Credit Cardholders' Bill of Rights Act of 2009
Floor Speech
CREDIT CARDHOLDERS' BILL OF RIGHTS ACT OF 2009 -- (Senate - May 14, 2009)
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Mr. SCHUMER. Mr. President, I thank my colleague from Oklahoma for yielding. There are two issues I wish to address. The first will be this bill, in particular, the gift card title in the Credit Card Act. Secondly, I wish to speak a little bit about the NTSB hearings on flight 3407 which, as my colleagues know, crashed outside Buffalo and Clarence with a tragic result.
First, before I get into the substance on gift cards, I wish to commend Senator Dodd, Senator Shelby, and all the members of the Banking Committee for doing an excellent job on this bill. The bottom line is we need good, strong, tough regulation on credit cards. The days when disclosure was enough are over. I happened to believe that once and worked hard for disclosure measures. There is something called the ``Schumer box'' that is on all credit card solicitations applications because it puts in large letters the interest rates. Back in the old days, that worked. Every credit card, even though interest rates were 6, 7, 8 percent, was at 19.8 percent, but you couldn't find that out. So when people signed up for a credit card, they had no idea what interest rate they were paying. Once the box got on the solicitations, on the applications, interest rates came down. Good old-fashioned American competition began to work.
But in recent years--maybe they just got smarter or maybe they got more desperate for profits--credit card companies have found a way around disclosure. A person believes they are signing up for one rate, but then in the fine print, basically, if you wake up out of bed, the rate goes higher--much higher. We have gotten letters and heard stories from people who were on a 7-percent fixed rate and it went up to 23 percent overnight.
If it is on a future balance, that is fine. You can get another credit card. But it isn't. These rates go up on existing balances. Let's say you have a $4,000 balance, which is the average for American families with credit cards. Calculate it. You go from 7 percent a month on $4,000 to 23 percent on $4,000, and that is a difference of hundreds of dollars a month. These days, with the economy the way it is, with families struggling to make ends meet, a couple hundred dollars a month is the difference between being able to survive and perhaps going bankrupt; being able to survive and not being able to provide some of the basic necessities.
The legislation before us stops all those practices. The frustration, I must say, on both sides of the aisle, with the practices of the credit card industry is mounting. I would say to those in the credit card industry: Unless you get your act together, there may be other amendments and bills you will not find to your liking. It is about time to be responsible. I understand the banking industry is in tough times, and we all hope they will recover, but to recover by taking advantage of consumers is unfair, unwise, wrong, and we aim to stop it with this legislation.
The provision I wish to address specifically is one that I worked on with the Presiding Officer. We are both sponsors. The Senator from Colorado has done great work on this legislation, and I wish to thank him for his assistance as we move it forward. I also wish to thank, on this particular issue, both Senator Dodd and Senator Shelby, who walked the extra mile. I think it shows that if you work hard at legislating, and you are willing to compromise, it pays off. The original bill the Presiding Officer and I put in was tougher than the proposal here, but the proposal here is good and strong. It makes a huge difference between what exists now--which is virtually nothing--and what will become law, and it is something I think everyone can be proud of.
I also wish to thank those in the consumer industry. As do I, as well as the Presiding Officer, they wanted a stronger bill, but they understood that when you legislate, you can't let the perfect be the enemy of the good. Getting something strong is better than getting nothing, even if you would have preferred something stronger.
Well, we are all familiar with gift cards. In many ways, they are the perfect present. You get the opportunity to choose whatever you want the most. When you get a gift card, it is great. You can think of 15 different things you want and decide which one you want to buy. You can go to the store, pick out what you want, and get it without spending a dime of your own money.
We have all opened that gift from Aunt Edna and wished she had spent the money on a gift card instead of that sweater you are never going to wear. I, for one, am not very good at picking out gifts. So gift cards are a boon to me, not only as a recipient but as somebody who gives gifts because I can buy the gift card, and I can breathe a sigh of relief that my family member or friend will have something they want instead of something I have chosen that they might not want at all, which often happens when I choose gifts. I guess I am a little like Aunt Edna.
Gift cards are a very good thing, and we don't want to snuff them out or limit their extent.
