Hire More Heroes Act of 2015

Floor Speech

BREAK IN TRANSCRIPT

Mr. DURBIN. Mr. President, if we ask most people in America what is the most heavily subsidized industry in America, which industry, which sector of our economy receives the highest level of Federal subsidy in America, I guess they would get it wrong, because it turns out the sector that gets the highest degree of Federal subsidy is for-profit colleges and universities--for-profit colleges and universities.

I wish to say a word or two about the current status of the largest of these for-profit colleges and universities and the tactics they are using to become even fatter at the expense of the American taxpayers.

I will read a quote about the for-profit college industry:

They are not educators and they're looking to manipulate this model to make money. There is nothing wrong with making money, but I think anyone making money in an educational activity has a higher standard of accountability.

Some might think that was a quote from some speech I gave here. They would be wrong. That was a quote from John Murphy, a cofounder of the University of Phoenix, during a recent interview he gave to Deseret News National. As the article rightly observes, the University of Phoenix is the ``grand-daddy'' of the for-profit industry, but the enterprise has experienced a dramatic shift in priorities since it became a publicly traded company, according to Mr. Murphy, one of the cofounders. The reason for the change, according to Murphy, is the combination of the new corporate entity--for-profit University of Phoenix--chasing stock prices with the temptation of the open spigot of Federal funds. Mr. Murphy calls the Federal student loan money ``the juice'' of the for-profit college industry. And for its part, the University of Phoenix is swimming in the juice. They received 84 percent of their revenue from Federal title IV funding in 2012 and 2013. How much? It was $3.5 billion.

According to law, for-profit colleges are prohibited--we don't want them to become too dependent on the Federal Government, so we prohibit them from receiving any more than 90 percent of their revenue from title IV Federal funding--90 percent.

When I think of the outrage I hear from those in Washington who track Federal money, I can't believe they are overlooking this industry. A major loophole, however, allows the University of Phoenix to not include veterans' GI Bill benefits or Department of Defense tuition assistance programs in their Federal revenue calculation. So I joined with Senator Tom Carper of Delaware and others to fix this, to close this loophole, to hold the for-profit colleges to no more than 90 percent of the revenue coming directly from the Federal Government.

A recent article by Aaron Glantz published by the Center for Investigative Reporting provides a troubling look into the world of for-profit college recruitment of America's veterans and members of our military. The article details how the University of Phoenix has become a major sponsor of military events. In one instance, they paid $25,000 to sponsor a concert for military members and their families. The company gave away Galaxy computer tablets and wrapped the stage in a giant University of Phoenix banner. In other instances, the Center for Investigative Reporting found that the University of Phoenix sponsored ``resume workshops'' which essentially amounted to recruitment drives for their university. According to the article, the company sponsored hundreds of events on military bases, including rock concerts, Super Bowl parties, father-daughter dances, Easter egg hunts, chocolate festivals, fashion shows, and even brunch with Santa.

University of Phoenix paid $250,000--a quarter of a million dollars--to sponsor events over the last 3 years at Fort Campbell, KY. Private sponsorship of military events is not unusual, but it has to raise some eyebrows when the company whose profits depend on recruiting servicemembers are paying for these programs. Let's face it. That is what these events are for--recruitment events for the company.

In the name of corporate sponsorship, the University of Phoenix could gain direct access to military bases with a nod and a wink to servicemembers: Come to Phoenix. We care about the military.

Boy, has it paid off for Phoenix and what Mr. Murphy called ``the juice'' of Federal funds.

The University of Phoenix is the fourth largest recipient of Department of Defense tuition assistance funds which help servicemembers continue their education. In fiscal year 2014, the University of Phoenix received more than $20 million of these benefits. But hold on tight. Here is where the juice gets deep. When it comes to veterans' GI Bill funding, the University of Phoenix is a top recipient in America of these funds--$272 million. In return, the company offers servicemembers and veterans degrees of questionable value, below-average graduation rates, and--get this--a student loan default rate almost 40 percent higher than the national average. That is what we are offering to members of our military and veterans through the University of Phoenix and their programs.

