Credit Card Accountability, Responsibility and Disclosure Act

Floor Speech

CREDIT CARD ACCOUNTABILITY, RESPONSIBILITY AND DISCLOSURE ACT -- (Senate - May 18, 2009)

Ms. KLOBUCHAR. Mr. President, I am here to speak out in support of the Credit Card Accountability, Responsibility and Disclosure Act.

I am proud to be a cosponsor of this bipartisan legislation, which will help to end the abusive practices of the credit card industry that are hurting so many hard-working middle-class families. I thank Senator Dodd and Senator Shelby for their efforts to come together on a bill that protects consumers and brings so much needed relief to Main Street families. It has been a long time in coming. I wish we had been able to pass this a few weeks ago, but I am hopeful we will be able to get it done this week.

As families are sitting around the kitchen table looking at their budgets, they have a lot of expenses to deal with--the basics such as food, electricity, the rising cost of college and health care, and growing credit card bills.

Seventy-eight percent of households in this country have at least one credit card. At the end of last year, Americans' credit card debt was more than $972 billion. The average household debt is more than $8,300. This does basically track--when you look back over the last 8 to 10 years--where wages have gone down and expenses have gone up. I know that before we entered this economic crisis, it was about $6,000 that the average middle-class family was behind. Now you see $8,300--their credit cards. But it is not just debt that families are paying off. In 2006, two-thirds of the credit card companies' profits came from interest payments.

So millions of families are dealing with huge amounts of credit card debt at the same time they are dealing with the many other challenges that are a result of this economic downturn. Their hours have been reduced or one of them may have lost a job or they may have difficulty sending their kids to college.

This isn't just an economic issue, it is also an issue of fairness and common sense. I believe Americans have the obligation and duty to pay the debts they owe. But too many credit card companies are using deceptive practices and fine print to take advantage of hard-working American families. The credit card companies are using tiny words on the back of the bills, and they are doing this to pad their own profits.

Many companies hide the terms of the agreement behind fine print and confusing language. They apply payments to the low-rate balances before high-rate balances and, worst of all, they raise interest rates without proper notice.

According to the Consumers Union, a study of the 12 largest credit card issuers found that 93 percent of credit cards allowed the issuer to raise the interest rate ``at any time'' by changing the agreement; 93 percent of credit cards allow the issuer--the credit card company--to raise the interest rate at any time by simply changing the agreement.

This isn't right. Credit card companies should not be making a profit by pulling the rug out from under American consumers.

When I think about this issue, I don't just think about that 93 percent figure, I think about people in my State who have played by the rules and used credit cards responsibly and made timely payments and have good credit ratings--only to turn around and have the rules changed.

I heard from one man in Mahtomedi, MN, who had a credit rating of 800. He had never made a late payment, had never been delinquent on his account in any way. He got word in April that his fixed rate of 5.9 percent was going up to 10.9 percent in May and would thereafter be a variable rate; that is, what used to be a fixed rate at 5.9 percent will be changing constantly. He will have no control.

He called the credit card company to complain and, do you know what. The credit card company told him he ought to be happy because his was one of the lower rate increases. They told him he should not take it personally.

It is awfully hard not to take these rate increases personally when you have not done anything to justify having your rate increased, when you are going to have a tough time making ends meet anyway because of the tough economy, and because you have to pay so much more to keep a card you have had for years and years.

I also heard from a woman in St. Joseph, MN. She had her credit card for 12 years. She had never been late on a payment and has her credit card bill automatically paid from her checking account every month. She recently contacted her credit card company because she noticed her interest rate had suddenly gone up a lot in 1 month. She had received no advance notice from her bank about the interest rate increase.

But her problems didn't stop there. The problem was that the credit card company applied the new interest rate to her existing balance, and with the new interest rate factored in, her balance suddenly exceeded her available credit.

Do you know what? She got hit with another interest rate increase. This woman, who had been a great customer for 12 years, saw her interest rate go up from 8 percent, to 19.3 percent, to 27 percent--all in a matter of 16 days--and through absolutely no fault of her own. She started at 8 percent and she had the money deducted from her checking account every month and she had not had any problems with late payments. She starts at 8 percent, goes up to 19.3 percent, and she ends up at 27 percent--all in a matter of 16 days, through no fault of her own. They raised the interest rate without telling her, applied it to her existing account balance and, suddenly, she was stuck with a problem she didn't even create.

In the letter she wrote to me, she asked some valid and heartbreaking questions:

How is something like this legal? How can the credit card companies make it even harder in such hard times?

These are questions a lot of hard-working Minnesotans and other Americans are asking today, and they deserve answers.

We want Americans to pay their debt, and we want our businesses to succeed, but consumers deserve a level playing field, they deserve some rules of the road, and they deserve an end to the abuses and deceptive practices by the credit card industry.

The credit card bill that is on the floor is going to do that. The bill will put commonsense rules into place to ensure fairness for consumers.

First, the bill protects people from arbitrary interest rate increases, such as we saw with the man from Mahtomedi, MN, and the woman from St. Joseph, MN. It establishes fair rules and makes sense for how and when companies can raise interest rates. Additionally, the bill prohibits credit card companies from increasing rates on a cardholder for the first year when that account is open.

Second, the bill requires credit card companies to give people 45 days' notice of interest rate, fee, and finance charge increases. This will ensure that people such as the woman from St. Joseph, MN, who wrote me, would not see any surprises on their credit card statements anymore. They will get a notice.

Third, the bill prevents credit card companies from charging abusive fees. For example, credit card companies would not be able to charge you a fee for the ``privilege'' of paying down your credit card.

Fourth, the bill requires more transparency from credit card companies. Credit card bills will be mailed 3 weeks before they are due to give consumers plenty of advance warning. Credit card companies will have to disclose any changes to the terms of a credit card agreement when people renew their cards. They will have to be upfront about the length of time and the total interest it will take to pay off the card balance if people only make minimum monthly payments. I think that would be helpful for many people I know, if they knew exactly how long it would take--if they just pay the minimum amount--and how much extra they would be paying. They will have to post their credit card agreements on the Internet so people can look at them anytime and compare them.

Fifth, the bill strengthens oversight of the credit card industry so we can hold companies accountable for their behavior.

This legislation will give consumers much-needed protections from bad practices that have been going on for too long. It is the beginning of leveling the playing field.

If we are going to get our economy moving, we need to restore trust in our financial systems, and when it comes to the credit card industry, that means protecting consumers from unfair practices and putting into place commonsense rules that will bring much-needed transparency and accountability.

We will be voting on this bill shortly. When I cast my vote, I will be voting
for all the people in my State who are working hard and playing by the rules and just want the credit card companies to do the same.

We cannot forget that the ultimate goal of reviving our economy is to make it possible for people in this country--who have worked hard, done everything right, paid their bills, and gotten these credit card bills--to get ahead. This bipartisan legislation, which I cosponsored, will end the unfair practices that have been going on too long for Main Street families, so they can keep more of their hard-earned money.

I yield the floor and suggest the absence of a quorum.

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