prescribe the binding oath or affirmation of renunciation and 
allegiance required to be naturalized as a citizen of the United 
States, to encourage and support the efforts of prospective citizens of 
the United States to become citizens, and for other purposes; to the 
Committee on the Judiciary.
  Mr. ALEXANDER. Mr. President, Senators from both parties are working 
very hard these days to put together an immigration bill. The majority 
leader is working hard to create an environment in which that can 
happen, and I appreciate his doing that. It is not easy to do. But it 
is absolutely essential that we have a comprehensive immigration bill.
  This is not something Members of the Congress can blame on anybody 
else. It is not the Governors' job, it is not the mayors' job, it is 
not the county commissioners' job, it is not the Sheriff's job, it is 
our job to decide what our immigration policy should be. It is our job 
to secure the border. It is our job to make certain that those who come 
here are legally here. It is also our job to make sure that those who 
come here legally have an opportunity to become Americans, a chance to 
become part of our country.
  We have a motto above our wall that says, ``One from many.'' It 
doesn't say ``Many from one.'' We are very proud of our magnificent 
diversity in this country. People come here from virtually every 
country in the world. Anyone who has gone to the naturalization 
ceremonies can attest, where last year 650,000 new citizens stood in 
courthouses all across America, raised their right hands and swore 
their allegiance to this country--nothing is more moving than that. But 
as much as we prize that diversity, what we prize even more is our 
ability to turn all that diversity into one country.
  Unity is harder than diversity. There are a lot of diverse countries 
in the world, and they are ripped apart by their differences. We have 
been fortunate. As other countries struggle with the idea of becoming 
French, becoming German, becoming Japanese--it is hard to do. But in 
this country, if you become a citizen, you have to become an American.
  How do you do that? You don't do it by your race. In fact, our 
Constitution says that race cannot be used.
  You don't do it by any other form of ancestry. It doesn't matter 
where your grandparents came from. What does matter is that you 
subscribe to a few principles and that you learn a common language. 
Those are the most basic elements of the unity, this fragile and 
important unity that makes us the United States of America instead of 
just another United Nations.
  In anticipation of the immigration debate next week, I introduce 
today, along with Senators Cochran and Cornyn, what we call the 
Strengthening American Citizenship Act. It is an essential part of any 
immigration bill because it addresses what happens after one lawfully 
becomes a resident of this country and begins to think about lawfully 
becoming a citizen.
  This legislation will help legal immigrants who are prospective 
American citizens learn our common language and learn about our ways of 
government. I introduced this legislation last year, in the 109th 
Congress, when we considered an immigration bill. It had several 
cosponsors and it passed this body 91 to 1. It was an amendment to the 
Senate immigration bill, in April of 2006.
  I hope the Senate will agree again to make it a part of the bill. It 
might not make the most headlines, but it will make as much lasting 
difference in immigration legislation as possible.
  Here, in brief, is what the legislation would do. First, it would 
help prospective citizens learn English and it would do that in two 
ways. It would provide education grants of up to $500 for English 
courses for immigrants who declare their intent to become American 
citizens. They might use these grants of $500, for example, to go to 
any accredited agency such as ``Fuentes,'' in Los Angeles, a place I 
happen to know about, which can do, for that amount of money, an 
excellent job of helping, in that case mostly Spanish-speaking 
citizens, learn also to speak English. So it is a $500 voucher, in 
effect, to help any lawful person learn English.
  Second, it will change the citizenship rules to allow those who learn 
to speak English fluently to reduce from 5 to 4 years the amount of 
time they have to wait to become a citizen. These are two ways we are 
trying to help people learn English and by doing that value our common 
language.
  There are other ways to do that. Senator Kennedy and I have talked 
about the fact that there are lines of people in Boston, his State, and 
Nashville, in my State, of adults who want to learn English, but there 
is no room for them in the adult education programs we fund. Perhaps 
when we pass the Workforce Investment Act, or other appropriations 
bills, we can find other ways to help people who want to learn English, 
learn English. But this legislation focuses specifically on prospective 
citizens who want to learn English by giving them a grant to help them 
do it and by giving them an incentive to

[[Page 12541]]

learn the language fluently. They can become a citizen then in 4 years 
instead of 5.
  Also, it helps prospective citizens learn more about the American way 
of life. Albert Shanker, the late President of the American Federation 
of Teachers, said the common school was created in America, the public 
school, to help largely immigrant children learn reading and writing 
and arithmetic and what it means to be an American, with the hope they 
would go home and teach their parents.
  The last time we had such a large percentage of foreign-born people 
in our country was in about 1900, the turn of that century. 
Organizations all over America got busy helping new arrivals learn 
about our country, learn about our Declaration of Independence, learn 
about our Constitution and the ideas that were part of it because they 
knew that, since you do not become a citizen based upon your race or 
your ancestry and you do it upon the idea of America, that someone 
needed to help these people learn about the idea of America. Many were 
very eager to do that.
  The legislation I introduced today would establish a foundation to 
support the activities of the Office of Citizenship within the 
Department of Homeland Security so that organizations that want to 
support and cooperate in efforts to reach out to prospective citizens 
can do so.
  It would provide grants to organizations to provide classes in 
American history and civics. We are talking about a lot of prospective 
citizens--650,000 or so last year. After this immigration bill it may 
be more, because if you become a citizen, you are going to have to be 
legally here. So we want to make sure we have plenty of help for these 
who want to do that.
  Third, codify the oath of allegiance. One of the most remarkable 
oaths, I suppose, in the American language, is the oath of allegiance 
that the 650,000 new citizens take when they become Americans. It is an 
oath that goes all the way back to George Washington's time and Valley 
Forge. It was essentially the oath that Washington and his officers 
took at the beginning of the American revolution. It says that I, 
George Washington, or I, the new citizen, declare that we owe no 
allegiance or obedience--in that case, to King George;

      . . . and that we renounce, refuse and abjure any allegiance 
     or obedience to him and do swear that I will, to the utmost 
     of my power, support, maintain and defend the said United 
     States.

  Essentially, that same oath of allegiance is the oath new citizens 
take. This elevates that oath of allegiance from a bureaucratic rule to 
a part of the law and gives it the same dignity that the Pledge of 
Allegiance has and the national anthem has. Finally, this legislation 
would celebrate new citizens by focusing on these hundreds of 
ceremonies that we have, in which people from all over the world wear 
their best clothes, prove that they have good character, that they have 
waited 5 years, that they have learned English, that they have passed a 
test about citizenship, and they are ready to say: As proud as I am of 
where I came from, I now pledge my allegiance to the United States of 
America.
  We want to celebrate those events. This instructs the Secretary of 
Homeland Security to develop and implement a strategy to make those 
naturalization ceremonies more important in the fabric of our everyday 
life, and establish an award for citizens who have been naturalized in 
the last 10 years who have made an outstanding contribution to the 
American Nation. We all know in our own experiences that new Americans 
are sometimes the best Americans. They make the largest contribution. 
They have the best understanding of our country. We want to celebrate 
what they have done.
  This is legislation the Senate adopted before. Senator Cochran, 
Senator Cornyn, and I are introducing it to make sure we adopt it again 
when immigration comes up.
  I also wish to mention that I intend on looking at a comprehensive 
effort toward the same goal, which I like to call the American 
citizenship agenda; learning English and what it means to becoming an 
American. I have identified several areas, and I may introduce 
amendments in many of these areas to the immigration bill.
  These were not introduced the last time, but they would include 
clarifying the mission of the Office of Citizenship within the U.S. 
Citizenship and Immigration Service, establishing State citizenship 
advisory boards in a number of States, coordinating efforts toward 
helping immigrants learning English, American history, and civics. It 
would create an employer tax credit for businesses that help their 
employees learn English. As I mentioned earlier, at the beginning of 
the 20th century, there were a great many businesses hiring new 
Americans who spent their money, their time, and their effort to make 
sure those new employees understood what it meant to become Americans.
  One way to meet this need of a large percentage of foreign-born 
people in our country is to provide tax incentives to businesses that 
help their employees learn English. Another proposal is to require a 
demonstration of English language proficiency when an individual renews 
his or her green card; establishing a Presidential award for companies 
that go above and beyond in bringing their employees together as 
Americans; finally, asking for a Government Accountability Office study 
to identify the need of lawful permanent residents not speaking English 
and the associated costs; in other words, how many people living in our 
country do not speak English and what would be the cost and the most 
effective programs of helping them learn English.
  That is my purpose today, to introduce the Strengthening American 
Citizenship Act, legislation that passed when we considered the 
immigration bill in 2006, and which Senators Cochran and Cornyn and I 
hope will be a part of this legislation; then to discuss what I call 
the Strengthening American Citizenship Agenda, which will be looking 
for a variety of other ways to help make sure we not only celebrate our 
diversity but we find ways to celebrate our unity.
  We can look across the ocean at Europe and see the struggle in Turkey 
right now for that nation's identity. We can see the difficulty France 
and Germany are having as Muslim workers have a hard time integrating 
into their country. We do not want the United States of America to 
become a country where we have enclaves of people who have no loyalty 
to the idea of this Nation. We want to create an environment where 
everyone has an opportunity to think about loyalty to this country, 
where almost all have a chance to think about becoming a citizen one 
day, and where every single person who lives here has an opportunity to 
learn to speak our common language, not just for their benefit but so 
we do not become a tower of Babel or a United Nations, that we become a 
United States of America, as our Founders envisioned.
                                 ______
                                 
      By Ms. STABENOW (for herself, Mr. Voinovich, Mr. Kerry, Mr. 
        Levin, and Ms. Snowe):
  S. 1394. A bill to amend the Internal Revenue Code of 1986, to 
exclude from gross income of individual taxpayers discharges of 
indebtedness attributable to certain forgiven residential mortgage 
obligations; to the Committee on Finance.
  Ms. STABENOW. Mr. President, under current law, only two categories 
of individuals pay tax on the sale of their principle residence: the 
truly fortunate who have realized a capital gain of more than $250,000, 
$500,000 on a joint return, or the truly unfortunate who lose equity in 
their home and are forced to pay tax if the lender forgives some 
portion of the mortgage debt. Surely this is an anomalous result.
  Nevertheless, newspaper and television reports describe the burdens 
families all over the country are facing as lenders foreclose on 
borrowers who cannot make their mortgage payments. In more and more 
circumstances, these borrowers, often minorities and the elderly, are 
unable to make the escalating payments associated with subprime loans 
and some complex adjustable rate mortgage products.
  Other media reports focus on the challenges sellers face if they live 
in

[[Page 12542]]

areas with declining home values. There are instances where the value 
of housing in a whole market occasionally falls through no fault of the 
homeowner. A plant closes, environmental degradations are found nearby, 
a regional economic slump hits hard. This happened during the 1980s in 
the oil patch and in southern California and New England at the 
beginning of the 90s.
  This is happening right now in Michigan with the depressed automotive 
industry. The Detroit metropolitan area had the highest percentage of 
households in foreclosure in the 150 largest metropolitan areas, with 
an average of more than 10,000 foreclosures in each quarter. The 
foreclosures affected 1 out of every 21 households, nearly five times 
the national average. Over the first quarter of 2007, Michigan had over 
29,000 foreclosures and Detroit was on pace to record 11,000 for that 
same time period.
  One thing these news reports do not mention is the tax problem that 
sellers or those in foreclosure will face if lenders forgive and do not 
require payment on some or all of a mortgage debt at the time of 
disposition. What happens to these people who must sell their homes 
during a downturn or who cannot make their payments and go into 
foreclosure? They must pay taxes on the amount forgiven; it is treated 
as income.
  Below are two hypothetical scenarios where owners must have to pay 
taxes on the amount forgiven and those estimated taxes. The first 
example is a situation where there has been a downturn in the housing 
market. The second example is where a family, possibly because of loss 
of job, illness, or decrease in income or significant changes in the 
mortgage rate, can neither refinance the property nor sustain the 
payments and the lender forecloses on the property.