But what most people do not realize is that these gift cards often come with hidden fees and short expiration dates. After a period of time that can be as short as 6 months, the issuer begins charging value off the cards, reducing their value and depriving recipients of their gifts. That means if your mom or aunt or friend did their holiday shopping early, by the time April or May rolled around, you could be slowly but surely giving your gift card back to the bank piece by piece by piece.
Consumers usually pay a high fee when you buy the card, sometimes as much as 20 percent of the value. Well, on top of that, the recipient of the cards faces other charges such as monthly maintenance fees, dormancy fees or even a separate fee for each time the card is used. That is not fair. It is not fair when you get a gift card, say, at Christmastime and you say: I will save it until June to buy something I can use in the summer, and you go to the store and the gift card doesn't have the whole value on the card. That is not right. It is not fair. Frankly, it is not what the giver signed up for when he or she bought that card and gave it to you in a gesture of friendship or love.
For years, issuers of these cards have used fees to make hefty profits, largely on the backs of consumers, but with this legislation we are going to ensure that recipients are protected and can use their cards free of these duplicitous fees for a reasonable period of time.
First, the bill ensures that no fee can be charged unless there is no activity on the card for 12 consecutive months from the date on which the last charge is imposed. Let me explain. If you purchased the card the week before Christmas and give it to your child, parent, spouse on Christmas Day, for a whole year, until next Christmas, that card doesn't decline in value one penny. That is a very good thing and very much needed. During that year, if you use the card once but don't use the whole value--let's say it is a $50 card and you buy something for $22--the 12-month period starts again so you have plenty of time to use the card.
Second, the bill will require the Federal Reserve to determine a fair amount for the fees and set a minimum balance above which fees can't be charged. So the issuers aren't charging people exorbitant rates to use their cards and aren't taking up the entire value of the cards with these fees. If, for instance, the gift card is for $50 and they charge you $5 a month, within 10 months, the gift card is useless. It is my view the fee will not be more than $1 or $1.50 when the regulator sets it, and it will give the gift card a much longer life. Of course, we are leaving it up to the Federal Reserve.
We are also letting them set a minimum balance. My guess is it will be $15 or so, above which the fee doesn't bite in, so the gift card will last a lot longer.
Fourth, the bill ensures that gift cards have expiration dates of at least 5 years from the time they are issued. It is simply unfair to cancel the gift totally after 6 months or even a year. So now the gift card stays in existence for 5 years.
I believe this legislation makes gift cards fairer, better, and even happier gifts to give during the holiday season, for birthdays or an anniversary. I encourage people to use the gift card.
One other point I think is very important. This legislation, for the first time, will make sure that so-called open loop cards--the kind which can be used anywhere and that you get as a holiday present--will be regulated at all. There has been no regulation before. Consumers Union, U.S. PIRG, the National Consumer Law Center, and the Consumer Federation of America all support the actions we are taking on this issue. We have heard from one of the biggest gift card issuers that they, too, are comfortable with this bill because we are making commonsense changes to this business to ensure that consumers can get a fair deal and that issuers can continue to offer these valuable products. The bottom line: You get a gift card, you know it is going to have its full value for at least a year, with no expiration date, no monthly fee that takes a chunk off the gift card. It means what you are giving the recipient is getting, nothing less.
At the end of the day, the reason this bill has been so important to me and to the Senator from Colorado, who worked so hard on it with me and others, is we want to protect consumers who purchase these products as gifts for their friends and loved ones. Consumers who purchase or receive a $50 gift card should get $50 in value without having to pay excessive fees.
CONTINENTAL CONNECTION FLIGHT 3407
Mr. President, I want to speak a little bit about the conclusion of the NTSB hearings that occurred this week in reference to Continental Connection Flight 3407.
We all know what happened on that flight. On February 12, 2009, the lives of family members, many of whom live in western New York, changed in a tragic and dramatic way when they lost their loved ones on a Buffalo-bound flight from Newark Airport.
