Statement of Richard C. Shelby U.S. Senate Committee on Banking, Housing, and Urban Affairs ""Examining the Billing, Marketing, and Disclosure Practic

Statement

Statement of Richard C. Shelby U.S. Senate Committee on Banking, Housing, and Urban Affairs ""Examining the Billing, Marketing, and Disclosure Practices of the Credit Card Industry, and Their Impact on Consumers." "

Thank you Mr. Chairman. I commend you for holding this important hearing this morning.

Over the last thirty years, there has been considerable change in our nation's credit markets. In the past, card issuers offered fixed-rate, fee-based cards to consumers with only the best credit ratings. Today, the use of risk-based pricing allows issuers to offer a wide variety of cards to a greater number of consumers by using different rates, fee structures, and credit limits. While it is clear that such innovation has greatly, and positively, affected the cost and availability of credit, it is also clear that these changes have led to some troubling practices as well.

Generally speaking, more complex credit card products involve more conditions and variables, making it harder for the average consumer to fully understand their rights and responsibilities. Large numbers of consumers, in fact, do not understand the basic terms that can affect rates and fees. For example, many are surprised when the rate on their card is raised, even
though they have made every payment in full and on time. Through the practice known as "universal default," credit card issuers maintain the right to raise rates when they discover that a consumer was late or missed a payment on ANY of the consumer's other credit accounts.

The marketing of credit card products has also changed dramatically in recent years. From the internet, to college campuses, to the mailbox, credit card solicitations are everywhere. The marketing campaign does not stop when a consumer already has an issuer's card - or even when the card holder is having trouble making payments. In fact, some issuers extend additional
credit to troubled borrowers with full knowledge of their credit difficulties.
At the outset of this hearing, I think we must recognize the integral role credit cards play in the financial lives of almost all adult Americans. Nearly half of all of Americans use credit cards to conduct transactions worth billions of dollars. With that in mind, this Committee has a responsibility to not only identify abuses and questionable practices by issuers, but also to highlight the positive aspects of the credit card marketplace while emphasizing the
responsibilities of the individual card holder.

I believe that credit must not only be used responsibly, but extended responsibly as well. The key to achieving both of these goals is access to accurate and understandable information.

I look forward to hearing from today's panel on the state of the credit card business and how Congress can continue to be a constructive influence in a dynamic and necessary sector of our financial services industry.

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