------------------------------------------------------------------------
 
------------------------------------------------------------------------
         Decrease in home prices or ``short sale''
Mortgage...................................................     $100,000
Market Value at Purchase...................................      100,000
Market Value at Sale.......................................       90,000
Sale Price.................................................       90,000
Debt Remaining After Sale..................................       10,000
Taxes Due if forgiven by the lender @ 15 percent tax rate..        1,500
                     Lender forecloses
Mortgage...................................................     $100,000
Foreclosure Amount.........................................       80,000
Debt Remaining After Foreclosure...........................       20,000
Taxes Due if forgiven by the lender @ 15 percent tax rate..        3,000
------------------------------------------------------------------------

  In the ``short sale'' transaction, if the lender forgives the $10,000 
of outstanding debt, the family will have taxable income of $10,000 on 
the transaction and owe $1,500, even though they have just sustained an 
economic loss and no cash gain.
  In a second scenario, if the foreclosure sale does not cover the 
amount of outstanding debt on the property or $20,000, the lender might 
forgive remaining debt. Again, the borrower is treated as having 
received ``income'' when the debt is forgiven and in the example, would 
owe $3,000 in taxes on the $20,000 that was forgiven.
  Clearly it is unfair to tax people on phantom income, particularly 
right at the time they have had a serious economic loss and have no 
cash with which to pay the tax. My bill, the Mortgage Relief Act, will 
relieve families of a tax burden when their lender forgives part of the 
mortgage on a principal residence.
  None of us wants to learn that families in our own districts will be 
forced to pay taxes when they have no money and have incurred a 
substantial loss on what, for most, is the most significant asset they 
own, and possibly the only asset they have. While my legislation will 
not repair their credit or punish those who mislead them into 
inappropriate loans, it will prevent them from further financial harm.
  Mr. KERRY. Mr. President, it is becoming more difficult for a middle 
class family to purchase a home. Last week the Senate Finance Committee 
held a hearing on middle class economic issues. We learned from the 
witnesses that families are struggling because their fixed costs are 
greater and one of these fixed costs is housing. Professor Elizabeth 
Warren testified that houses purchased now are only slightly larger 
than those purchased in the 1970's, but the median mortgage payment is 
76 percent larger than a generation ago.
  Today, there are serious problems in our mortgage lending market 
which need to be addressed. Too many families are unable to make the 
monthly mortgage payments on their homes. Foreclosure rates are 
increasing. Some homeowners who are facing foreclosure have received 
what are known as ``subprime'' loans which allow an adjustable rate of 
mortgage interest or a break on payments during the first years of the 
mortgage. The ``subprime'' lending market has been an important tool to 
allow people with poor credit histories to obtain access to credit 
including mortgages. However, in recent years some lenders have used 
these ``subprime'' mortgage loans to put homeowners into mortgage 
products with high interest rates that increase after a short period of 
time. Additionally, some homeowners have opted to buy homes they could 
not afford by using the ``subprime'' loan market. In either case, too 
many homeowners have been unable to keep up with the changes in their 
mortgage payments and have been forced into foreclosure.
  Last year, the Commonwealth of Massachusetts had a record 19,487 
foreclosure filings. One of every 92 U.S. households faced foreclosure 
and there are expected to be more disclosures in 2007. Published 
reports show that Massachusetts has had approximately 10,000 
foreclosures filings already this year. Monthly payments on millions of 
loans are expected to increase dramatically as low introductory 
interest rates balloon as much as 50 percent. The Nonprofit Center for 
Responsible Lending predicts that one in five subprime mortgages done 
in the past 2 years will end up in foreclosure.
  Today, Senators Stabenow, Voinovich and I are introducing the 
Mortgage Relief Cancellation Act of 2007. This legislation will help 
families who are faced with mortgages that they are unable to pay. 
Fortunately, some lenders are willing to modify loans and forgive some 
debt, but the borrower is required to pay income tax on the cancelled 
debt.
  Under present law, the discharged debt is treated as income. Some 
homeowners are learning about this rule the hard way and find 
themselves owing a large tax bill on debt that was forgiven. The 
Mortgage Relief Cancellation Act of 2007 would exclude from income the 
debt that is forgiven for certain mortgage loans.
  An example of this is a situation in which a homeowner sells their 
house to prevent disclosure and the proceeds do not cover the full 
mortgage obligation. The lender agrees to forgive the difference. Under 
the Mortgage Relief Cancellation Act of 2007, the amount forgiven would 
not be included in taxable income. This legislation also addresses 
forgiveness of debt as part of a restructuring arrangement.
  I urge you to support this legislation.
                                 ______
                                 
      By Mr. LEVIN (for himself and Mrs. McCaskill):
  S. 1395. A bill to prevent unfair practices in credit card accounts, 
and for other purposes; to the Committee on Banking, Housing, and Urban 
Affairs.
  Mr. LEVIN. Mr. President, I am introducing today, along with Senator 
McCaskill, the Stop Unfair Practices in Credit Cards Act.
  Credit cards are a fixture of American family life today. People use 
them to buy groceries, to rent a car, shop on the Internet, pay college 
tuition, and even pay their taxes. In 2005, the average family had five 
credit cards. American households used nearly 700 million credit cards 
to buy goods and services worth $1.8 trillion. Credit cards fuel 
commerce, facilitate financial planning, help families deal with 
emergencies. But credit cards have also contributed to record amounts 
of household debt. Some credit card issuers have socked families with 
sky-high interest rates of 25 and 30 percent and higher. They have hit 
consumers with hefty fees for late payments, for exceeding a credit 
card limit, and other transactions. In too many cases, credit card 
issuers have made it all but impossible for working-class families to 
climb out of debt.
  That is why in 2005, the Permanent Subcommittee on Investigations, 
which I chaired, on which Senator McCaskill serves, initiated an in-

[[Page 12543]]

depth investigation into unfair and abusive credit card industry 
practices.
  In the fall of 2006, the Government Accountability Office, the GAO, 
released a report which I had requested, which for the first time in 
years provided a comprehensive examination of the interest rates and 
fees being charged by credit card companies. Following the release of 
that report, and continuing through today, the subcommittee has been 
deluged with calls and letters from Americans expressing anger and 
frustration at the way they have been treated by their credit card 
companies, and sharing stories of unfair and often abusive practices. 
The subcommittee has been examining those allegations of unfair 
treatment and has identified many troubling credit card industry 
practices which should be banned or restricted.
  Our first hearing in March focused on industry practices involving 
grace periods, interest rates, and fees. It revealed a number of 
unfair, often little-known, and sometimes abusive credit card 
practices, which prey upon families experiencing financial hardships, 
and squeezed even consumers who pay their credit card bills on time.
  The legislation we are introducing today is aimed at stopping abusive 
credit card practices that trap too many hard-working families in a 
downward spiral of debt. American families deserve to be treated 
honestly and fairly by their credit card companies. Our bill would help 
ensure that fair treatment. Here are a few things our bill would do. It 
would stop credit card companies from charging interest on debt that is 
paid on time. It would crack down on abusive fees, including repeated 
late fees and over-the-limit fees, and fees to pay your bill.
  It would also prohibit the charging of interest on those fees. It 
would establish guidelines on interest rate increases, including a cap 
on penalty interest rate hikes at no more than 7 percent. It would 
require that increased interest rates apply only to future credit card 
debt and not the debt already incurred.
  Our bill will be referred to the Senate Banking Committee, which has 
primary jurisdiction over credit card legislation, and which has been 
holding its own hearing on unfair credit card practices. Our friend, 
Senator Dodd, the committee chairman, has a long history of fighting 
credit card abuses. Senator Shelby, the ranking Republican, as well as 
many other members of the committee, has also expressed concern about a 
number of credit card problems.
  It is my hope our bill and the legislative record being compiled by 
our Permanent Subcommittee on Investigations will help the Banking 
Committee in its deliberations and help build momentum to enact 
legislation halting the unfair credit card practices that outrage 
American consumers. Credit card abuse is too harmful to American 
families, our economy, and our economic future to let these unfair 
practices continue.
  Let me describe the key provisions of our bill in more detail. The 
first section of the bill would put an end to an indefensible practice 
that imposes little known and unfair interest charges on many 
unsuspecting, responsible consumers. Most credit cards today offer what 
is called a grace period. Cardholders are told that, if they pay their 
monthly credit card bill during this grace period, they will not be 
charged interest on the debt for which they are being billed. What many 
cardholders do not realize, however, is that this grace period 
typically provides protection against interest charges only if their 
monthly credit card bill is paid in full. If the cardholder pays less 
than 100 percent of the monthly bill--even if the cardholder pays on 
time--he or she will be charged interest on the entire billed amount, 
including the portion that was paid by the specified due date.
  An example shows why this billing practice is unfair and should be 
stopped. Suppose a consumer who usually pays his or her credit card 
account in full and owes no money as of December 1 makes a lot of 
purchases in December. The consumer gets a credit card bill on January 
1 for $5,020, due January 15. Suppose the consumer pays that bill on 
time, but pays $5,000 instead of the full amount owed.
  Most people assume that the next bill would be for the $20 in unpaid 
debt, plus interest on that $20. But that commonsense assumption is 
wrong. That is because current industry practice is to charge the 
consumer interest not only on the $20 that wasn't paid on time, but 
also on the $5,000 that was paid on time. Let me say that again. 
Industry practice is to force the consumer to pay interest on the 
portion of the debt that was paid on time. In other words, the consumer 
would pay interest on the entire $5,020 from the first day of the 
billing month, January 1, until the day the $5,000 payment was made on 
January 15, compounded daily. So much for a grace period. After that, 
the consumer would be charged interest on the $20 past due, compounded 
daily, from January 15 to the end of the month.
  The end result would be a February 1 bill that more than doubles the 
$20 debt. Using an interest rate of 17.99 percent, for example, in just 
one month, the $20 debt would rack up interest charges of more than 
$35.
  Charging $35 of interest over one month on a $20 credit card debt is 
indefensible, especially when applied to a consumer who paid over 90 
percent of their credit card debt on time during the grace period. Our 
legislation would end this unfair billing practice by amending the 
Truth in Lending Act to prohibit the charging of interest on any 
portion of a credit card debt that is paid on time during a grace 
period. Using our example, this prohibition would bar the charging of 
interest on the $5,000 that was paid on time, and result in a February 
balance that reflects what a rational consumer would have expected: the 
$20 past due, plus interest on the $20 from January 1 to January 31.
  The second section of our bill would address a related unfair billing 
practice, which I call ``trailing interest.'' Charging trailing 
interest on credit card debt is another widespread, but little known 
industry practice that squeezes responsible and largely unsuspecting 
consumers for still more interest charges.
  Going back to our example, you might think that once the consumer 
gets gouged in February by receiving a bill for $55 on a $20 debt, and 
pays that bill on time and in full, without making any new purchase, 
that would be the end of that credit card debt for the consumer. But 
you would be wrong. It would not be the end.
  Even if, on February 15, the consumer paid the February 1 bill in 
full and on time--all $55--the next bill would likely have an 
additional interest charge related to the $20 debt. In this case, the 
charge would reflect interest that would have accumulated on the $55 
from February 1 to 15, which is the time from when the bill was sent to 
the day it was paid. The total interest charge in our example would be 
about 38 cents. While some credit card issuers will waive trailing 
interest if the next month's bill is less than $1, a common industry 
practice is to fold the 38 cents into the next bill if a consumer makes 
a new purchase.
  Now 38 cents isn't much in the grand scheme of things. That may be 
why many consumers don't notice this extra interest charge or bother to 
fight it. 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 correct. But by nickel 
and diming tens of millions of consumer accounts with trailing interest 
charges, credit card issuers reap large profits.
  This little known billing practice, which squeezes consumers for a 
few more cents on the dollar, and targets responsible cardholders who 
pay their bills on time and in full, goes too far. If a consumer pays a 
credit card bill on time and in full--paying 100 percent of the amount 
specified by the date specified in the billing statement--it is unfair 
to charge that consumer still more interest on the debt that was just 
paid. Our legislation would put an end to trailing interest by 
prohibiting credit card issuers from adding interest charges to a 
credit card debt which the consumer paid on time and in full in 
response to a billing statement.

[[Page 12544]]

