Credit Cardholders' Bill Of Rights Act Of 2009 - Resumed

Floor Speech

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Mr. MERKLEY. Mr. President, I commend my chairman, the distinguished Senator from Connecticut, for his work on the legislation before us today. This has been a complex issue. The chairman has worked very hard to bring people together on all sides. I commend also the senior Senator from Alabama for his vital engagement on these reforms that touch the wallet or the pocketbook of virtually every American. America needs credit card reform.

Take the case of Maggie Bagon, a 59-year-old social worker from Salem, OR. As reported in the Oregonian, Maggie used her card conservatively. She paid her bills on time. So she was incensed when her credit card company charged her a late fee.

So she called up the bank. They told her the terms of her contract permitted them to sit on her payment for 10 days before they posted it to her account, and that made it feasible--in fact, lawful--for them to charge her a late fee when she paid her bill early.

That type of practice is a scam. Maggie and thousands of Oregonians, perhaps millions of Americans, have been charged late fees for paying their credit cards early. That kind of deception and trickery has to end.

Late fees for early payments is not the only type of scam we have had in this industry. How about interest charges on balances that have been paid off? Well, you have paid it off, and you are very happy about that. You are now free of interest? No, you are not--not under the rules of the fine print in many credit card agreements.

How about fees for going over the limit when you do not know you are over the limit? Well, it used to be you were simply turned down and that was fine because that was the deal you had and you understood the deal. But now suddenly you get your credit card statement, and you find out you were charged a $30 fee when you bought a newspaper with a credit card or you were charged a $30 fee when you bought a $5 meal with your credit card because the bank was not going to tell you about the fee because they wanted to collect those fees for going over the limit.

Well, this act will fix that problem, that type of scam on the American worker. In fact, credit card companies have even charged fees for making your payments at all. Some charge fees for paying with a check. Some charge fees for paying over the Internet. Some charge fees for paying by telephone. That is simply crazy, and this act will address these types of tricks and traps that have become key and central to the industry.

As a member of the Oregon House of Representatives and as speaker, I worked with my colleagues to reform lending practices in our home State. We tried to address credit card practices to establish fair rules of the road, and our legal counsel said: No, you can't do that here at the State level. You have to do that at the Federal level. It is federally preempted. So we were not able to help people such as Maggie, the citizens of our State, have fair practices. Only the Federal Government, under Federal law, can make these changes.

But if we all have reserved to ourselves the power to set fair practices, then we have a moral obligation to set those fair practices. We have an obligation on behalf of the millions of American citizens such as Maggie. That is why this legislation is so important.

It is strong, commonsense legislation which targets the most abusive practices. In particular, I am proud it prohibits ``universal default'' on existing balances--that bait-and-switch tactic when, under the deal you have signed up for, you are charged 7 percent, but after you make those charges, your interest rate is suddenly switched to 29 percent.

I am proud this bill requires that payments beyond the minimum monthly payment be applied to the balances with the highest rate of interest.

I am proud this bill limits the aggressive solicitation of young persons; that it prohibits fees based on the method of payment, be it telephone, mail, Internet or otherwise; that it prohibits over-the-limit fees unless a person opts in to that feature--it is a fair deal, you choose it--and that it prohibits late fees if the card issuer delayed posting the payment.

These long-overdue, commonsense reforms are important steps to bring transparency and fairness to credit card contracts. These reforms will help Maggie and millions such as her from Connecticut to Oregon and everywhere in between.

Friends, this legislation is also good for our banking system. There is one clear lesson we have learned this year; that is, fair lending results in families who are on a solid foundation, strong consumers, and it avoids the sort of securitization that results in poison pills being based on fraudulent, deceptive practices, poison pills that infect our banks and financial institutions around the world.

Even the banks are aware this system is flawed, and some have tried to offer better, safer cards. But they found it hard to differentiate themselves. Why is that? Well, here is why. It is pretty straightforward. Consumers do not have the time or patience to read the dozens of pages of fine print that come in a credit card contract and then to compare its terms--and be able to evaluate its terms--to the dozens of pages that come with another credit card.

But even if a person dedicated a week of their life to comparing two credit card contracts, it would not matter because, at the end of the contract, it says: These terms can be changed at the discretion of the credit card company at any time. And they are changed frequently. Therefore, the contract does not give you the ability to compare and contrast. Therefore, we have a dysfunctional market because consumers are not able to choose better cards with better practices.

We need to create a functional market where there is competition--competition not based on how many tricks and traps you can insert into the fine print but competition based on value, based on good interest rates, based on fair fees, and based on good, old-fashioned consumer service.

Friends and colleagues, this legislation is fundamentally about fairness. It is long overdue. Our citizens deserve fair contracts on credit. It makes our families stronger. It makes our national financial system stronger.

I certainly commend Senator Dodd for his 20 years of labor, day in and day out, to reform these practices. I commend President Obama for his leadership on this very important issue.

Friends, it is time to adopt these reforms. President Obama is waiting. Maggie Bagon of Salem, OR, is waiting, along with millions of other Americans, for simple fairness.

I yield the floor.

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