I don't think this type of behavior by the University of Phoenix is what the President had in mind when he signed Executive Order 13607, intended to prevent for-profit colleges from gaining preferential access to our military.

I have written to Secretary of Defense Ash Carter about the outrage. If it is a matter of University of Phoenix not following DOD rules, I want the Department to take action. If the University of Phoenix's actions outlined in this report are within the rules, the rules need to be changed.

I want to say a word about another story by the Center for Investigative Reporting last week. This is almost incredible. It is difficult for me--I can't--to recount the details of the story I am about to relate, and my colleagues will understand why in a moment.

According to the Center for Investigative Reporting, nearly 2,000 unaccredited institutions received more than $260 million in GI Bill benefits between 2009 and 2014. Some of them are for profit; all are totally unaccredited. When someone serves in our military, we offer them GI Bill benefits--once-in-a-lifetime benefits--for the betterment of themselves and their family. Once they have used the benefits, they are gone.

One example of one of these unaccredited institutions that is receiving these benefits for our military--GI Bill benefits--is a sexual therapy school in San Francisco. The name of it is the Institute For Advanced Study of Human Sexuality--unaccredited. The activities that are described in the article about this school I cannot say on the floor of the Senate. The institute openly brags--this unaccredited institute receiving GI Bill benefits openly brags about its massive collection of pornography, and we sent this institution GI Bill funding. That is outrageous.

Seven other Senators joined me in writing to Secretary McDonald of the VA last week asking him to investigate and explain. I also expect to speak with him by next week, and I hope to hear that the VA is taking action. The GI Bill is too important for our veterans to have these benefits ever questioned because of a scandal such as this.

Stories such as these abuses by the for-profit college industry and these unaccredited so-called schools are appearing more frequently. In newspapers and other media outlets across America, this issue has never received so much attention. Unfortunately, here in the Halls of Congress, you can still hear the crickets when it comes to this issue. I hope this changes. If we are serious about really caring about our military and their families and our veterans, if we are serious about caring about taxpayers' dollars, if we are honest about this industry that is fleecing the American taxpayers and members of our military, this Congress should act on a bipartisan basis. But some of these schools have friends in high places. Every time I have tried to call them out, someone has stepped in to their defense, usually in a private manner so the public doesn't know.

The day of reckoning is coming for these for-profit schools. The stock market is catching up with them. Stockholders are catching up with them. Students and their families are catching up with the fact that they are a waste of time and money. Now we have to make sure the taxpayers have their day and their attention directed toward this outrageous exploitation.

5TH ANNIVERSARY OF DODD-FRANK

Mr. DURBIN. Mr. President, July 21 marks the fifth anniversary of the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Let's remember what was happening when the law was created. In 2008, we were staring in the face of the greatest economic meltdown since the Great Depression. Wall Street banks and financial companies had built a multi-trillion dollar house of cards. They built it out of subprime and predatory mortgage lending, mortgage-backed securities with inflated credit ratings, and unregulated derivatives based on these mortgages. It was enormously complex and risky, and our financial regulatory system was ill-equipped to oversee it. It all started coming apart when several mortgage lenders went under, and Bear Stearns began wobbling.

Then in March 2008 Bear Stearns went down. By September 2008 one giant financial company after another started collapsing: Lehman Brothers, Merrill Lynch, AIG, Washington Mutual, Wachovia. It was a time of panic. Credit markets froze. The stock market swung wildly. Congress had to take dramatic steps to stop the economy from going into free fall. Who suffered the most from Wall Street's misbehavior? Main Street Americans.

As a result of the financial crisis, unemployment went up over 10 percent. Nearly nine million Americans lost their jobs. Millions of families faced foreclosure on their homes. More than $19 trillion in household and retirement wealth was wiped away.

It was clear we had to act to get out of this ``great recession,'' and we did. We saved the auto industry, passed the Recovery Act to boost the economy, and stabilized the economy. We have now had 64 consecutive months of job growth, and the unemployment rate is down to 5.3 percent. But it was clear to all of us who lived through that financial crisis that we needed to reform our financial regulatory system and curb risky and predatory financial practices.