  A third problem examined by the subcommittee involves a widespread 
industry practice in which credit card issuers claim the right to 
unilaterally change the terms of a credit card agreement at any time 
for any reason with only a 15-day notice to the consumer under the 
Truth in Lending Act.
  As the National Consumer Law Center testified at our hearing, this 
practice means that smart shoppers who choose a credit card after 
comparing a variety of card options are continually vulnerable to a 
change-in-terms notice that alters the favorable terms they selected, 
and provides them with only 15 days to accept the changes or find an 
alternative. By asserting the right to make unilateral changes to 
credit card terms on short notice, credit card issuers undermine not 
only the bargaining power of individual consumers, but also principles 
of fair market competition. Such unilateral changes are particularly 
unfair when they alter material terms in a credit card agreement such 
as the interest rate applicable to extensions of credit.
  That is why our bill would impose two types of limits on credit card 
interest rate hikes. First, for consumers who comply with the terms of 
their credit card agreements, the bill would prohibit a credit card 
issuer from unilaterally hiking an interest rate that was represented 
to, and included in the disclosures provided, to a consumer under the 
Truth in Lending Act, unless the consumer affirmatively agreed in 
writing to the increase at the time it is proposed. This prohibition is 
intended to protect responsible consumers who play by the rules from a 
sudden hike in their interest rate for no apparent reason--a complaint 
that the subcommittee has heard all too often. Under our bill, issuers 
would no longer be able to unilaterally hike the interest rates of 
cardholders who play by the rules.
  The bill's second limit would apply to consumers who, for whatever 
reason, failed to comply with the terms of their credit card agreement, 
perhaps by paying late or exceeding the credit limit. In that 
circumstance, credit card issuers would be permitted to impose a 
penalty interest rate on the account, but the bill would place a cap on 
how high that penalty interest rate could go.
  Specifically, the bill would limit any such penalty rate hike to no 
more than a 7 percent increase above the interest rate in effect before 
the penalty rate was imposed. That means a 10 percent rate could rise 
no higher than 17 percent, and a 15 percent rate could not exceed 22 
percent. This type of interest rate limit is comparable to the caps 
that today operate in many adjustable mortgages. The effect of the 
credit card cap would be to prohibit penalty interest rates from 
dramatically increasing the interest rate imposed on the cardholder, as 
happened in cases examined by the subcommittee where credit card 
interest rates jumped from 10 percent or 15 percent to as much as 32 
percent. Penalty interest rate hikes that double or triple existing 
interest rates are simply unreasonable and unfair.
  If a credit card account were opened with a low introductory interest 
rate followed by a higher interest rate after a specified period of 
time, it is intended that the penalty rate cap proposed in the bill 
would apply to each of those disclosed rates individually. For example, 
suppose the credit card account had a 0 percent introductory rate for 6 
months and a 12 percent rate after that. Suppose further that, during 
the 6-month introductory period, the cardholder exceeded the credit 
limit. The bill would allow the card issuer to impose a penalty 
interest rate of up to 7 percent for the rest of the 6 month period. 
Once the 6-month period ended, it is intended that the 12 percent rate 
would take effect. If the consumer were to again exceed the limit, it 
is intended that any penalty rate imposed upon the account be no 
greater than 19 percent.
  If a card issuer were to analyze an account and conclude that a 
penalty rate increase of up to 7 percent would be insufficient to 
protect against the risk of default on the account, the issuer could 
choose to reduce the credit limit on the account or cancel the account 
altogether. If the card issuer chose to cancel the account, it is 
intended that the consumer would retain the right to pay off any debt 
on the account using the interest rate that was in effect when the debt 
was incurred.
  The point of the bill's penalty interest rate cap is to stop penalty 
interest rate hikes which are disproportional; which too often stick 
families with sky-high interest rates of 25 percent, 30 percent, and 
even 32 percent; and which too often make it virtually impossible for 
working American families to climb out of debt.
  Still another troubling practice involving credit card interest rate 
hikes is the problem of retroactive application. Industry practice 
today is to apply an increased interest rate not only to new debt 
incurred by the cardholder, but also to previously incurred debt.
  Retroactive application of a higher interest rate means that pre-
existing credit card debt suddenly costs a consumer much more to repay. 
Take, for example, a $3,000 credit card debt that a consumer was paying 
down each month with timely payments. Suddenly, the cardholder falls 
ill, misses a payment or pays it late, and the card issuer increases 
the interest rate from 15 percent to 22 percent. If applied to the 
existing $3,000 debt, that higher rate would require the cardholder to 
make a much steeper minimum monthly payment and pay much more interest 
than originally planned. That is often enough to sink a working family 
into a deepening spiral of debt from which they cannot recover.
  By making it a common practice to institute after-the-fact interest 
rate hikes for existing credit card debt--in effect unilaterally 
changing the terms of an existing loan--the credit card industry has 
unfairly positioned itself to reap greater profits at consumers' 
expense. Our bill would fight back by limiting the retroactive 
application of interest rate hikes to lessen the financial impact on 
American households. Specifically, our bill would provide that interest 
rate hikes could be applied only to future credit card debt and not to 
any credit card debt incurred prior to the rate increase. Instead, any 
earlier debt would continue to accrue interest at the rate previously 
in effect.
  The first set of provisions in our bill addresses unfair practices 
related to interest rates. The next set of provisions targets unfair 
practices related to fees imposed on cardholders by credit card 
companies.
  The need for proconsumer fee protections is illustrated by the story 
of Wes Wannemacher of Ohio, a witness featured at the subcommittee's 
March hearing. In 2001 and 2002, Mr. Wannemacher charged about $3,200 
on a new Chase credit card to pay for expenses mostly related to his 
wedding. Over the next 6 years, he paid about $6,300 toward that debt, 
yet in February 2007, Chase said that he still owed them about $4,400.
  How could Mr. Wannemacher pay nearly double his original credit card 
debt and still owe $4,400? As he explained in his testimony, in 
addition to repaying the original debt of $3,200, Mr. Wannemacher was 
socked with $4,900 in interest charges, $1,100 in late fees, and 47 
over-limit fees totaling $1,500, despite going over his $3,000 credit 
limit by a total of $200. These facts show that Mr. Wannemacher paid 
$2,600 in fees on a $3,200 debt. In addition, those fees were added to 
his outstanding credit card balance, and he was charged interest on the 
fee amounts, increasing his debt by hundreds if not thousands of 
additional dollars. There is something so wrong with this picture, that 
Chase didn't even defend its treatment of the account at the 
subcommittee hearing; instead, Chase forgave the $4,400 debt that it 
said was still owing on the Wannemacher credit card.
  It is no secret that credit card companies are making a great deal of 
money off the fees they are imposing on consumers. According to GAO, 
fee income now produces about 10 percent of all income obtained by 
credit card issuers. The GAO report which I commissioned on this 
subject identified a host of different fees that have become common 
practice, including fees for transferring balances, making a late

[[Page 12545]]

payment, exceeding a credit limit, paying a bill by telephone, and 
exchanging foreign currency. According to GAO, late fees now average 
$34 per month and over-limit fees average $31 per month, with some of 
these fees climbing as high as $39 per month. As Mr. Wannemacher 
discovered, these hefty fees are not only added to the credit card's 
outstanding balance, they also incur interest. The higher the fees 
climb, the higher the balances owed, and the higher the interest 
charges on top of that.
  Charging interest on money borrowed is certainly justified, but 
squeezing additional dollars from consumers by charging interest on 
transaction fees goes too far. Steep fees already deepen household debt 
from credit cards; those fees should not also generate interest income 
for the credit card issuer. Our bill would ban this industrywide 
practice by prohibiting credit card issuers from charging or collecting 
interest on the fees imposed on consumers.
  Mr. Wannemacher exceeded the $3,000 limit on his credit card on three 
occasions in 2001 and 2002 for a total of $200. Over the following 6 
years, however, he was charged over-the-limit fees on 47 occasions 
totaling about $1,500. In other words, Chase tried to collect over-the-
limit fees from Mr. Wannemacher that were seven times larger than the 
amount he went over the limit.
  At our March hearing, Chase did not attempt to defend the 47 over-
the-limit fees it imposed; instead, it announced that it was changing 
its policy and would join with others in the industry in imposing no 
more than three over-the-limit fees in a row on a credit card account 
with an outstanding balance that exceeded the credit limit. While 
Chase's voluntary change in policy is welcome, it doesn't go far enough 
in curbing abusive practices related to over-the-limit fees.
  First, if a credit card issuer approves the extension of credit that 
allows the cardholder to exceed the account's established credit limit, 
the issuer should be allowed to impose only one over-the-limit fee for 
that credit extension. One fee for one violation--especially when the 
card issuer facilitated the violation by approving the excess credit 
charge.
  Second, the fee should be imposed only if the account balance is over 
the credit limit at the end of the billing cycle. If a cardholder 
exceeds the limit in the middle of the billing cycle and then takes 
prompt action to reduce the balance below the limit, perhaps by making 
a payment or obtaining a credit for returning a purchase, there is no 
injury to the creditor and no justification for an over-the-limit fee.
  Third, a credit card issuer should impose an over-the-limit fee only 
when an action taken by the cardholder causes the credit limit to be 
exceeded, and not when a penalty imposed by the card issuer causes the 
excess charge. The card issuer should not be able to pile penalty upon 
penalty, such as by assessing a late fee on an account and then, if the 
late fee pushes the credit card balance over the credit limit, also 
imposing an over-the-limit fee.
  In addition, the bill would require credit card issuers to offer 
consumers the option of establishing a true credit limit on their 
account--a credit limit that could not be exceeded, because the account 
would be programmed to refuse approval of any extension of credit over 
the established limit. In too many cases, credit card issuers no longer 
provide consumers with the option of having a fixed credit limit, 
preferring instead to enable all of their cardholders to exceed their 
credit limits only to be penalized by a hefty fee, added interest, and, 
possibly, a penalty interest rate.
  There is more. Another unfair but common fee is what I call the 
``pay-to-pay fee.'' It is the $5 to $15 fee that many issuers charge 
consumers to pay their credit card bill on time by using the telephone. 
To me, charging folks a fee to pay their bills is a travesty. My bill 
would prohibit a credit card issuer from charging a separate fee to 
allow a credit cardholder to pay all or part of a credit card balance.
  Another fee that has raised eyebrows is the one charged by credit 
card issuers to exchange dollars into or from a foreign currency. A 
number of issuers today charge an amount equal to 2 percent of the 
amount of currency being exchanged in addition to a 1-percent 
``conversion fee'' charged by Visa or Master Card, for a total of 3 
percent Our bill responds by requiring foreign currency exchange fees 
to reasonably reflect the actual costs incurred by the creditor to 
perform the currency exchange, and requiring regulators to ensure 
compliance with that standard.
  In addition to unfair practices involving interest rates and fees, 
the subcommittee investigation uncovered several unfair industry 
practices involving how credit cardholder payments are applied to 
satisfy finance charges and other credit card debt. One such practice 
that has caught the subcommittee's attention is the industrywide 
practice of applying consumer payments first to the balances with the 
lowest interest rates.
  Right now, a single credit card account often carries balances 
subject to multiple interest rates. Credit cards typically use one 
interest rate for purchases, another for cash advances, and a third for 
balance transfers. Many card issuers also offer new customers low 
introductory interest rates, such as 0 or 1 percent, but limit these 
``come on'' rates to a short time period or to a balance transferred 
from another card. Moreover, many of these interest rates may vary over 
time, since it is a common practice to offer variable interest rates 
that rise and fall according to a specified rate or index.
  When a consumer payment is made, credit card issuers currently have 
complete discretion on how to apply that payment to the various 
balances bearing different interest rates. Consumers are typically 
given no option to direct where their payments are applied. Today, 
virtually all credit card issuers apply a consumer payment first to the 
balance with the lowest interest rate. After that balance is paid off, 
card issuers apply the payment to the balance with the next lowest 
interest rate, and so on.
  This payment practice clearly favors creditors over consumers. It 
allows the card issuers to direct payments first to the balances that 
provide them with the lowest returns, and minimize payments to the 
balances bearing the highest interest rates so those balances can 
accumulate more interest for a longer period. Consumers who want to pay 
off a cash advance bearing a 20 percent interest rate, for example, are 
told that they cannot make that payment until they first pay off all 
other balances with a lower interest rate.
  Our bill would replace this unfair industrywide practice with a 
proconsumer approach. Reversing current industry practice, the bill 
would require cardholder payments to be applied first to the balance 
bearing the highest interest rate, and then to each successive balance 
bearing the next highest rate, until the payment is used up. The bill 
would also require credit card issuers to apply cardholder payments in 
the most effective way to minimize the imposition of any fees or 
interest charges to the account.
  In addition, the bill would prohibit credit card issuers from 
imposing late fees on consumers if the issuer was itself responsible 
for the delay in crediting the payment. For example, if a card issuer 
changed the mailing address for payments, had to shut down its mail 
sorting equipment for repairs, or mistakenly routed a consumer payment 
to the wrong department, the issuer would not be allowed to assess a 
late fee on the cardholder for the resulting late payment. Instead, if 
the card issuer caused the late payment, it would be barred from 
assessing a late fee on the consumer.
  In addition to provisions to improve practices related to interest 
rates, fees, and consumer payments, the bill would add two new 
definitions to the Truth in Lending Act, intended to further address 
concerns related to unfair credit card practices.
  The first definition involves use of the term, ``prime rate.'' Many 
credit card issuers today use variable interest rates that are linked 
to the ``prime rate'' or ``prime interest rate'' and vary over time. 
For example, a disclosure may indicate that a credit card

[[Page 12546]]

