[Congressional Record (Bound Edition), Volume 155 (2009), Part 10]
[Senate]
[Pages 12662-12664]
[From the U.S. Government Publishing Office, www.gpo.gov]




                           CREDIT CARD REFORM

  Mr. DORGAN. Mr. President, this week we will once again take up 
legislation--and, hopefully, finish it--called the credit card reform 
bill. I wanted to speak for a few minutes about what the bill contains 
and why it is important we enact that legislation.
  I have spoken many times in the last year and a half about the 
subprime mortgage scandal. It is another adjunct of this. A substantial 
amount of debt, debt to purchase a home, is not unusual. Almost no one 
can purchase a home by using cash because they don't have that kind of 
cash. So they borrow money, which is called a home mortgage. The 
subprime home mortgage scandal is unbelievable, and I have spoken about 
it at length. I have shown advertisements from Countrywide Mortgage 
which was the largest mortgage lender, from Millennium Mortgage and 
Zoom Credit, and other mortgage companies that were advertising to 
people with: If you have been bankrupt, if you have bad credit, if you 
don't pay your bills on time, come to us. We will give you a mortgage. 
It was unbelievable what was going on. Bad credit, no credit, slow 
credit, bankrupt, come to us. We will give you a home mortgage.
  That sort of thing steered this country's economy right into the 
ditch and caused a massive amount of problems. Now we see all of these 
foreclosures and banks in trouble. It is an unbelievable mess. At its 
root is a substantial amount of greed and a massive amount of mortgage 
debt. In some cases mortgages were made to people who couldn't pay 
them, with teaser rates of 2 percent which, when reset, would be 10 and 
12 percent, and prepayment penalties so that someone couldn't get out 
of this mess. It is unbelievable. That is the home mortgage subprime 
scandal. A lot of folks got rich. The guy who ran Countrywide Mortgage 
left with $200 million. The company collapsed, a substantial amount of 
people were injured and hurt, but he left with a couple hundred million 
dollars. He was given the Horatio Alger award. He won businessman of 
the year, a big deal. He steered his company right into the ditch as 
well.
  This isn't about subprime mortgages. It is about another form of 
indebtedness, credit card debt. Let me talk for a moment about where we 
find ourselves with credit cards. It is interesting. In 2008, there 
were 4.2 billion credit card solicitations sent to consumers. Think of 
that, 4.2 billion credit card solicitations sent to consumers. We are 
told it was a bad year--the economy was collapsing--but apparently not 
in the credit card industry. The average credit card debt per household 
that has a balance is $10,000. That is the average credit card debt of 
households that have a credit card balance. Total amount of credit made 
available by issuers in 2007 was about $5 trillion.
  This legislation will start to help to curb some of the unfair credit 
card practices. Let me be quick to say that I use credit cards. I am 
sure all of my colleagues do. There is a very significant value to 
credit cards. I am not suggesting there is not. I am saying, when you 
wallpaper the entire country with credit cards, including especially 
targeting kids who have no jobs, and then saying, as they did in the 
subprime mortgage, if you have bad credit, come to us, we will give you 
a credit card, there is something wrong with that. Yet that is what has 
been happening. Now we are seeing credit card companies who have had 
customers for 5, 10, 20 years, who have never been late with a payment, 
jack up their interest rates from 7 percent to 27 percent. Credit card 
holders are completely astounded by the penalties and interest rate 
increases, despite the fact that they have never had a late payment. 
Those are some of the abuses

[[Page 12663]]

that have existed. This legislation will begin to deal with those 
abuses.
  Let me show a couple of charts. This is an advertisement for a 
platinum card. It says:

       Even if your credit is less than perfect.

  That is just a little offshoot of what they did in the subprime 
mortgage. Hey, if your credit ain't perfect, as they say, come to us. 
You got bad credit, slow credit, no credit, been bankrupt, come over 
here; let us give you a hand. That is what this credit card says.
  Here is a debit card. This is one by the Bank of America. It makes a 
point but that I think is important. You can see the colors on this 
debit card. Obviously, this is aimed at kids. This is obviously a 
children's approach to Joe Camel for cigarettes. But we have a debit 
card that is about the same thing.
  Let me show first this chart. This shows Bruce Guiliano, senior vice 
president for licensing for Sanrio, Inc., which owns the Hello Kitty 
brand. That is the next card I will show you. It says:

       We think our target age group will be from 10 to 14, 
     although it certainly could be younger.

  Can you imagine grown men and women sitting around saying: What is 
our target group for credit cards. We think this is our target group 
for the new Hello Kitty Platinum Plus Visa credit card. Is this 
unbelievable? If somebody said to you in class at Harvard Business 
School: Here is a business proposition. What do you think it will be 
like if you run a company and you are putting credit cards out there 
and you are aiming credit cards at kids, 12-year-old kids.
  This is, obviously, the Hello Kitty Platinum Plus card. I would love 
to know the person who thought this up, to ask: Are you nuts?
  My son happened to get a credit cart solicitation a long while ago. 
He is in college now. He got a solicitation from a credit card company 
saying: We have a preapproved credit card for you, and we want you to 
take a trip to Paris, France. So actually I came to the floor of the 
Senate and explained to this credit card company, my son is only 12 
years old. He is not going to Paris. He is not going to take your 
credit card either.
  But what are the credit card companies doing soliciting young kids to 
get a credit card?
  This is not an accident. I just showed you: Our target audience is 10 
to 14. So what do we do with the targets? We design a credit card, a 
Hello Kitty Platinum Plus, pink and white and yellow. Unbelievable.
  Let me show you a credit card for people who don't have such great 
credit. They get a gold card. This is First Premier Bank. Here is what 
they do. You don't have such good credit? We will give you a credit 
card. Come on. The limit is going to be $250. It is going to be gold. 
But here is the trick. In order to get this credit card that you can 
use for up to $250, you have to pay a $48 annual fee. You have to pay a 
$29 account set-up fee, a $95 program fee and $7 a month for servicing. 
Does that sound like good business to you? Not to me. It sounds like 
the kind of thing I used to see in the movies. They wore strange suits 
with big thick stripes, and they carried violin cases. They loaned each 
other money.
  I understand this. Michigan State University. I could use this for 
any university. A credit card company wanting to wallpaper the dorms 
and fraternity houses of virtually anyone who is going to college. Most 
of them don't have a job; some do. I understand the value of a credit 
card for a college student. What I don't understand is, the credit 
cards are given to a college student and, in many cases, the parents 
will cosign because if the student doesn't have a job, you have to have 
the parents' cosignature. Then all of a sudden the credit card limit is 
increased without the permission of the cosigner. That is the game.
  Here are some notes from constituents of mine. This is a couple from 
Minot:

       My wife and I both have credit scores greater than 800 and 
     have never been late on any of our payments. So Capital One 
     just sent us a notice that our interest rate on our credit 
     card will almost triple.

  Never been late, always made payments on time. Their interest rate is 
going to triple.
  Here is one from Fairmount:

       I just wanted to let you know how upset I am with the 
     credit card company (Citibank). They have decided to raise my 
     interest rate to 27 percent. I have always paid my bill on 
     time, have a good credit rating (820). Why would a company 
     that has been bailed out by taxpayers because of bad 
     practices then decide to stick it to us by raising interest 
     rates so high.

  He refers to the local mafia, but the fact is, I know there are no 
local mafia there.
  From Williston:

       Enough is enough. We have shored up these banks with our 
     hard-earned tax dollars just to have them raise the interest 
     rates on their credit cards to 28 percent and 26.3 percent 
     for absolutely no reason. Something has to be done.

  Let me reiterate that I think credit cards are valuable and useful. 
Most of us use credit cards. But what I think has happened is certain 
practices have evolved and developed that are pretty unseemly. A 
practice that says: We need to figure out how to go after kids. It 
reminds me of the tobacco debate. Because if you don't get a kid when 
they are a kid, you are not going to get them to smoke; right? Anybody 
know of somebody who has reached the age of 30 and they are sitting 
around their living room thinking to themselves, all right, I need to 
do something different, what haven't I yet done that I should begin 
doing, and decides the answer is to start smoking? Does anybody know 
anyone like that? The only way you get somebody to smoke is you find a 
kid and addict the kid to cigarettes. What about this, aiming a Visa 
card at 10 to 14-year-olds? It is unbelievable to me.
  We bring a bill to the floor of the Senate that we think we will vote 
on tomorrow. We will have a cloture vote first. We will see if we can't 
put a stop to some of the practices that have allowed some of the same 
companies that have gotten substantial bailout funds to say to their 
customers, who have always paid their bills on time, never been late: 
We have a treat for you. We have a big, old surprise in your mailbox. 
You know that 7 percent or 9 percent interest rate you used to pay on 
your credit card balance? No more. Now it is going to be 27 or 28 
percent.
  That is not a business practice I think is justifiable. I think 
Senator Dodd and Senator Shelby from the Banking Committee have brought 
us legislation that is necessary and one that will be helpful in trying 
to put a stop to unfair business practices.
  I know there are some who say this is none of government's business. 
I think it is. When consumers are injured, consumers individually and 
even in a significant group are no match for the size of the companies 
that have decided to engage in this and do this to the American people. 
This legislation is very simple. It sets up the conditions under which 
we will try to protect consumers from arbitrary interest rates, fee and 
finance increases, and we will prohibit interest charges on paid-off 
balances from previous billing cycles, prohibit interest charges on 
debt that is paid on time. We will require payments to be applied first 
to the credit card balance with the highest interest rate. We will 
protect students and other young consumers from aggressive credit card 
solicitations. We will require greater disclosure of rates and terms 
and billings, details by credit card companies, and establish tougher 
penalties for companies that violate these laws.
  This is not rocket science. It is very simple. When you engage in 
these practices and start injuring consumers, often without their 
knowledge, when you are doing something that is fundamentally unfair 
and doing it all across the country, the Banking Committee, led by 
Senators Dodd and Shelby, has a right and the Senate has a right to 
say: We will try to put a stop to it. There needs to be some semblance 
of fairness and equity for the American people. There are a whole lot 
of folks who go to work every day, work hard, try to do the best they 
can to care for their family and deal with their daily lives. They pay 
their bills.

[[Page 12664]]

They have credit cards. They pay those credit card bills. They have 
made a deal with the credit card company over time about the conditions 
of that credit card bill, only to discover one day when they come home 
from work their mailbox contains a little message from the credit card 
company: Yes, you are a good customer. We have news for you. You are 
going to pay higher fees and triple the interest rates, and there is 
not a thing you can do about it.
  Well, do you know what? The American people can do something about it 
through the actions of the Senate. I think that is going to happen--
beginning tomorrow--and I think it will be good news for the American 
people.
  Mr. President, I yield the floor and suggest the absence of a quorum.
  The ACTING PRESIDENT pro tempore. The clerk will call the roll.
  The bill clerk proceeded to call the roll.
  Ms. KLOBUCHAR. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER (Mr. Bingaman). Without objection, it is so 
ordered.

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