Credit Cardholders' Bill Of Rights Act Of 2009 - Continued

Floor Speech

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Mr. SANDERS. Madam, this amendment, No. 1062, is being cosponsored by Senator Harkin, Senator Durbin, Senator Levin, Senator Leahy, and Senator Whitehouse. Before I speak on this amendment, let me begin by commending the chairman of the Banking Committee, Senator Dodd, and Ranking Member Shelby, for introducing the underlying bill we are debating today that, for the first time, would seriously begun to crack down on big banks and credit card issuers that are ripping off millions of American consumers by charging outrageously high interest rates and sky-high fees. The American people are saying loudly and clearly: Enough is enough. This legislation begins--begins--to move us in the right direction.

I also commend President Obama for his leadership on this issue. Without his tenacious support for this bill, it is doubtful we would have the necessary votes to pass this important piece of legislation--and we will have the necessary votes to do that.

Under the Dodd-Shelby bill, credit card companies will no longer be payable to raise interest rates at any time for any reason. Credit card companies will be banned from retroactively raising interest rates on consumers who are less than 60 days late in paying their credit card bills.

This bill also prohibits credit card issuers from increasing interest rates on consumers during the first year after a credit card account is opened, and it requires teaser rates to last at least 6 months, among many other things.

When I was the ranking member of the Financial Institutions and Consumer Credit Subcommittee in the House, I fought to end the ``bait and switch'' practices of the credit card companies for years. It is something we worked on for a long time in the House. I applaud Chairman Dodd for putting a stop to some of the most egregious practices being perpetrated by the credit card companies today.

But while Chairman Dodd and Ranking Member Shelby deserve strong credit for standing up to the big banks and credit card issuers that oppose this legislation, in my view, this bill, as good as it is, does not go far enough. That is why I am introducing this amendment today. At a time when banks are receiving the largest taxpayer bailout in the history of the world, at a time when the Federal Reserve is providing banks with zero interest loans, those same banks are now charging consumers outrageous fees and sky-high interest rates on credit cards and other loans.

In other words, after taking $700 billion from the taxpayers, after getting zero interest loans from the Fed, what these banks are now saying is: Thank you very much, chump, we are going to take your money, and then we are going to charge you 25 or 30 percent interest rates.

All over this country, people are saying: Sorry, that cannot be allowed to continue.

That is why we are here tonight. Today one-third of all credit cardholders in this country are paying interest rates above 20 percent and as high as 41 percent--more than double what they paid in interest in 1990. Nineteen years later, people are now paying double what they paid in 1990. According to a recent Business Week article:

Bank of America sent letters notifying some responsible cardholders that it would more than double their rates to as high as 28 percent, without giving an explanation for the increase. What's striking is how arbitrary the Bank of America rate increases appear.

In other words, they are doing it, and I know many people in Vermont call and they say: I paid my bills every month on time. Why are you doubling my interest rates? Essentially, what the bank is saying is: We are doing it because we can do it.

That is not acceptable.

Citigroup, Bank of America, Wells Fargo, and other banks should not be permitted to charge consumers 25 to 30 percent interest on their credit cards while they are getting bailed out by the middle-class taxpayers of this country. The amendment I am proposing with Senators Harkin, Durbin, Levin, Leahy, and Whitehouse would cap credit card interest rates at 15 percent, the same interest rate cap that Congress imposed on credit unions almost 30 years ago. Under our amendment, the Federal Reserve would have the authority to allow credit card lenders to charge higher rates if the Fed determines this cap would threaten the safety and soundness of financial institutions.

In other words, the time is now--not tomorrow, not next year, but now--to have a national usury rate. As a nation, what we must say is banks cannot charge people 25 percent or 30 percent. As I mentioned, this is not a new idea I pulled out of my ear. This, in fact, is what credit unions have been living under for the last 30 years. Do you know what. Credit unions are doing fine. I don't see them crawling in here asking for hundreds of billions of dollars of bailout money. They are doing fine with that regulation, and we should impose that same regulation on the private banks as well.