will bear an interest rate equal to the prime rate plus a specified 
number of percentage points. Since the 1950s, the term ``prime rate'' 
has been commonly understood to mean the lowest interest rate offered 
by U.S. banks to their most creditworthy borrowers. That is how the 
term is defined, for example, in Webster's Collegiate Dictionary.
  The problem, however, is that no current statute or regulation 
defines the prime rate referenced in credit card disclosures under the 
Truth in Lending Act, and some card issuers have stated expressly that 
the prime rate used in credit card agreements does not necessarily 
match the lowest interest rates they provide to their most creditworthy 
borrowers. Litigation has also arisen between cardholders and card 
issuers as to what is meant by the term and whether cardholders are 
being misled. A cite is Lum v. Bank of America, 361 F.3d 217 (3d Cir. 
2004).
  To remedy this gap in the law, the bill would require credit card 
disclosures under the Truth in Lending Act that reference the prime 
rate to use the bank prime loan rate published by the Federal Reserve 
Board. This published rate is widely accepted in the financial 
community as an accurate depiction of the lowest interest rate offered 
by U.S. banks to their most creditworthy borrowers, and the rate is 
readily available to the public on the Federal Reserve Web site. By 
mandating use of this published rate, the bill will ensure that 
consumers are not deceived by a credit card issuer using a misleading 
definition of the commonly used term ``prime rate.''
  The second definition added by the bill to the Truth in Lending Act 
involves specifying the ``primary federal regulator'' of a credit card 
issuer. Today, many credit card issuers are federally chartered or 
regulated banks subject to one or more Federal bank regulators. The 
bill would make it clear that when a card issuer is a Federal bank, its 
primary Federal regulator is the same primary regulator assigned to the 
bank under Federal banking law. The provision would also make it clear 
that the primary Federal regulator is responsible for overseeing the 
bank's credit card operations, ensuring compliance with credit card 
statutes and regulations, and enforcing the prohibition against unfair 
or deceptive acts or practices in the Federal Trade Commission Act. 
Another provision in the bill would make it clear that Federal 
regulators are expected to conduct at least annual audits to ensure 
card issuer compliance with the statutes and regulations seeking to 
ensure fair and effective credit card operations.
  The next section of the bill would improve current credit card data 
collection efforts. Right now, credit card issuers file periodic 
reports with the Federal Reserve providing information about credit 
card interest rates and profits. This data plays a critical role in 
credit card oversight efforts, as well as financial and economic 
analyses related to consumer spending and household debt. The bill 
would strengthen current data collection efforts by requiring more 
specific information on interest rates and fees. For example, current 
data reports cannot be used to determine how many credit card accounts 
have interest rates of 25 percent or greater, what types of fees are 
imposed on consumers, or how many cardholders are affected by such 
interest rates and fees. The new bill would ensure that regulators, 
credit card users, and the public have the information needed to answer 
those basic questions.
  The bill would also require the development of credit card 
industrywide estimates of the approximate relative income derived from 
interest rates, fees imposed on cardholders, fees imposed on merchants, 
and any other material source of income. GAO provided this information 
for the first time in its 2006 report, estimating that the credit card 
industry now derives about 70 percent of its income from interest 
charges, 20 percent from interchange fees imposed on merchants, and 10 
percent from fees imposed on consumers. This valuable information 
should continue to be collected so that regulators, credit card users, 
and the public gain a more informed understanding of the credit card 
industry.
  The bill's data collection requirements are largely modeled upon and 
intended to replicate key interest rate, fee, and revenue data 
presented by GAO in its 2006 report, ``Credit Cards: Increased 
Complexity in Rates and Fees Heightens Need for More Effective 
Disclosures to Consumers.'' Credit card experts were also consulted to 
determine what information would be most helpful to strengthen credit 
card oversight.
  The final provision in the bill would provide a 6-month transition 
period for credit card issuers to implement the bill's provisions.
  Credit card issuers like to say that they are engaged in a risky 
business, lending unsecured debt to millions of consumers, and that's 
why they have to set interest rates so high and impose so many fees. 
But the data shows that, typically, 95 to 97 percent of U.S. 
cardholders pay their bills. And it is clear that credit card 
operations are enormously profitable. For the last decade, credit card 
issuers have reported year after year of solid profits, maintained 
their position as the most profitable sector in the consumer lending 
field, and reported consistently higher rates of return than commercial 
banks. Credit card issuers make such a hefty profit that they sent out 
8 billion pieces of mail last year soliciting people to sign up.
  With profits like those, credit card issuers can afford to stop 
treating American families unfairly. They can give up charging interest 
on debt that was paid on time, give up charging consumers a fee to pay 
their bills, give up hiking interest rates from 15 percent to 32 
percent, and give up imposing repeated over-the-limit fees for a single 
over-the-limit purchase. As one Michigan businessman expressed it to 
the subcommittee, ``I don't blame the credit card issuers for putting 
me into debt, but I do blame them for keeping me there.''
  Some argue that Congress doesn't need to ban unfair credit card 
practices; they contend that improved disclosure alone will empower 
consumers to seek out better deals. Sunlight can be a powerful 
disinfectant, which is why I have strongly urged the Federal Reserve 
Board to expedite its regulatory effort to strengthen credit card 
disclosure and help consumers understand and compare how various credit 
cards work. But credit cards have become such complex financial 
products that even improved disclosure will frequently not be enough to 
curb the abuses--first because some practices are so complex that 
consumers can't easily understand them, and second because better 
disclosure does not always lead to greater market competition, 
especially when virtually an entire industry is using and benefiting 
from practices that disadvantage consumers.
  So when we find credit card practices that are inherently unfair, 
consumers are often best served, not by greater disclosure, but by 
stopping the unfair practices that take advantage of them. Among those 
practices identified in this bill are unfair interest charges that 
squeeze consumers who pay their credit card debt on time; unilateral 
and retroactive interest rate hikes that deepen and prolong credit card 
debt; unreasonable fees; and payment allocation practices that prevent 
consumers from paying off the credit card debts bearing the highest 
interest rates first.
  Congress needs to enact proconsumer legislation that puts an end to 
unfair credit card practices. I am afraid that these practices are too 
entrenched, too profitable to the credit card companies, and too immune 
to consumer pressure for the companies to change them on their own. Our 
bill offers measures that would combat a host of unfair practices that 
plague consumers and unfairly deepen and prolong their debt. I look 
forward to working with my colleagues to address these problems.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                S. 1395

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

[[Page 12547]]



     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Stop Unfair Practices in 
     Credit Cards Act of 2007''.

     SEC. 2. STOP UNFAIR INTEREST RATES AND FEES.

       Section 163 of the Truth in Lending Act (15 U.S.C. 1666b) 
     is amended--
       (1) by striking the section title and all that follows 
     through ``If an open'' and inserting the following:

     ``Sec. 163. Billing period and finance charges

       ``(a) Billing Period.--
       ``(1) Fourteen-day minimum.--If an open'';
       (2) by striking ``(b) Subsection (a)'' and inserting the 
     following:
       ``(2) Excusable cause.--Subsection (a)''; and
       (3) by adding at the end the following:
       ``(b) No Interest Charge on Debt That Is Paid on Time.--If 
     an open end consumer credit plan provides a time period 
     within which an obligor may repay any portion of the credit 
     extended without incurring an interest charge, and the 
     obligor repays all or a portion of such credit within the 
     specified time period, the creditor may not impose or collect 
     an interest charge on the portion of the credit that was 
     repaid within the specified time period.
       ``(c) No Interest on Debt That Is Paid on Time and in 
     Full.--In an open end consumer credit plan, if a billing 
     statement requests an obligor to repay within a specified 
     time period all of the credit extended under the plan and 
     related finance charges, and the obligor pays all of the 
     specified amount within the specified time period, the 
     creditor may not impose or collect an additional interest 
     charge on the amount that was paid in full and within the 
     specified time period.
       ``(d) Limits on Interest Rate Increases.----
       ``(1) In general.--With respect to a credit card account 
     under an open end consumer credit plan, the creditor shall 
     not increase the periodic rate of interest applicable to 
     extensions of credit while such account remains open, 
     unless--
       ``(A) such increase is pursuant to the expiration of an 
     introductory rate which was disclosed under section 
     127(c)(6);
       ``(B) such increase is pursuant to the application of a 
     variable rate which was disclosed under section 
     127(c)(1)(A)(i)(II);
       ``(C) such increase is pursuant to the application of a 
     penalty rate which was disclosed under subsections (a)(4) and 
     (c)(1)(A)(i) of section 127; or
       ``(D) the obligor has provided specific written consent to 
     such increase at the time such increase was proposed.
       ``(2) Limit on penalty interest rate.--If an obligor fails 
     to repay an extension of credit in accordance with the terms 
     of a credit card account under an open end consumer credit 
     plan, and the creditor determines to apply a penalty rate, as 
     described in paragraph (1)(C), notwithstanding paragraph 
     (1)(D), such penalty rate may not, while such account is 
     open, exceed 7 percentage points above the interest rate that 
     was in effect with respect to such account on the date 
     immediately preceding the first such penalty increase for 
     such account.
       ``(e) Interest Rate Increases Limited to Future Credit 
     Extensions.--With respect to a credit card account under an 
     open end consumer credit plan, if the creditor increases the 
     periodic interest rate applicable to an extension of credit 
     under the account, such increased rate shall apply only to 
     extensions of credit made on and after the date of such 
     increase under the account, and any extension of credit under 
     such account made before the date of such increase shall 
     continue to incur interest at the rate that was in effect on 
     the date prior to the date of the increase.
       ``(f) No Interest Charges on Fees.--With respect to a 
     credit card account under an open end consumer credit plan, 
     if the creditor imposes a transaction fee on the obligor, 
     including a cash advance fee, late fee, over-the-limit fee, 
     or balance transfer fee, the creditor may not impose or 
     collect interest with respect to such fee amount.
       ``(g) Fixed Credit Limit.--With respect to each credit card 
     account under an open end consumer credit plan, the creditor 
     shall offer to the obligor the option of obtaining a fixed 
     credit limit that cannot be exceeded, and with respect to 
     which any request for credit in excess of such fixed limit 
     must be refused, without exception and without imposing an 
     over-the-limit fee or other penalty on such obligor.
       ``(h) Over-the-Limit Fee Restrictions.--With respect to a 
     credit card account under an open end consumer credit plan, 
     an over-the-limit fee, as described in section 
     127(c)(1)(B)(iii)--
       ``(1) may be imposed on the account only when an extension 
     of credit obtained by the obligor causes the credit limit on 
     such account to be exceeded, and may not be imposed when such 
     credit limit is exceeded due to a penalty fee, such as a late 
     fee or over-the-limit fee, that was added to the account 
     balance by the creditor; and
       ``(2) may be imposed only once during a billing cycle if, 
     on the last day of such billing cycle, the credit limit on 
     the account is exceeded, and no additional over-the-limit fee 
     shall be imposed in a subsequent billing cycle with respect 
     to such excess credit, unless the obligor has obtained an 
     additional extension of credit in excess of such credit limit 
     during such subsequent cycle.
       ``(i) Other Fees.--
       ``(1) No fee to pay a billing statement.--With respect to a 
     credit card account under an open end consumer credit plan, 
     the creditor may not impose a separate fee to allow the 
     obligor to repay an extension of credit or finance charge, 
     whether such repayment is made by mail, electronic transfer, 
     telephone authorization, or other means.
       ``(2) Reasonable currency exchange fee.--With respect to a 
     credit card account under an open end consumer credit plan, 
     the creditor may impose a fee for exchanging United States 
     currency with foreign currency in an account transaction, 
     only if--
       ``(A) such fee reasonably reflects the actual costs 
     incurred by the creditor to perform such currency exchange;
       ``(B) the creditor discloses publicly its method for 
     calculating such fee; and
       ``(C) the primary Federal regulator of such creditor 
     determines that the method for calculating such fee complies 
     with this paragraph.
       ``(j) Annual Audit.--The primary Federal regulator of a 
     card issuer shall audit, on at least an annual basis, the 
     credit card operations and procedures used by such issuer to 
     ensure compliance with this section and section 164, 
     including by reviewing a sample of billing statements to 
     determine when they were mailed and received, and by 
     reviewing a sample of credit card accounts to determine when 
     and how payments and finance charges were applied. Such 
     regulator shall promptly require the card issuer to take any 
     corrective action needed to comply with this section.''.

     SEC. 3. STOP UNFAIR APPLICATION OF CARD PAYMENTS.

       Section 164 of the Truth in Lending Act (15 U.S.C. 1666c) 
     is amended--
       (1) by striking the section heading and all that follows 
     through ``Payments'' and inserting the following:

     ``Sec. 164. Prompt and fair crediting of payments

       ``(a) In General.--Payments''; and
       (2) by adding at the end the following:
       ``(b) Application of Payment.--Upon receipt of a payment 
     from a cardholder, the card issuer shall--
       ``(1) apply the payment first to the card balance bearing 
     the highest rate of interest, and then to each successive 
     balance bearing the next highest rate of interest, until the 
     payment is exhausted; and
       ``(2) after complying with paragraph (1), apply the payment 
     in the most effective way to minimize the imposition of any 
     finance charge to the account.
       ``(c) Changes by Card Issuer.--If a card issuer makes a 
     material change in the mailing address, office, or procedures 
     for handling cardholder payments, and such change causes a 
     material delay in the crediting of a cardholder payment made 
     during the 60-day period following the date on which such 
     change took effect, the card issuer may not impose any late 
     fee or finance charge for a late payment on the credit card 
     account to which such payment was credited.''.

     SEC. 4. STOP DECEPTIVE DISCLOSURE.

       Section 127(e) of the Truth in Lending Act (15 U.S.C. 
     1637(e)) is amended by adding at the end the following:
       ``(3) Interest rate linked to prime rate.--If a credit card 
     solicitation, application, agreement, or plan specifies use 
     of a variable interest rate established by reference to a 
     `prime rate', `prime interest rate', or similar rate or 
     index, the referenced rate shall be disclosed and defined as 
     the bank prime loan rate posted by a majority of the top 25 
     (by assets in domestic offices) United States chartered 
     commercial banks, as published by the Board of Governors of 
     the Federal Reserve System. To avoid an unfair or deceptive 
     act or practice, a card issuer may not use the term `prime 
     rate' to refer to any other type of interest rate.''.

     SEC. 5. DEFINITIONS.

       Section 103 of the Truth in Lending Act (15 U.S.C. 1602) is 
     amended by adding at the end the following:
       ``(cc) Primary Federal Regulator.--
       ``(1) In general.--The term `primary Federal regulator', 
     when used with respect to a card issuer that is a depository 
     institution, has the same meaning as the term `appropriate 
     Federal banking agency', under section 3 of the Federal 
     Deposit Insurance Act.
       ``(2) Areas of responsibility.--For each card issuer within 
     its regulatory jurisdiction, the primary Federal regulator 
     shall be responsible for overseeing the credit card 
     operations of the card issuer, ensuring compliance with the 
     requirements of this title, and enforcing the prohibition 
     against unfair or deceptive acts or practices.''.

     SEC. 6. STRENGTHEN CREDIT CARD INFORMATION COLLECTION.