Five years ago, we did just that by enacting the Dodd-Frank Wall Street Reform and Consumer Protection Act. It took months of legislating--dozens of hearings, extended debate and amendments in committees and on the floor, and a robust conference committee process. The result was a landmark reform law that reined in the worst abuses of Wall Street and provided critical new protections for consumers and Main Street businesses.

2007 when a law professor named Elizabeth Warren told me about all the tricks and traps that banks and mortgage companies were using on consumers. She said we need an agency that is focused like a laser on making sure that there is transparency and fairness in consumer financial products. I agreed. So in 2008 I introduced the first bill that sought to create this consumer financial protection agency.

I could not have been prouder when this agency was established by the Dodd-Frank Act. This was a landmark win not only for consumers but for our overall economy.

When consumers have transparent and accurate information about financial products, they are empowered to make better choices. Senator Warren did an admirable job of getting the CFPB up and running. And now, under the leadership of Richard Cordray, the CFPB has achieved great success in protecting consumers, especially those most often targeted by wrongdoers--students; older Americans; servicemembers, veterans and their families; and the economically disadvantaged. To date, the CFPB has obtained over $10 billion in relief to consumers through its enforcement actions.

The CFPB went after several of the Nation's largest credit card companies for targeting their customers with deceptive and fraudulent activities. This resulted in nearly $2 billion being paid back to more than 12 million customers nationwide. To further protect students and their families, the CFPB has brought action against for-profit colleges for their predatory lending practices.

In November 2013, the CFPB announced its first enforcement action in the predatory payday lending industry. This led to $14 million in restitution from Cash America for targeting servicemembers and their families and violating the Military Lending Act in the process. Since then, the CFPB has continued to limit the ability of payday lenders to prey on vulnerable families across America.

The CFPB is a tremendous success story. But the successes of Dodd-Frank don't stop there.

When the Dodd-Frank bill was on the Senate floor, I offered an amendment that dealt with the issue of debit card swipe fees. This amendment was adopted by the Senate with 64 votes--47 Democrats and 17 Republicans--and it was enacted into law. My amendment marked the first time that Congress acted to rein in excessive swipe fees, which were lining the pockets of big banks and costing billions for merchants and their consumers. I am pleased to report this reform has achieved significant success.

For those who don't remember, swipe fees are fees fixed by Visa and MasterCard, and are paid by merchants to card-issuing banks whenever a purchase is made with a card. Because Visa and MasterCard set the fees on behalf of all banks, there is no competition between banks on the fee rates--so the rates always went up. By 2009, the banks were collecting about $16 billion per year in debit swipe fees from merchants. And merchants had to pass that cost on to their customers in the form of higher prices. Of course, the banks didn't need all of this swipe fee money to conduct debit transactions. The actual cost to process a debit transaction is just a few cents. But the banks and card companies exploited the swipe fee system so they would receive far more than they would ever need--an average of 44 cents per transaction.

It didn't have to be this way. Many other countries have thriving debit card systems with swipe fees strictly regulated or prohibited altogether. But in the U.S., swipe fees were spinning out of control. There were no market forces working to keep fees at a reasonable level. So I offered my amendment to bring some reasonable regulation to this system.

My amendment said that if the Nation's biggest banks are going to let Visa and MasterCard fix swipe fee rates for them, then the rates must be reasonable and proportional to the cost of processing a transaction. And my amendment also said there needs to be a real choice of card networks available for each debit transaction. This reform cut the average debit swipe fee in half, from about 44 cents to about 24 cents.

This is actually pretty modest reform. Most other countries have gone much further in regulating swipe fees. But boy, did the big banks scream about it. They said swipe fee regulation would be the end of the world. They claimed it would kill the debit card system, devastate small banks and credit unions, and cause banks to jack up other fees on consumers. Well, the law took effect in 2011, so we have had some time to see how it has worked. And as it turns out, the horror stories that the banks predicted turned out to be pure fiction.