I met with some of these family members on Tuesday--nine family members who lost loved ones on that flight. First, I have to express my respect and admiration for these family members. It was a little less than 3 months ago that they lost a husband, a wife, a child, a parent, or a fiance, and there is a huge hole in their hearts. Yet they were down in Washington making sure that a thorough investigation was done to determine why flight 3407 crashed, and then to continue working to see that corrective measures were taken on all other flights, so that what befell their loved ones would not happen to others. It was an act of bravery, courage, strength, fortitude, generosity, and compassion. The people in that room--and we had some heartfelt moments together--were saintly. They were trying to light a candle amidst the darkness that enveloped their lives. I felt for them when we met, as I feel for them today.
The crash of flight 3407 in Clarence, NY, claimed 50 lives and serves as a tragic reminder that our Nation's aviation industry is not immune to tragic incidents.
The 3-day-long hearings at NTSB have revealed some very disturbing suggestions into what may have caused the crash of the Bombardier Dash 8 Q400 airplane.
First, I am troubled by the reports that the Colgan pilots of the Dash 8 were not adequately trained in the operation of the ``stick-pusher''--the instrument installed in aircraft like the Dash 8 that prevents an aircraft from stalling. The stick-pusher is not demonstrated in pilot flight training simulators, and experts believe that the pilots are missing out on important hands-on training.
Suffice it to say that when the flight flew over Clarence, just before it crashed, the pilots may not have been adequately trained to deal with what was happening.
Colgan maintains that the FAA does not require this kind of simulator training. Today, I have written to Secretary Ray LaHood and asked that he reevaluate FAA's approval of airline training curricula.
We have also learned that the pilots of flight 3407 were not properly rested before their flights. It is obvious why. The young copilot of the flight lived in a suburb of Seattle, and her salary was $16,000 a year. She flew across country, tired, sleeping in an empty pilot seat, if she could--no stop, no rest, and then boarded the flight to Newark that she was copilot of on its way to Buffalo. It seems that it may be--I hope not, but it seems like it--that some commuter airlines both underpay and overwork their pilots to save costs. There is an unfortunate possibility that they could put safety second, with cost cutting first. That just cannot be. That has to change.
The second thing I am doing is urging the FAA not only to look at the number of hours that a pilot can fly--they have regulations for that--but the conditions which a pilot who begins a flight has endured previous to the flight, so that they are alert and rested as their tenure for that day or that few days begins.
The airline industry is evolving. What we are seeing is more and more smaller commuter airlines, and the FAA is not keeping up. The FAA needs to crack down on issues of pilot rest, compensation, and training, especially with these young airlines that seem to be prioritizing issues of saving money. They should be making priority No. 1 the issue of safety.
For the last 8 years, the FAA has had ineffective leadership with one goal: to cut costs. The head of the FAA--I met her and had arguments with her--seemed to take direction almost all the time from the OMB. All of us believe we should cut costs in this Government--I certainly do--but not when it comes to safety. I believe that the FAA, which requires the small commuter airlines to observe the same regulations as the larger airlines, hasn't kept up enforcing the rules with so many of the commuter airlines out there.
The crash investigation also initially suggested that icing conditions may have affected the aircraft. A bright light was shed on the fact that the NTSB and the FAA have differing recommendations as to how a pilot should handle an icing situation, and that the NTSB first asked the FAA to adopt the NTSB's recommendations 12 years ago--to no avail.
For this reason, I, along with my colleagues Senator Rockefeller and Senator Dorgan, called for an official GAO investigation into what specific roles the NTSB and the FAA should be playing in aircraft icing prevention, and why such a lag exists between the time the NTSB makes a recommendation and the FAA formally adopts it. It seems to me--these are just my observations--that the NTSB does put safety first, and I sometimes wonder if the FAA is always doing that.
The GAO has informed us that they are in the process of forming an investigatory team for our request and will begin to pursue answers soon.
In conclusion, I cannot say enough how humbled I am by the work of all of flight 3407's family members. It is a tribute to their loved ones' lives that they are in Washington to advocate for aviation safety. I assured them, as we talked and prayed together, that I would do everything I could to make sure we get to the bottom of what happened on flight 3407, and then take whatever corrective action needs to be taken to prevent future flights such as 3407 from crashing.
I yield the floor.
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