       Section 136(b) of the Truth in Lending Act (15 U.S.C. 
     1646(b)) is amended--
       (1) in paragraph (1)--
       (A) by striking ``The Board shall'' and inserting the 
     following:
       ``(A) In general.--The Board shall''; and
       (B) by adding at the end the following:
       ``(B) Information to be included.--The information under 
     subparagraph (A) shall include, as of a date designated by 
     the Board--
       ``(i) a list of each type of transaction or event for which 
     one or more of the card issuers has imposed a separate 
     interest rate upon a cardholder, including purchases, cash 
     advances, and balance transfers;

[[Page 12548]]

       ``(ii) for each type of transaction or event identified 
     under clause (i)--

       ``(I) each distinct interest rate charged by the card 
     issuer to a cardholder, as of the designated date; and
       ``(II) the number of cardholders to whom each such interest 
     rate was applied during the calendar month immediately 
     preceding the designated date, and the total amount of 
     interest charged to such cardholders at each such rate during 
     such month;

       ``(iii) a list of each type of fee that one or more of the 
     card issuers has imposed upon a cardholder as of the 
     designated date, including any fee imposed for obtaining a 
     cash advance, making a late payment, exceeding the credit 
     limit on an account, making a balance transfer, or exchanging 
     United States dollars for foreign currency;
       ``(iv) for each type of fee identified under clause (iii), 
     the number of cardholders upon whom the fee was imposed 
     during the calendar month immediately preceding the 
     designated date, and the total amount of fees imposed upon 
     cardholders during such month;
       ``(v) the total number of cardholders that incurred any 
     interest charge or any fee during the calendar month 
     immediately preceding the designated date; and
       ``(vi) any other information related to interest rates, 
     fees, or other charges that the Board deems of interest.''; 
     and
       (2) by adding at the end the following:
       ``(5) Report to congress.--The Board shall, on an annual 
     basis, transmit to Congress and make public a report 
     containing an assessment by the Board of the profitability of 
     credit card operations of depository institutions. Such 
     report shall include estimates by the Board of the 
     approximate, relative percentage of income derived by such 
     operations from--
       ``(A) the imposition of interest rates on cardholders, 
     including separate estimates for--
       ``(i) interest with an annual percentage rate of less than 
     25 percent; and
       ``(ii) interest with an annual percentage rate equal to or 
     greater than 25 percent;
       ``(B) the imposition of fees on cardholders;
       ``(C) the imposition of fees on merchants; and
       ``(D) any other material source of income, while specifying 
     the nature of that income.''.

     SEC. 7. CONFORMING AMENDMENT.

       Section 8 of the Fair Credit and Charge Card Disclosure Act 
     of 1988 (15 U.S.C. 1637 note) is repealed.

     SEC. 8. EFFECTIVE DATE.

       This Act and the amendments made by this Act shall become 
     effective 180 days after the date of enactment of this Act.
                                 ______
                                 
      By Mr. REID (for himself and Mr. Cochran):
  S. 1398. A bill to expand the research and prevention activities of 
the National Institute of Diabetes and Digestive and Kidney Diseases, 
and the Centers for Disease Control and Prevention with respect to 
inflammatory bowel disease; to the Committee on Health, Education, 
Labor, and Pensions.
  Mr. REID. Mr. President, I rise today to introduce legislation 
focused on a devastating condition known as inflammatory bowel disease, 
IBD.
  Crohn's disease and ulcerative colitis, collectively known as 
inflammatory bowel disease, IBD, are chronic disorders of the 
gastrointestinal tract which afflict approximately 1.4 million 
Americans, 30 percent of whom are diagnosed in their childhood years. 
IBD can cause severe abdominal pain, fever, and intestinal bleeding. 
Complications related to the disease include; arthritis, osteoporosis, 
anemia, liver disease, growth and developmental challenges, and 
colorectal cancer. Inflammatory bowel disease represents a major cause 
of morbidity from digestive illness and has a devastating impact on 
patients and families.
  In the 108th Congress, I sponsored bipartisan legislation focused on 
IBD. Several important provisions of that bill were incorporated into 
legislation known as the Research Review Act which was enacted in 2005.
  The legislation I am introducing today builds on the progress made in 
2005 by calling for an increased Federal investment in biomedical 
research on IBD. The hope for a better quality of life for patients and 
families depends on basic and clinical research sponsored by the 
National Institute of Diabetes and Digestive and Kidney Diseases, 
NIDDK, at the National Institutes of Health. The Inflammatory Bowel 
Disease Research Act calls for an expansion of NIDDK's research 
portfolio on Crohn's disease and ulcerative colitis in order to 
capitalize on several exciting discoveries that have broadened our 
understanding of IBD in recent years. By increasing our investment in 
this area, we will maximize the possibility that we will be able to 
offer hope to millions of Americans who suffer from this debilitating 
disease. At the same time, progress in this area could also mean we 
would save millions of dollars in net health care expenditures through 
reduced hospitalizations and surgeries.
  In addition to biomedical research, this legislation also calls on 
the Centers for Disease Control and Prevention to expand its IBD 
epidemiology program to include additional studies focused on pediatric 
IBD. As I mentioned earlier, 30 percent of individuals with IBD are 
diagnosed in their childhood years. Children with IBD often miss school 
activities for reasons related to IBD and run the risk of having 
delayed puberty and impaired growth as a result of this illness. It is 
therefore appropriate that we also dedicate resources to efforts that 
will allow us to better understand pediatric IBD.
  Mr. President, I urge all Senators to join me in this important cause 
by cosponsoring the Inflammatory Bowel Disease Research Act.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                S. 1398

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

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Inflammatory Bowel Disease 
     Research Enhancement Act''.

     SEC. 2. FINDINGS.

       Congress makes the following findings:
       (1) Crohn's disease and ulcerative colitis are serious 
     inflammatory diseases of the gastrointestinal tract.
       (2) Crohn's disease may occur in any section of the 
     gastrointestinal tract but is predominately found in the 
     lower part of the small intestine and the large intestine. 
     Ulcerative colitis is characterized by inflammation and 
     ulceration of the innermost lining of the colon. Complete 
     removal of the colon in patients with ulcerative colitis can 
     potentially alleviate and cure symptoms.
       (3) Because Crohn's disease and ulcerative colitis behave 
     similarly, they are collectively known as inflammatory bowel 
     disease. Both diseases present a variety of symptoms, 
     including severe diarrhea, abdominal pain with cramps, fever, 
     and rectal bleeding. There is no known cause of inflammatory 
     bowel disease, or medical cure.
       (4) It is estimated that up to 1,400,000 people in the 
     United States suffer from inflammatory bowel disease, 30 
     percent of whom are diagnosed during their childhood years.
       (5) Children with inflammatory bowel disease miss school 
     activities because of bloody diarrhea and abdominal pain, and 
     many adults who had onset of inflammatory bowel disease as 
     children had delayed puberty and impaired growth and have 
     never reached their full genetic growth potential.
       (6) Inflammatory bowel disease patients are at high risk 
     for developing colorectal cancer.

     SEC. 3. NATIONAL INSTITUTE OF DIABETES AND DIGESTIVE AND 
                   KIDNEY DISEASES; INFLAMMATORY BOWEL DISEASE 
                   RESEARCH EXPANSION.

       Subpart 3 of part C of title IV of the Public Health 
     Service Act (42 U.S.C. 285c et seq.) is amended by adding at 
     the end the following:

     ``SEC. 434B. INFLAMMATORY BOWEL DISEASE.

       ``(a) In General.--The Director of the Institute shall 
     expand, intensify, and coordinate the activities of the 
     Institute with respect to research on inflammatory bowel 
     disease. Such research may be focused on, but not limited to, 
     the following areas:
       ``(1) Genetic research on susceptibility for inflammatory 
     bowel disease, including the interaction of genetic and 
     environmental factors in the development of the disease.
       ``(2) Research targeted to increase knowledge about the 
     causes and complications of inflammatory bowel disease in 
     children.
       ``(3) Animal model research on inflammatory bowel disease, 
     including genetics in animals.
       ``(4) Clinical inflammatory bowel disease research, 
     including clinical studies and treatment trials.
       ``(5) Expansion of the Institute's Inflammatory Bowel 
     Disease Centers program with a focus on pediatric research.
       ``(6) The training of qualified health professionals in 
     biomedical research focused on inflammatory bowel disease, 
     including pediatric investigators.
       ``(7) Other research priorities identified by the 
     scientific agendas `Challenges in Inflammatory Bowel Disease 
     Research' (Crohn's and Colitis Foundation of America) and 
     `Chronic Inflammatory Bowel Disease' (North American Society 
     for Pediatric Gastroenterology, Hepatology and Nutrition).

[[Page 12549]]

       ``(b) Authorization of Appropriations.--To carry out 
     subsection (a), there are authorized to be appropriated 
     $80,000,000 for fiscal year 2008, $90,000,000 for fiscal year 
     2009, and $100,000,000 for fiscal year 2010.''.

     SEC. 4. CENTERS FOR DISEASE CONTROL AND PREVENTION; EXPANSION 
                   OF INFLAMMATORY BOWEL DISEASE EPIDEMIOLOGY 
                   PROGRAM.

       Part A of title III of the Public Health Service Act (42 
     U.S.C. 241 et seq.) is amended by adding at the end the 
     following:

     ``SEC. 310A. CENTERS FOR DISEASE CONTROL AND PREVENTION; 
                   EXPANSION OF INFLAMMATORY BOWEL DISEASE 
                   EPIDEMIOLOGY PROGRAM.

       ``(a) In General.--Not later than 1 year after the date of 
     enactment of this Act, the Director of the Centers for 
     Disease Control and Prevention shall expand the Inflammatory 
     Bowel Disease Epidemiology Program within the National Center 
     for Chronic Disease Prevention and Health Promotion to 
     include additional studies focused on--
       ``(1) the incidence and prevalence of pediatric 
     inflammatory bowel disease in the United States;
       ``(2) genetic and environmental factors associated with 
     pediatric inflammatory bowel disease;
       ``(3) age, race or ethnicity, gender, and family history of 
     individuals diagnosed with pediatric inflammatory bowel 
     disease; and
       ``(4) treatment approaches and outcomes in pediatric 
     inflammatory bowel disease.
       ``(b) Consultation.--The Director shall carry out 
     subsection (a) in consultation with a national voluntary 
     patient organization with experience serving the population 
     of individuals with pediatric inflammatory bowel disease and 
     organizations representing physicians and other health 
     professionals specializing in the treatment of such 
     populations.
       ``(c) Authorization of Appropriations.--To carry out this 
     section, there are authorized to be appropriated $5,000,000 
     for fiscal year 2008, and such sums as may be necessary for 
     each of fiscal years 2009 and 2010.''.
                                 ______
                                 
      By Mr. BIDEN:
  S. 1399. A bill to amend the Internal Revenue Code of 1986 to combine 
the Hope Scholarship Credit and the deduction for qualified tuition and 
related expenses into a refundable college affordability and creating 
chances for educational success for students (ACCESS) credit, to 
establish an Early Federal Pell Grant Commitment Demonstration Program, 
and to increase the maximum Federal Pell Grant Award; to the Committee 
on Finance.
  Mr. BIDEN. Mr. President, I rise today to introduce the College 
Affordability and Creating Chances for Educational Success for Students 
Act of 2007, or College ACCESS Act. It will make a 2-year or 4-year 
college degree affordable for every student.
  The United States is the largest economy in the world, and our 
skills, our brains, are the foundation of our economic strength. 
However, if we do not substantially expand access to higher education, 
we will not be able to count on continued dominance. Consider the 
facts: China and India both produce twice as many engineers a year as 
we produce. One out of five U.S. scientists and engineers are foreign-
born. An Indian engineer costs only 20 percent of an American engineer. 
By 2010, the U.S. will produce about 15 percent of the world's science 
and engineering doctorate degrees. This is down from 50 percent, half 
the world total, in 1970. High-speed access to information has leveled 
the playing field, radiologists in India are reading x-rays from 
American hospitals.
  This is a global economy. In a world where America's competitive 
advantage gap is closing fast, we should be ensuring guaranteeing that 
every student can pursue higher education. The importance of a college 
degree has never been greater, but over the next decade 2 million 
students will forgo college because of cost. The price tag of a degree 
at a four year public college has risen 35 percent in the last 5 years, 
the largest increase in tuition and fees in any 5-year period in the 
last 30 years. We can not approach college as if it is a luxury, rather 
than a necessity. And we should be worried about the rising costs that 
are putting college out of reach for more and more Americans. We aren't 
giving students and their families enough financial support to obtain 
their educational goals, it is that simple.
  We need to act, and we need to act now, and that is why I am 
introducing the College ACCESS Act. This legislation addresses some of 
the disparities in our current system with innovative new ways to help 
Americans pay for college.
  First, my College ACCESS Plan fully covers the average cost of 
tuition and fees at a 2-year public college and covers more than half 
of the average cost of tuition and fees at a public 4-year college.
  Right now, students and their families can take advantage of either 
the Hope Credit or the tuition and fees deduction, obtaining a maximum 
benefit of $1,120 or $1,650, respectively. Although these incentives 
help to make college more affordable, they fall far short of providing 
the level of relief needed to ensure that all students can afford 
college.
  By replacing the Hope Credit and the tuition and fees deduction with 
a single $3,000 credit, the equivalent of a $12,000 deduction, and 
making it refundable, middle class and low income families will get 
real help with college costs. My College ACCESS tax credit simplifies 
this process and is indexed annually for inflation. So, when the cost 
of college goes up, the amount of assistance goes up as well.
  Second, my College ACCESS proposal increases Pell Grants. When this 
program was established, it covered most of the cost of tuition at a 4-
year public college. This is no longer the case. Currently, the maximum 
annual Pell Grant award is $4,310, and the average annual cost of 
tuition and fees at a 4-year public college is $5,800. Students are 
seeing their tuition costs rise every year while the levels of Federal 
funding fail to keep up. This reality is one that more and more 
students are facing every day, a reality that says, you can go to 
college, but only if you can afford it, and you won't get much help 
from us.
  My College ACCESS Act seeks to remedy this by raising the maximum 
Pell Grant award to $5,100 for 2007-2008, followed by increases of $300 
per year for the next 5 years, for a maximum Pell Grant in 2011-2012 of 
$6,300.
  Finally, the College ACCESS Plan would provide funding for a 
demonstration program in four states that would commit a maximum 
Federal Pell Grant award to eligible 8 grade students so they know 
they're going to get this assistance when they graduate. By using the 
same eligibility criteria as the National School Lunch Program, 
students would be identified based on need, and then provided with 
information on the Pell Grant program, the costs of college, and what 
Federal and State financial assistance is available to them.
  Right now, students don't find out if they are eligible for Federal 
aid until their senior year, much less how much they will receive. If 
you've ever put kids through college, like I have, you know that this 
time frame doesn't allow much leeway for planning ahead. An earlier 
promise of Federal aid will begin the conversation about college early 
and continue it through high school. That way, students and their 
families can visualize college in their future, and this goal can 
sustain them through the moment they open that acceptance letter.
  My mother has an expression that I think rings true in the larger 
scope of America: ``Children tend to become that which you expect of 
them.'' I want a country where we expect much from America's children. 
Our future, and our economic security, depend on it.
  I ask unanimous consent that a summary of this bill be included in 
the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                     The College ACCESS Act of 2007