Let us look at the facts. First, swipe fee reform hasn't hurt the growth of the debit system. Debit card use continues to grow each year, according to the Federal Reserve. And it hasn't hurt small banks and credit unions, either. My amendment exempted all but the biggest one percent of card-issuing banks from fee regulation. The Fed announced in May 2013 that this small issuer exemption ``is working as intended.''

Credit unions and small banks have thrived since the amendment took effect, because the amendment has enabled them to receive higher fees than their big bank competitors. It has helped level the playing field between the big banks and the little guys.

Don't take it from me. Here is what press releases from the Credit Union National Association have said since my amendment took effect in 2011:

November 2012: ``Credit Unions Growing at Sustained, Increasingly Strong Pace.''

March 2013: ``The credit union movement is healthy, vibrant and on the rise.''

Last February: ``Credit unions experience fast growth on all fronts in 2014 ..... 2015 expected to surpass banner year.''

I know the small banks and credit unions will never thank me for this reform. But the reality is they have gained a competitive advantage through this reform. It has helped them.

And how about consumers? Well, the banks said my amendment would cause consumer checking fees to go through the roof--and they still try to pretend that is the case. But the facts say otherwise.

Last September the Wall St. Journal reported that ``After peaking in 2009, the annual account fees collected at U.S. commercial banks have declined markedly, even as the volume of bank deposits has swelled.'' Transparency and competition is helping keep fees down.

The American Bankers Association reported last year that 62 percent of Americans pay nothing at all for bank services. And this year Bankrate.com found that 72 percent of credit union checking accounts came with no maintenance fees.

And what about savings to consumers? Well, noted economist Robert Shapiro did a study in 2013 and estimated that swipe fees overall were reduced by about $8.5 billion in 2012. He estimated that about $6 billion of these reductions were passed along from merchants to consumers in the form of lower prices.

While it may be hard to see those price reductions when you spread the savings across the entire economy, the fact is that the savings are real. Unfortunately, the savings should have been even greater. When the Federal Reserve drafted a proposed rule for my amendment, they planned for a fee cap of 7 to 12 cents--far closer to the actual cost of processing a debit transaction. But the banks lobbied the Fed hard to double the proposed cap, and the Fed gave in to the bank lobbyists. Of course, the banks and card companies promptly took advantage of the watered-down regulation and turned the fee cap into a fee floor. As a result, there are still excessive swipe fees begin charged in the debit system--not to mention credit card swipe fees, which have not been reformed at all.

There is no doubt that swipe fees continue to distort the incentives in our payments system. Banks and card companies continue to shape the system to maximize fees instead of efficiency and security. Just look at the issue of card security technology. The banks ignored this for years--until my amendment made part of the debit swipe fee contingent on having effective fraud prevention technology in place.

Just a few weeks after my amendment took effect in 2011, Visa finally announced a roadmap to promote adoption of smart-chip cards in the United States. MasterCard soon followed. That is good news, but unfortunately the banks and card networks are still steering away from using PINs on cards--even though the rest of the world uses a chip-and-PIN system and PINs mean lower fraud. Why avoid PINs? Because several other card companies compete with Visa and MasterCard on PIN transactions, and the competition means the fees are lower. Further reform is needed to correct these skewed incentives.

We have more work to do to make sure our credit and debit card systems are competitive, transparent and fair. I hope the Federal Reserve and my colleagues in both parties will work with me in this effort.

Unfortunately, when it comes to Dodd-Frank, Republicans in Congress have spent the past 5 years trying to undermine this legislation. We must not forget the lessons we learned from the financial crisis. We can't go back to the system we had before Dodd-Frank. Instead let's work together to protect what works, make constructive improvements, and expand Dodd-Frank's reforms where needed.

Remember, Wall Street used to get its way all the time around here, and they led us down a path that almost took our economy off a cliff. Let's not go back there. Let's promise the American people that never again will Congress allow financial tricks and traps to bring our economy to near-ruin.

I see one of my colleagues on the floor, and I yield the floor.

BREAK IN TRANSCRIPT

Source