Restoring American Financial Stability Act of 2010 - Continued

Floor Speech

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Mr. DURBIN. Madam President, I thank the Senator. I hope to join him as a cosponsor. It wasn't that long ago--the Senator will remember--when we had a debate on the floor about credit card reform. People across America said: There are some things going on with credit cards that aren't fair and right, and we need you to police these credit cards and make sure they don't do outrageous things and charge people unreasonably.

I think we made some progress in the law we passed, but we made one critical error: we gave the credit card companies a long grace period to adjust to the changes. If you will notice, over the last year or so you received notices--I got them at my home in Springfield, IL--from credit card companies saying they were going to raise interest rates on the credit cards before the new law went into effect. My wife saved them and said: Mr. Smart Senator, how did you let this happen? It turned out that we had no control on those interest rates during that period of time and very little after the reform bill.

What the Senator from Rhode Island is challenging us to look at is this: What is a reasonable amount to charge for an interest rate? His decision--and I concur with it--is, let's let each State make that decision.

Thirty-two years ago, the Supreme Court incorrectly removed the authority of States to make that decision. They said: If your credit card company is located in State X, you are bound by the laws of State X when it comes to interest rates for all of your customers across the United States. You don't have to change for a customer living in Arkansas, which has a cap on interest rates, or for a customer living in Illinois. You just take the law of State X and that is the law you apply to your customers.

The Senator from Rhode Island says: Why would we allow that? Why don't we let standards be established by each State? He doesn't dictate the standard--whether it is 5, 10, or 100 percent. That will still be up to the State. He doesn't say it will happen overnight. He gives a year for them to phase it in.

It will also level the playing field for a lot of community banks and local financial institutions in each State bound by State law.

When the community banks in Illinois are doing business with me as a resident of Illinois, there are laws that can apply, and in other States as well. But when it comes to credit cards, they can charge me whatever they want because the States they say they do business in have no rules whatsoever.

The net result of this most people understand. If the interest rates are not regulated, if they literally go to the high heavens, people end up paying enormous sums of money. The penalties involved go through the roof as well.

This is a legitimate issue and a legitimate subject for us to raise. I believe, as the Senator from Rhode Island does, that there is a reasonable level of interest rates where a reputable institution can make a good profit. Beyond that, it turns out to be a trap that a lot of people fall into because they do not realize there is no ceiling whatsoever on the interest rates they are being charged.

There will be other amendments on this financial stability bill. This is one that I think most people will understand completely. The law of your State will determine the interest rate you are going to pay on your credit card, not the law of some other State. I do not think it is an unreasonable amendment. It is a very reasonable one. It reduces the cost for families and businesses and the life they lead, and it gives to each State the authority to decide what that limit will be within each State. For those who argue against Federal control, the Senator from Rhode Island is taking this right back to the local level where the decisions will be made.

I am happy to support his amendment, and I encourage my colleagues to join us in cosponsoring it.

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