                   Title I--College ACCESS Tax Credit

       Consolidate two existing tax incentives--the Hope 
     Scholarship Credit and the tuition and fees deduction--and 
     replaces them with a single $3,000 refundable tax credit that 
     is the equivalent of a $12,000 deduction. The College ACCESS 
     Tax Credit would fully cover the average cost of tuition and 
     fees at a public two-year college, $2,300, and would cover 
     more than half of the average cost of tuition and fees at a 
     public four-year college, $5,800. Currently, the tuition and 
     fees deduction has a maximum value of $1,120, about 20 
     percent of the average cost of tuition and fees at a public 
     four-year college. The Hope Scholarship Credit is more 
     valuable, with a maximum value of $1,650, about 28 percent of 
     the average cost of tuition and fees at a public four-year 
     college.
       Expand eligibility for the tax credit to ease the burden of 
     paying for college for more

[[Page 12550]]

     families. Currently, the Hope Scholarship Credit is phased 
     out for married couples earning $90,000 to $110,000, $45,000 
     to $55,000 for individuals. Married couples earning $130,000 
     to $160,000, $65,000-$80,000 for individuals, are eligible 
     only for a reduced tuition and fees deduction. The College 
     ACCESS Tax Credit expands eligibility, providing the full 
     credit to married couples whose adjusted gross income is less 
     than $130,000, $65,000 for individuals and phasing out the 
     credit for married couples with incomes between $130,000 and 
     $166,000, $65,000 and $83,000 for individuals. Broadening the 
     income limits for this credit would result in approximately 4 
     million more hard working American families being eligible 
     for this assistance than under the current tax incentives and 
     limits. Recognizing that the cost of college rises each year, 
     both the income limits and phase-out range for the credit 
     would be adjusted annually for inflation. Furthermore, 
     families could claim a credit for more than one eligible 
     dependent in a school year. In pursuing their education, 
     individuals will be eligible for credits totaling up to 
     $12,000 toward an undergraduate degree, associate's degree, 
     certificate, or continuing education as well as credits 
     totaling up to $6,000 toward a graduate degree; as long as 
     they are enrolled at least half-time.
       Make the tuition tax credit refundable. Making the College 
     ACCESS Tax Credit refundable would expand this incentive to 
     the very students and families that need it the most, low 
     income families. This credit would allow low income families 
     to qualify for up to $3,000 to cover tuition payments that 
     aren't covered by Pell Grants. Low income students who do 
     attend college often face prohibitive costs even after 
     receiving aid from the government and their institution.


  Title II--Early Federal Pell Grant Commitment Demonstration Program

       Fund a demonstration program that would commit Pell Grants 
     to students in 8 grade. Currently, most students find out 
     whether or not they will receive a Pell Grant during their 
     senior year of high school. Starting the financial aid 
     process earlier would allow families and students to plan 
     ahead for college and develop an expectation that the future 
     includes higher education. The proposal provides funding for 
     an Early Pell Grant Commitment Demonstration Program in four 
     States, each of which would commit Pell Grants to two cohorts 
     of up to 10,000 8 grade students, one in school year 2007-
     2008, and one in school year 2008-2009. Participation would 
     be contingent on students' 8 grade eligibility for free or 
     reduced price meals under the National School Lunch Program. 
     Participants would qualify for the Automatic Zero Expected 
     Family Contribution on the Free Application for Federal 
     Student Aid, FAFSA, guaranteeing them a maximum Pell Grant, 
     $4,310 for 2007-08. Additionally, the act requires an 
     independent evaluation to be conducted to determine the 
     impact and effectiveness of the program.
       Provide students with essential information regarding the 
     costs of college as well as available State and Federal 
     assistance. The Early Pell Grant Demonstration Project would 
     provide funding for States, in conjunction with the 
     participating local education agencies, to conduct targeted 
     information campaigns beginning in the 8 grade and continuing 
     through students' senior year. These campaigns would inform 
     students and their families of the program and provide 
     information about the cost of a college education, State and 
     Federal financial assistance, and the average amount of aid 
     awards. A targeted information campaign, along with a 
     guarantee of a maximum Pell Grant, would provide information 
     essential to the college-planning process and would help 
     break down the barriers that cost and information often form.


          Title III--Increase Federal Pell Grant Maximum Award

       Expand the maximum Pell Grant from $4,310 to $5,100. In 
     1975, the maximum Pell Grant covered 84 percent of the cost 
     of tuition, fees, room, and board at a four-year public 
     college (Pell Grants, unlike tax incentives, can be used to 
     pay for the cost of room and board). The maximum Pell Grant 
     this year covered 33 percent of the average cost of tuition, 
     fees, room, and board at a public four-year college, $12,115. 
     While Congress increased the maximum Pell Grant for 2007-2008 
     to $4,310, a more substantial increase is long overdue, as 
     the cost of tuition has outpaced the growth in family income 
     for the last two decades. The College ACCESS Act would 
     increase the maximum Pell Grant to $5,100 for 2007-2008, 
     followed by increases of $300 per year for the next five 
     years, for a maximum Pell Grant in 2011-12 of $6,300.


                       Estimated Five-Year Costs

       Title I--$24.1 Billion
       Title II--$35 billion
       Title III--$36.5 million
                                 ______
                                 
      By Mr. ENZI (for himself, Mr. Alexander, Mr. Allard, Mr. Burr, 
        Mr. Isakson, and Ms. Murkowski):
  S. 1400. A bill to amend the Higher Education Act of 1965 to improve 
the information and repayment options to student borrowers, and for 
other purposes; to the Committee on Health, Education, Labor, and 
Pensions.
  Mr. ENZI. Mr. President, I rise to speak about the Student 
Information Means a Positive Loan Experience Act, the SIMPLE Act, which 
I, along with Senators Alexander, Allard, Burr and Isakson, am 
introducing today. With the increasing debt level of many students, it 
is important to make sure borrowers have good options for managing 
their debt and good information on the available options so they make 
wise, informed decisions.
  We are calling this the SIMPLE Act for a reason. We have heard 
testimony from experts and comments from borrowers and other 
stakeholders about the information borrowers receive currently. On the 
one hand, borrowers receive so much information that they have 
``information overload,'' which leads to confusion. On the other hand, 
many borrowers do not receive good information about the full range of 
tools available to help them repay their loans. What has come through 
loud and clear is that we need to simplify the information and spell 
out the impact of selecting various options. Borrowers need better, 
clearer information to help them make better decisions, not more 
repayment plans and confusing choices.
  There are already four repayment plans in the Federal Family 
Education Loan program and four in Direct Loans. From the data we have 
obtained, it is clear that the vast majority of borrowers with Stafford 
loans have a standard repayment plan. Many borrowers are not taking 
advantage of the graduated, extended or income sensitive/income 
contingent repayment plans currently available.
  Rather than adding another repayment plan, this bill makes the 
existing repayment plans more flexible, by providing borrowers with the 
option to pay only the interest on their loans for the first 2 years 
they are in repayment, regardless of their repayment plan. The bill 
also expands access to the extended repayment plan to borrowers with 
$20,000 of student loan debt, instead of the $30,000 currently needed 
to qualify for extended repayment plans.
  The bill also revises the definition of economic hardship, raising 
the eligibility cut-off point to 150 percent of the poverty line and 
taking family size into account when making the determination of 
eligibility.
  To make sure borrowers understand the availability of the various 
options, and the impact different repayment plans would have on their 
payments, the bill expands and clarifies the information to be provided 
to borrowers during their exit interview. Information on repayment 
plans available will include a discussion of the different features of 
each plan, average anticipated monthly payment amounts, and the ability 
of the borrower to prepay their loans or to change repayment plans.
  The bill requires borrowers to be provided with clear information on 
the availability of deferment and forbearance. These are two excellent 
debt management tools, but borrowers must understand the potential 
impact on their loan principal and total interest paid on their loans 
when they choose these options.
  During exit counseling, borrowers must also be provided with 
information on the effect of consolidating student loans on the 
borrower's underlying loan benefits, including grace periods, loan 
forgiveness and cancellation. Borrowers must be informed that different 
lenders offering consolidation loans may offer different borrower 
benefits.
  Last, but not least, borrowers must be given notice that information 
on their student loans is housed in the National Student Loan Database 
and they must be told how to access their information. It will help 
them keep track of the status of their loans and the outstanding 
principal.
  All of this is designed to help borrowers ask questions first, then 
make decisions that are right for them. The concept is simple, and 
requires a few, but essential changes to the Higher Education Act to 
put them into effect.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.

[[Page 12551]]

  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                S. 1400

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

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Student Information Means a 
     Positive Loan Experience Act of 2007''.

     SEC. 2. PURPOSE.

       The purpose of this Act is to improve--
       (1) the repayment plans available to borrowers of loans 
     under title IV of the Higher Education Act of 1965 (20 U.S.C. 
     1070 et seq.); and
       (2) borrowers' understanding of--
       (A) the repayment plans available for such loans;
       (B) the conditions under which such loans may be cancelled 
     or forgiven; and
       (C) the availability of deferments, forbearance, and 
     consolidation for such loans, and the impact on the balance 
     of such loans and total interest paid of using those options.

     SEC. 3. FLEXIBLE REPAYMENT PLANS.

       (a) Student Loan Requirements.--Section 427(a)(2)(H) of the 
     Higher Education Act of 1965 (20 U.S.C. 1077(a)(2)(H)) is 
     amended by inserting ``, and, if applicable, the option of 
     electing to delay repayment or principal for the first 2 
     years of the repayment period'' before the semicolon at the 
     end.
       (b) FFEL Repayment Plans.--Section 428(b)(9) of the Higher 
     Education Act of 1965 (20 U.S.C. 1078(b)(9)) is amended--
       (1) in subparagraph (A)--
       (A) in the first sentence of the matter preceding clause 
     (i), by inserting ``, and the election described in 
     subparagraph (C)'' after ``thereon'';
       (B) in clause (ii), by inserting ``, which plan shall be 
     established by the lender with the informed agreement of the 
     borrower'' before the semicolon at the end; and
       (C) by striking clause (iv) and inserting the following:
       ``(iv) for new borrowers on or after October 7, 1998, who 
     accumulate outstanding loans under this part totaling more 
     than $20,000, an extended repayment plan, with a fixed annual 
     or graduated repayment amount paid over an extended period, 
     not to exceed 25 years, except that the borrower shall repay 
     annually a minimum amount determined in accordance with 
     paragraph (1)(L)(i).''; and
       (2) by adding at the end the following:
       ``(C) Option for first 2 years.--A lender shall offer each 
     new borrower of loans on or after October 7, 1998, the 
     opportunity to elect, for the first 2 years of repayment of 
     such loans, to delay the repayment of principal, regardless 
     of the repayment plan selected under this paragraph.''.
       (c) Direct Loan Repayment Plans.--Section 455(d) of the 
     Higher Education Act of 1965 (20 U.S.C. 1087e(d)) is 
     amended--
       (1) in paragraph (1)--
       (A) in the matter preceding subparagraph (A)--
       (i) in the first sentence, by inserting ``, and the 
     election described in paragraph (6)'' after ``the loan''; and
       (ii) in the third sentence, by striking ``may choose'' and 
     inserting ``shall choose from''; and
       (B) in subparagraph (C), by striking ``428(b)(9)(A)(v)'' 
     and inserting ``428(b)(9)(A)(iv)''; and
       (2) by adding at the end the following:
       ``(6) Option for first 2 years.--The Secretary shall offer 
     each new borrower of loans on or after October 7, 1998, the 
     opportunity to elect, for the first 2 years of repayment of 
     such loans, to delay the repayment of principal, consistent 
     with section 428(b)(9)(C).''.
       (d) Effective Date.--The amendments made by this section 
     shall apply with respect to loans for which the first 
     disbursement is made on or after October 7, 1998.

