Restoring American Financial Stability Act of 2010

Floor Speech

BREAK IN TRANSCRIPT

Mr. WHITEHOUSE. Mr. President, I wish to say a few words on the amendment I have pending and that we will be voting on in the next 2 days that will restore the historic power of States to control interest rates they charge to their citizens.

One of the things I hear most about when I am home in Rhode Island is from folks who can't understand why their credit card interest rate suddenly jumped to over 30 percent. For a long time, the tricks and the traps in those long credit card contracts pitched people into these penalty rates. I think a lot of people don't read all the fine print and aren't sure exactly what it means. We have individual consumers up against the craftiest lawyers the credit card industry can hire, and the result is when they trigger one of these traps and they get caught by one of these little tricks, they end up being kicked into a very high penalty rate.

Recently, after the credit card reform bill passed a year ago, we saw the credit card industry actually not even waiting for the tricks or traps to be triggered. They just began to spontaneously raise people's interest rates; again, very often over 30 percent. The Presiding Officer and I are both of an age where we can remember a time when interest rates of that level would have been a matter to refer to the authorities, not a commonplace business practice of our biggest industries. When we think of the pain and the suffering and the economic stress families get put under when they fall into these burdensome, exorbitant penalty rates--I think we should do something about it. My amendment would allow us to do just that.

It doesn't take any new risks. It doesn't create dramatic new policy. It does things that my friends on the other side of the aisle have been supportive of over the years. It honors the independent authority of States to make decisions to protect their citizens. It supports consumers--the little guy--against the huge corporations, and it puts our local banks on a level playing field with these big out-of-State banks.

We got here because of an unusual loophole that the Supreme Court opened 30 years ago. We did not have a debate on the Senate floor saying: What should our policy be? Should we take away the rights of States to protect their consumers, to protect their citizens from exorbitant out-of-State interest rates? We never had that discussion. This happened inadvertently.

It happened as a result of a Supreme Court decision back in 1978 that said when a bank in one State and a consumer in another State have a transaction, it will be the laws of the home State of the bank that govern. It didn't look like a very big deal at the time. It didn't take the crafty bank lawyers long to see that it opened a very tricky loophole, and they could move to the States in this country that had the worst consumer protection legislation, and from there--from those outposts of the worst consumer protection--they could market into other States. The fact that the other State they were marketing into had good consumer protections and protected those State's citizen didn't matter. It didn't help because of the Supreme Court decision.

I submit if, as a Senate, we were to have debated that proposition, there would not have been many votes for the outcome. The notion of the policy of the United States on protecting consumers from interest rates should be that the rules of the worst State in the country trump every other State is a rule that nobody in their right mind would vote for. But because of this inadvertent Supreme Court loophole and because of the crafty work of these big national banks and their lawyers, we are now in that exact situation--a situation that none of us would ever have voted for and that we shouldn't tolerate now.

So I urge my colleagues on the other side of the aisle to vote for this amendment. I wish to thank Senator Cochran from the other side of the aisle for cosponsoring it, and I wish to ask his colleagues in the Republican caucus to join him in supporting it.

This bill we are looking at right now is very esoteric and technical. It is preventive medicine. It engages in things such as trying to rebuild the Glass-Steagall firewall, trying to promptly regulate collateralized debt obligations, trying to put appropriate leverage limitations on banks. That is all pretty arcane stuff.

The American people want this reform, and it should happen. But here is a deliverable they can take right home. They will see a difference as soon as their States respond. They can be protected from these outrageous 30-percent interest rates as a result of this bill. It is not a big Federal Government that is coming to do this; it is the State governments, State by State. Indeed, if a State wants to have no consumer protections and have its citizens vulnerable to these predatory and exorbitant credit card deals, fine. They can do that. There is nothing in my amendment that requires a State to do anything. It just empowers them with the same power they had at the founding, with the same power they had for 202 years, until 1978 came along and this peculiar Supreme Court decision.

So I think it will be a good argument to go home with, and as voters in this country look at what Congress has done leading up to the November elections, to be able to say: You know what. Those 30-percent rates we never saw when we were children and that our parents never had to pay, the rates that you as a head of a family are now having to deal with with these credit card companies from out of State that you can barely reach on the phone, and if you do, you get pushed from phone tree to phone tree, we have done something about that. We have helped you. We have put you in a position where the States are sovereign again over these big national corporations rather than vice versa.

Right now, we, the big credit card companies, are sovereign over our States. That is not the way things should be in America. That is not the way the Founding Fathers set it up. It is not right for consumers. It violates the principle of the States being laboratories of democracy, and it completely eviscerates consumer protection.

So I urge my colleagues to support it and to put themselves in a position to be able to go home to their voters and say: We did something tangible for you. We didn't create bigger government. We let your existing State government make the decisions that for two centuries they were capable of making to protect you from the worst practices of the out-of-State credit card companies. The alternative is to have to go back and explain why people are still paying 30 percent when you have the chance to do something about it; why you chose the big out-of-State corporations and exorbitant interest rates over your own home State's protection of your own home State's citizens.

I think the position my colleagues would want to be in on that one is with your home State, with the doctrine of federalism, with the traditions of the United States of America, and with your consumers, rather than on the other side with the big out-of-State banks that charge these exorbitant rates.

So I hope I will have support, and I look forward to working with anyone who has questions.

I yield the floor.

BREAK IN TRANSCRIPT

Source