Establishing a national usury law is not a radical concept. Up until 1978, about half the States in our country had usury laws on the books capping credit card interest rates. While the State usury laws remain on the books in several States, they were effectively eradicated by a 1978 Supreme Court decision Marquette National Bank v. First of Omaha Service Corporation, which concluded that national banks could charge whatever interest rate they wanted if they moved to a State without a usury law, which is, of course, what they did. South Dakota, Delaware, other States do not have usury laws, and that is where these companies moved.

Our amendment simply applies the same statutory interest rate cap on credit cards that Congress imposed on credit unions in 1980, capping interest rates at 15 percent.

The National Credit Union Administration has the authority to raise interest rates if it determines the 15-percent cap threatens the safety and soundness of credit unions.

It is also important to know that the concept I am bringing forth tonight is one that former Senator Al D'Amato, Republican of New York--who was then chairman of the Banking Committee, by the way--advocated for in 1991, when he offered an amendment to cap credit card interest rates. The D'Amato amendment would have capped all credit card interest rates at 14 percent. Do you know what. That amendment won on the floor of the Senate by an overwhelming vote of 74 to 19. That was back in 1991. If that amendment received 74 votes in 1991, the truth is our amendment should receive even more because the situation today is more egregious than it was in 1991.

Here is what the Republican Senator, then chairman of the Banking Committee, Al D'Amato said in 1991:

Fourteen percent is certainly a reasonable rate of interest for banks to charge customers for credit card debt. It allows a comfortable profit margin but keeps banks in line so that interest rates rise and fall with the health of the economy.

He was right then. We are right now.

The Bible has a term for what we are seeing today. I see a lot of my friends coming to the floor and quoting the Bible. I don't often do it, but let me do it at this moment.

In the Bible quite often we see the term ``usury.'' Usury. It appears very often in the Bible. Because not only in Christianity, but in Judaism, in the Muslim world, there is a reprehension against people who lend money out at outrageously high rates. There is a strong sense that that type of activity is not moral.

In Dante's ``Divine Comedy'' there was a special place reserved in the seventh circle of hell for sinners who charged people usurious interest rates. So that is a warning for our friends in the credit card companies. Beware.

Today we do not need the hellfire and pitchforks, we do not need the rivers of boiling blood, but we do need a national usury law capping credit card interest rates. That is why I am proposing this amendment today.

I am not under any illusion that this amendment will easily pass. After all, the financial services industry has spent over $5 billion on campaign contributions and lobbying activities over the past 10 years in support of deregulation, and they are spending even more money today trying to prevent Congress from seriously regulating their industry. They are a very powerful force here in Washington. In many ways all of that money has got us to where we are today with the collapse of major banking institutions.

Let me conclude by saying this: On April 24, a few weeks ago, I sent an e-mail to my Senate mailing list, and I simply said: Tell me how credit card companies are treating you. We did not know what kind of response we would get. But 3 days later, I had almost 1,000 responses, many from obviously the State of Vermont, but from people all over this country.

I took some of these responses and I put them into a booklet. Let me conclude by reading a few of those e-mails that I received.

Donna from Neptune, NJ, writes:

I want to know why consumers are not protected in any way from these predatory lenders who were bailed out with my taxpayer dollars and then turn around and raise my interest rates from 7 percent to 27 percent because of ``difficult economic times'' for the credit industry. This is outrageous. I have not missed a payment and my credit rating is in the high 800s. How can they keep getting away with this?

And Steven from St. Johnsbury, VT, wrote:

A couple of weeks ago, Bank of America sent us a letter saying they were going to raise our interest rate from 7.3 percent to 24 percent. The letter stated we could get our credit report to find out why. We received our credit report and I still have no reason why they wanted to raise our rate. We did opt out, kept the 7.3 percent and we destroyed our card, but we do know what was wrong with our credit report.

On and on it goes, arbitrary acts on the part of credit card companies, raising rates to outrageous levels. There is a lot of frustration on the part of the American people as to what has gone on in Wall Street, and the fact of what has gone on here in Congress.

The American people want to know that we are fulfilling our constitutional responsibilities and representing the needs of ordinary people and not just major financial institutions that may make lots of campaign contributions and have their lobbyists out lining the Halls of Congress.

The time is now to say there must be a limit on credit card rates. The time is now to pass a national usury law. I hope very much we will have the support of our colleagues in going forward on this legislation.

I yield the floor.

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