     SEC. 4. REVISED DEFINITION OF ECONOMIC HARDSHIP.

       Section 435(o)(1) of the Higher Education Act of 1965 (20 
     U.S.C. 1085(o)(1)) is amended--
       (1) in subparagraph (A)(ii), by striking ``100 percent of 
     the poverty line for a family of 2'' and inserting ``150 
     percent of the poverty line applicable to the borrower's 
     family size''; and
       (2) in subparagraph (B)(ii), by striking ``to a family of 
     2'' and inserting ``to the borrower's family size''.

     SEC. 5. USEFUL AND COMPREHENSIVE STUDENT LOAN INFORMATION FOR 
                   BORROWERS.

       (a) Insurance Program Agreements.--Section 428(b)(1) of the 
     Higher Education Act of 1965 (20 U.S.C. 1078(b)(1)) is 
     amended--
       (1) in subparagraph (X), by striking ``and'' after the 
     semicolon;
       (2) in subparagraph (Y)(ii), by striking the period at the 
     end and inserting ``; and''; and
       (3) by adding at the end the following:
       ``(Z) provides that the lender shall, at the time the 
     lender grants a deferment to a borrower who received a loan 
     under section 428H and is eligible for a deferment under 
     section 427(a)(2)(C), provide information to the borrower to 
     enable the borrower to understand the impact of 
     capitalization of interest on the borrower's loan principal 
     and total amount of interest to be paid during the life of 
     the loan.''.
       (b) Guaranty Agreements.--Section 428(c)(3)(C) of the 
     Higher Education Act of 1965 (20 U.S.C. 1078(c)(3)(C)) is 
     amended--
       (1) in clause (i), by striking ``and'' after the semicolon;
       (2) in clause (ii), by striking ``and'' after the 
     semicolon;
       (3) by inserting after clause (ii) the following:
       ``(iii) the lender shall, at the time of granting a 
     borrower forbearance, provide information to the borrower to 
     enable the borrower to understand the impact of 
     capitalization of interest on the borrower's loan principal 
     and total amount of interest to be paid during the life of 
     the loan; and
       ``(iv) the lender shall contact the borrower not less often 
     than once every 180 days during the period of forbearance to 
     inform the borrower of--

       ``(I) the amount of unpaid principal and the amount of 
     interest that has accrued since the last statement of such 
     amounts provided to the borrower by the lender;
       ``(II) the fact that interest will accrue on the loan for 
     the period of forbearance;
       ``(III) the amount of interest that will be capitalized, 
     and the date on which capitalization will occur;
       ``(IV) the ability of the borrower to pay the interest that 
     has accrued before the interest is capitalized; and
       ``(V) the borrower's option to discontinue the forbearance 
     at any time; and''.

       (c) Lender Agreements.--Section 428C(b)(1) of the Higher 
     Education Act of 1965 (20 U.S.C. 1078-3(b)(1)) is amended--
       (1) in subparagraph (E), by striking ``and'' after the 
     semicolon;
       (2) by redesignating subparagraph (F) as subparagraph (G); 
     and
       (3) by inserting after subparagraph (E) the following:
       ``(F) that the lender shall, upon application for a 
     consolidation loan, provide the borrower with information 
     about the possible impact of loan consolidation, including--
       ``(i) the total interest to be paid and fees to be paid on 
     the consolidation loan, and the length of repayment for the 
     loan;
       ``(ii) whether consolidation would result in a loss of loan 
     benefits under this part or part D, including loan 
     forgiveness, cancellation, and deferment;
       ``(iii) in the case of a borrower that plans to include a 
     Federal Perkins Loan under part E in the consolidation loan, 
     that once the borrower adds the borrower's Federal Perkins 
     Loan to a consolidation loan--

       ``(I) the borrower will lose all interest-free periods that 
     would have been available for such loan under part E, such as 
     the periods during which no interest accrues on the Federal 
     Perkins Loan while the borrower is enrolled in school at 
     least half-time, the grace period, and the periods during 
     which the borrower's student loan repayments are deferred 
     under section 464(c)(2); and
       ``(II) the borrower will no longer be eligible for 
     cancellation of part or all of a Federal Perkins loan under 
     section 465(a);

       ``(iv) the ability of the borrower to prepay the 
     consolidation loan, pay such loan on a shorter schedule, and 
     to change repayment plans;
       ``(v) that borrower benefit programs for a consolidation 
     loan may vary among different lenders;
       ``(vi) the consequences of default on the consolidation 
     loan; and
       ``(vii) that by applying for a consolidation loan, the 
     borrower is not obligated to agree to take the consolidation 
     loan; and''.
       (d) Information Dissemination.--Subparagraph (M) of section 
     485(a)(1) of the Higher Education Act of 1965 (20 U.S.C. 
     1092(a)(1)(M)) is amended to read as follows:
       ``(M) the terms and conditions of the loans that students 
     receive under parts B, D, and E;''.
       (e) Exit Counseling.--Subparagraph (A) of section 485(b)(1) 
     of the Higher Education Act of 1965 (20 U.S.C. 1092(b)(1)(A)) 
     is amended by striking the subparagraph designation and all 
     that follows through ``465.'' and inserting the following: 
     ``(A) Each eligible institution shall, through financial aid 
     offices or otherwise, provide counseling to borrowers of 
     loans that are made, insured, or guaranteed under part B 
     (other than loans made pursuant to section 428C or loans made 
     to parents pursuant to section 428B), or made under part D 
     (other than Federal Direct Consolidation Loans or Federal 
     Direct PLUS Loans made to parents) or E, prior to the 
     completion of the course of study for which the borrower 
     enrolled at the institution or at the time of departure from 
     such institution. The counseling required by this subsection 
     shall include--
       ``(i) information on the repayment plans available, 
     including a discussion of the different features of each plan 
     and sample information showing the difference in interest 
     paid and total payments under each plan;
       ``(ii) the average anticipated monthly repayments under the 
     standard repayment plan and, at the borrower's request, the 
     other repayment plans for which the borrower is eligible;
       ``(iii) such debt and management strategies as the 
     institution determines are designed to facilitate the 
     repayment of such indebtedness;
       ``(iv) an explanation that the borrower has the ability to 
     prepay each such loan, pay the loan on a shorter schedule, 
     and change repayment plans;

[[Page 12552]]

       ``(v) the terms and conditions under which the student may 
     obtain full or partial forgiveness or cancellation of 
     principal or interest under sections 428J, 460, and 465 (to 
     the extent that such sections are applicable to the student's 
     loans);
       ``(vi) the terms and conditions under which the student may 
     defer repayment of principal or interest or be granted 
     forbearance under subsections (b)(1)(M) and (o) of section 
     428, 428H(e)(7), subsections (f) and (l) of section 455, and 
     section 464(c)(2), and the potential impact of such deferment 
     or forbearance;
       ``(vii) the consequences of default on such loans;
       ``(viii) information on the effects of using a 
     consolidation loan to discharge the borrower's loans under 
     parts B, D, and E, including, at a minimum--
       ``(I) the effects of consolidation on total interest to be 
     paid, fees to be paid, and length of repayment;
       ``(II) the effects of consolidation on a borrower's 
     underlying loan benefits, including all grace periods, loan 
     forgiveness, cancellation, and deferment opportunities;
       ``(III) the ability of the borrower to prepay the loan or 
     change repayment plans; and
       ``(IV) that borrower benefit programs may vary among 
     different loan holders; and
       ``(ix) a notice to borrowers about the availability of the 
     National Student Loan Data System and how the system can be 
     used by a borrower to obtain information on the status of the 
     borrower's loans.''.
       (f) Conforming Amendment.--Section 455(g) of the Higher 
     Education Act of 1965 (20 U.S.C. 1087e(g)) is amended by 
     striking ``428C(b)(1)(F)'' and inserting ``428C(b)(1)(G)''.

     SEC. 6. REPORT REQUIRED.

       Section 141(c) of the Higher Education Act of 1965 (20 
     U.S.C. 1018(c)) is amended--
       (1) in the subsection heading, by striking ``Plan and 
     Report'' and inserting ``Plan, Report, and Briefing''; and
       (2) by adding at the end the following:
       ``(4) Briefing on enforcement of student loan provisions.--
     The Chief Operating Officer shall provide an annual briefing 
     to the members of the authorizing committees on the steps the 
     PBO has taken and is taking to ensure that lenders are 
     providing the information required under clauses (iii) and 
     (iv) of section 428(c)(3)(C) and sections 428(b)(1)(Z) and 
     428C(b)(1)(F).''.
                                 ______
                                 
      By Mr. ENZI (for himself, Mr. Alexander, Mr. Allard, Mr. Burr, 
        Mr. Isakson, Mr. Roberts, and Ms. Murkowski):
  S. 1401. A bill to improve the National Student Loan Data System; to 
the Committee on Health, Education, Labor, and Pensions.
  Mr. ENZI. Mr. President, I rise to speak about the Student Financial 
Aid Data Privacy Protection Act, which I, along with Senators 
Alexander, Allard, Burr, Isakson and Roberts, am introducing today. In 
a climate where our personal financial information is at risk, it is 
now more important than ever to ensure that the Department of Education 
is providing appropriate safeguards around one of the world's largest 
databases, National Student Loan Data System.
  The Department of Education has not inspired confidence in its 
ability to protect its data systems from those bad actors who would 
misuse the financial information of students and parents. Indeed in 
2006 the House Committee on Oversight and Government Reform gave the 
Department of Education a failing grade for its efforts to improve the 
security of its data systems in compliance with the Federal Information 
Security Management Act.
  More recently, on April 17 of this year the Department of Education 
suspended the access of lenders, services and guaranty agencies to the 
National Student Loan Data System. While I am pleased to see that the 
Department of Education is monitoring this database, it is clear from 
the information provided by the Department of Education that this 
unprecedented restriction of access was done without having in place 
clear standard operating procedures for limiting and restoring access 
to the database.
  The National Student Loan Data System is a vital tool for lenders, 
universities and students. It is a system that is absolutely essential 
to the efficient functioning of our country's higher education loan and 
grant programs. When the operation of this system suffers, students 
suffer.
  Students and parents depend on this system to consolidate their 
loans. Lenders and guaranty agencies depend on this system to verify 
whether students should be entering their repayment period. And our 
institutions of higher education depend on this system to determine 
whether students are exceeding caps on how much they should be 
borrowing to attend college.
  This bill sets out operating principles for the National Student Loan 
Data System, to ensure that the Department of Education continues to 
manage this database in manner that advances the best interests of 
students. The bill requires the Department of Education establish 
protocols for limiting access to the database when there are suspicions 
that the system is being used inappropriately, and the steps to be 
taken in order to restore access.
  This bill also requires the Department of Education, lenders and 
guaranty agencies to assist students and parents in better 
understanding how their sensitive, financial information is entered 
into the National Student Loan Data System and then accessed by 
thousands of lenders, consolidators and guaranty agencies across the 
country.
  Finally, the bill prohibits nongovernmental researchers and policy 
analysts from accessing sensitive borrower-specific information, and 
directs the Secretary of Education to explore ways to empower students 
and parents to control which lenders are accessing their sensitive, 
financial information.
  We must help the 14.3 million students and their families who trust 
the Department of Education to protect their personal financial 
information. Action is needed to restore confidence in the ability of 
the Department of Education to manage the National Student Loan Data 
System. I want to thank Senators Alexander, Allard, Burr, Isakson and 
Roberts for joining me in this effort, and look forward to this bill 
being included in our efforts to reauthorize the Higher Education Act.
  I ask unanimous consent that the text of the bill be printed in the 
Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                S. 1401

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

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Student Financial Aid Data 
     Privacy Protection Act''.

     SEC. 2. NATIONAL STUDENT LOAN DATA SYSTEM.

       Section 485B of the Higher Education Act of 1965 (20 U.S.C. 
     1092b) is amended--
       (1) by redesignating subsections (d) through (g) as 
     subsections (e) through (h), respectively;
       (2) by inserting after subsection (c) the following:
       ``(d) Principles for Administering the Data System.--In 
     managing the National Student Loan Data System, the Secretary 
     shall take actions necessary to maintain confidence in the 
     data system, including, at a minimum--
       ``(1) ensuring that the primary purpose of access to the 
     data system by guaranty agencies, eligible lenders, and 
     eligible institutions of higher education is for legitimate 
     program operations, such as the need to verify the 
     eligibility of a student, potential student, or parent for 
     loans under part B, D, or E;
       ``(2) prohibiting nongovernmental researchers and policy 
     analysts from accessing personally identifiable information;
       ``(3) creating a disclosure form for students and potential 
     students that is distributed when such students complete the 
     common financial reporting form under section 483, and as a 
     part of the exit counseling process under section 485(b), 
     that--
       ``(A) informs the students that any title IV grant or loan 
     the students receive will be included in the National Student 
     Loan Data System, and instructs the students on how to access 
     that information;
       ``(B) describes the categories of individuals or entities 
     that may access the data relating to such grant or loan 
     through the data system, and for what purposes access is 
     allowed;
       ``(C) defines and explains the categories of information 
     included in the data system;
       ``(D) provides a summary of the provisions of the Federal 
     Educational Rights and Privacy Act of 1974 and other 
     applicable Federal privacy statutes, and a statement of the 
     students' rights and responsibilities with respect to such 
     statutes;
       ``(E) explains the measures taken by the Department to 
     safeguard the students' data; and
       ``(F) includes other information as determined appropriate 
     by the Secretary;
       ``(4) requiring guaranty agencies, eligible lenders, and 
     eligible institutions of higher education that enter into an 
     agreement with a potential student, student, or parent of 
     such student regarding a loan under part B,

[[Page 12553]]

     D, or E, to inform the student or parent that such loan shall 
     be--
       ``(A) submitted to the data system; and
       ``(B) accessible to guaranty agencies, eligible lenders, 
     and eligible institutions of higher education determined by 
     the Secretary to be authorized users of the data system;
       ``(5) regularly reviewing the data system to--
       ``(A) delete inactive users from the data system;
       ``(B) ensure that the data in the data system are not being 
     used for marketing purposes; and
       ``(C) monitor the use of the data system by guaranty 
     agencies and eligible lenders to determine whether an agency 
     or lender is accessing the records of students in which the 
     agency or lender has no existing financial interest; and
       ``(6) developing standardized protocols for limiting access 
     to the data system that include--
       ``(A) collecting data on the usage of the data system to 
     monitor whether access has been or is being used contrary to 
     the purposes of the data system;
       ``(B) defining the steps necessary for determining whether, 
     and how, to deny or restrict access to the data system; and
       ``(C) determining the steps necessary to reopen access to 
     the data system following a denial or restriction of 
     access.''; and
       (3) by striking subsection (e) (as redesignated by 
     paragraph (1)) and inserting the following:
       ``(e) Reports to Congress.--
       ``(1) Annual report.--Not later than September 30 of each 
     fiscal year, the Secretary shall prepare and submit to the 
     appropriate committees of Congress a report describing--
       ``(A) the results obtained by the establishment and 
     operation of the National Student Loan Data System authorized 
     by this section;
       ``(B) the effectiveness of existing privacy safeguards in 
     protecting student and parent information in the data system;
       ``(C) the success of any new authorization protocols in 
     more effectively preventing abuse of the data system;
       ``(D) the ability of the Secretary to monitor how the 
     system is being used, relative to the intended purposes of 
     the data system; and
       ``(E) any protocols developed under subsection (d)(6) 
     during the preceding fiscal year.
       ``(2) Study.--
       ``(A) In general.--The Secretary shall conduct a study 
     regarding--
       ``(i) available mechanisms for providing students and 
     parents with the ability to opt in or opt out of allowing 
     eligible lenders to access their records in the National 
     Student Loan Data System; and
       ``(ii) appropriate protocols for limiting access to the 
     data system, based on the risk assessment required under 
     subchapter III of chapter 35 of title 44, United States Code.
       ``(B) Submission of study.--Not later than 3 years after 
     the date of enactment of the Student Financial Aid Data 
     Privacy Protection Act, the Secretary shall prepare and 
     submit a report on the findings of the study to the 
     appropriate committees of Congress.''.
                                 ______
                                 
      By Mr. GRASSLEY:
  S. 1402. A bill to amend the Investment Advisors Act of 1940, with 
respect to the exemption to registration requirements; to the Committee 
on Banking, Housing, and Urban Affairs.
  Mr. GRASSLEY. Mr. President, I would like to introduce an important 
piece of legislation aimed at closing a loophole in our securities 
laws. This bill, The Hedge Fund Registration Act, is pretty simple. 
It's only two pages long. All it does is clarify that the Securities 
and Exchange Commission has the authority to require hedge funds to 
register, so the government knows who they are and what they're doing.
  Technically speaking, this bill would amend section 203(b)(3) of the 
Investment Advisers Act of 1940. It would narrow the current exemption 
from registration for certain investment advisers. This exemption is 
used by large, private pooled investment vehicles, commonly referred to 
as ``hedge funds.'' Hedge funds are operated by advisers who manage 
billions of dollars for groups of wealthy investors in total secrecy. 
They should at least have to register with the SEC, like other 
investment advisors do.
  Currently, the exemption applies to any investment adviser who had 
fewer than 15 clients in the preceding year and who does not hold 
himself out to the public as an investment adviser. The Hedge Fund 
Registration Act narrows this exemption and closes a loophole in the 
securities laws these hedge funds use to avoid registering with the SEC 
and operate in secret.
  Much has been reported during the last few years regarding hedge 
funds and the market power they yield because of the large amounts of 
capital they invest. In fact, some estimates are that these pooled 
investment vehicles account for nearly 30 percent of the daily trades 
in U.S. financial markets. The power and influence of that amount of 
volume is not some passing fad. It represents a new element in our 
financial markets. Congress needs to ensure that the SEC knows who is 
controlling these massive pools of money to ensure the integrity and 
security of the markets.
  The failure of Amaranth and the increasing interest in hedge funds as 
investment vehicles for public pension money means that this is not 
just a high stakes game for the super rich. Hedge funds affect regular 
investors. They affect the markets as a whole.
  My recent oversight of the SEC has convinced me that the Commission 
and the Self-Regulatory Organizations, SROs, need much more information 
about the activities of hedge funds in order to protect the markets 
from institutional insider trading and other potential abuses.
  This legislation is one small, simple step toward greater 
transparency. All it does is require that hedge funds register and tell 
the regulators who they are. This is not a burden. It is just common 
sense. Organizations that wield hundreds of billions of dollars in 
market power every day need to register with the agency that Americans 
rely on to regulate the financial markets.
  The SEC has already attempted to do this by regulation. Congress 
needs to act because of a decision made last year by a Federal appeals 
court. In 2006, the DC Circuit Court of Appeals overturned an SEC 
administrative rule that required registration of hedge funds. That 
decision effectively ended all registration of hedge funds with the 
SEC, unless and until Congress takes action.
  The Hedge Fund Registration Act would respond to that court decision 
by narrowing the current registration exemption and bring much needed 
transparency to hedge funds.
  Most people say the devil is in the details. Well here they are. This 
bill would authorize the SEC to require all investment advisers, 
including hedge fund managers, to register with the SEC. Only those 
that meet all four of the following criteria would be exempt: 1. 
managed less than $50 million, 2. had fewer than 15 clients, 3. did not 
hold himself out to the public as an investment advisor, and 4. managed 
the assets for fewer than 15 investors, regardless of whether 
investment is direct or through a pooled investment vehicle, such as a 
hedge fund.
  The Hedge Fund Registration Act is a first step in ensuring that the 
SEC simply has clear authority to do what it already tried to do. 
Congress must act to ensure that our laws are kept up to date as new 
types of investments appear.
  That said, this legislation didn't have many friends the last time I 
introduced it as an amendment. These funds don't want people to know 
what they do and have fought hard to keep it that way. Well, I think 
that is all the more reason to shed some sunlight on them to see what 
they're up to.
  I urge my colleagues to cosponsor and support this legislation, as we 
work to protect all investors, large and small.
                                 ______
                                 
      By Mr. INHOFE:
  S. 1404. A bill to provide for Congressional authority with respect 
to certain acquisitions, mergers, and takeovers under the Defense 
Production Act of 1950; to the Committee on Banking, Housing, and Urban 
Affairs.
  Mr. INHOFE. Mr. President, this is an important issue, one I have 
raised many times over the years. I have testified before the Banking 
Committee, and introduced numerous bills.
  It is not a new issue. There have been at least four high-profile 
times in the last 12 years where proposed foreign acquisitions in the 
U.S. have threatened our security.
  In 1998, President Clinton tried to turn over management of a 144-
acre terminal at the former U.S. Naval Station in Long Beach to the 
Chinese Ocean Shipping Company, COSCO--a

[[Page 12554]]

subsidiary of the People's Liberation Army.
  I am going to quote from an LA Times article from that time:

       The embattled COSCO deal came to an end Thursday night, 
     when congressional conferees submitted to Congress the 1998-
     99 Defense Authorization Bill . . . Leading the effort to 
     block COSCO from the facility were Sen. James Inhofe (R-OK) 
     and Rep. Duncan Hunter [of the] San Diego area.

  That was one battle that we won.
  Since working in 1995 to prevent Los Angeles ports from being 
controlled by Chinese interests, I have continued my pressure on the 
issue. For example, I expressed my concern with the CFIUS process over 
2 years ago in the spring of 2005 when I delivered four speeches on 
China. While examining this issue I came across a disturbing example of 
China buying the U.S. company, Magnequench Inc., and moving it 
piecemeal back to mainland China.
  Let me read from the floor speech I gave on April 4, 2005:

       I believe that CFIUS does not have a broad enough 
     conception of U.S. security. One example of CFIUS falling 
     short is with Magnequench International Incorporated. In 1995 
     Chinese corporations bought GM's Magnequench, a supplier of 
     rare earth metals used in the guidance systems of smart-
     bombs. Over twelve years, the company has been moved 
     piecemeal to mainland China, leaving the U.S. with no 
     domestic supplier of a critical component of rare-earth 
     magnets. CFIUS approved this transfer.

  The United States now has no domestic supplier of rare earth metals, 
which are essential for precision-guided munitions.
  That was one we lost.
  Following this series of four speeches that spring, on July 20, 2005, 
I introduced Senate amendment No. 1311 as an amendment to the annual 
National Defense Authorization Act for Fiscal Year 2006. My amendment 
prompted the very beginning of the legislative pursuit of this issue in 
recent years. For example, my amendment prompted another, later, 
second-degree amendment, Senate amendment No. 1335, by Senator Shelby, 
then the chairman of the Senate Banking Committee.
  I also testified before the U.S.-China Commission on July 21, 2005. 
The U.S.-China Economic and Security Review Commission is a bipartisan 
committee created in 2000 to monitor, investigate, and submit to 
Congress an annual report on the national security implications of the 
bilateral trade and economic relationship between the United States and 
the People's Republic of China.
  The Commission is composed of 12 members, 3 of whom are selected by 
each of the majority and minority leaders of the Senate, and the 
Speaker and the minority leader of the House. The Commissioners serve 
2-year terms.
  Their recommendations are consistent with the amendment I introduced 
to the Defense authorization bill that would have made some of the 
necessary changes to CFIUS.
  On September 28, 2005, the Government Accountability Office issued a 
report on CFIUS that is right in line with the recommendations of the 
US-China Commission. So this has not just been me saying that CFIUS is 
in need of critical change--it's the U.S.-China Commission and the GAO 
as well.
  When my amendment stalled over a committee jurisdictional point, on 
September 29, 2005, I chose to introduce the changes as a stand-alone 
bill, the Foreign Investment Security Act of 2005, S. 1797, which was 
referred to the Banking Committee. That bill was the first bill 
introduced in recent years on this topic.
  Later the Banking Committee held a hearing on the GAO report, and I 
testified before them on October 20, 2005, at that hearing.
  In all of these ways I have just mentioned, the Banking Committee was 
prompted by me to pursue this topic.
  In the past couple of years, several high profile business deals have 
been approved by CFIUS that would allow foreign-owned companies, in 
particular companies that are owned or controlled by foreign 
governments, to acquire other companies doing business in the United 
States.
  More recently I was concerned with China's state-owned CNOOC 
attempted to buyout Unocal, a US oil company. We won this one because 
of Congressional pressure, and CNOOC withdrew its bid. Over the past 2 
years, I have been pointing out that the CFIUS process has ignored some 
major issues which threaten our national security.
  The most publicized deal was the state owned Dubai Ports World, DPW, 
purchase of Peninsular and Oriental Steam Navigation, P&O, that would 
have allowed DPW to take over the operations at various east coast 
ports in the United States. The public outcry against this deal lead 
DPW to abandon its plans to operate the U.S. ports and that portion of 
the takeover was sold to U.S. based companies. However since the DPW-
P&O deal was canceled, other transactions have been approved by CFIUS 
that are just as questionable.
  CFIUS has received over 1,600 notifications and investigated under 
40. Of those, only one acquisition has been stopped by the President.
  This is a critical issue at a critical time. CFIUS seems to only get 
scrutiny when some major deal is in the papers. I have been paying 
attention to it all along. It needs reform, and I hope we can make some 
progress.
  I am glad that Congress is now taking a closer look at CIFIUS reform. 
Rest assured that I continue to push for this badly needed reform and 
as Congress addresses this issue, I will keep your thoughts in mind.
  Note too that I will ensure in particular that the national security 
aspects of this work are appropriately attended to. I will not stand 
idly by and allow a bill that is weak on national defense to pass.
  Let us all work together to ensure that the legislative process 
performs appropriately to defend our Nation, and let this bill I am 
introducing today be a new start.

                          ____________________