New Direction for Energy Independence, National Security, and Consumer Protection Act and the Renewable Energy and Energy Conservation Tax Act of 2007
Floor Speech
NEW DIRECTION FOR ENERGY INDEPENDENCE, NATIONAL SECURITY, AND CONSUMER PROTECTION ACT AND THE RENEWABLE ENERGY AND ENERGY CONSERVATION TAX ACT OF 2007 -- (Senate - April 03, 2008)
BREAK IN TRANSCRIPT
Mr. SANDERS. Mr. President, I congratulate Majority Leader Reid and Minority Leader McConnell, as well as Committee Chairman Dodd, and ranking committee member SHELBY for their hard work in beginning the process of trying to bring relief to families who are struggling to hold on to their homes. I think they are taking a good step forward. I think we have to do a lot more to address this very serious crisis.
It is no secret to anyone that the middle class in this country is in great danger. It is shrinking. Some think it is on the verge of collapse. Workers today who are going to fill up their car's gas tank are paying $3.20 for a gallon of gas in the State of Vermont, and there is a fear that may go higher. People are paying higher and higher prices for food. Since President Bush has been President, some 8 million Americans have lost their health insurance, health care costs are soaring, and a college education is unaffordable. In the meantime, wages, the real median family income for the average American family is going down, and the gap between the very rich and everybody else is getting wider. So we have some very serious problems. Among other aspects of that crisis is that the personal savings rate today is below zero, which, up until 2005, hasn't happened since the Great Depression. So what is happening is that people are working longer and longer hours, their wages are going down, we are losing good-paying jobs, and they do not have enough money to survive on so they are borrowing more and more money. That is the reality.
There is a lot, to my mind, that we have to consider as a country to begin addressing the fact that poverty is going up, the middle class is declining, and the gap between the rich and everybody else is growing wider. There is a lot we have to do. But as we now focus on the mortgage crisis, we have to take a hard look at interest rates in this country. I intend to offer an amendment to the housing bill that I want to say a few words on now and I will speak to at greater length later.
My amendment will clearly not solve all of the problems facing the middle class, but it will do one very important thing: It will take one action that is long overdue, and that is it would stop big banks, credit card companies, payday lenders, mortgage bankers, and other lenders from ripping off American consumers by charging outrageous interest rates.
I do a national radio show every Friday afternoon where people call in. And you know what they say? They say: We are sick and tired of paying 20, 25, 30 percent interest rates when, in fact, we pay our debt on time every single month. That is what they are saying. People who are borrowing money to send their kids to college are paying
outrageously high rates, and certainly we know, given the crisis we are debating today, that mortgage interest rates are off the charts.
With this amendment I will be offering, it would cap all interest rates at 8 percent above what the IRS charges income tax deadbeats. That is the formula we are using. Currently, the IRS charges a 6-percent interest rate to Americans who are late on paying their income tax returns. That is what we are doing today. The IRS adjusts these rates every quarter based on the Federal funds rate. If the Federal funds rate rises, the interest rate the IRS charges late filers goes up. If the Federal funds rate goes down, so does the interest rate the IRS charges late filers.
If the amendment I am offering were signed into law today, all interest rates in this country would be capped at 14 percent, including subprime mortgages, credit cards, auto loans, payday loans, and income tax refund anticipation loans. Why 14 percent? Why do we pick that number? It is an interesting point. I am glad you asked that question, Mr. President, and here is the answer. Because 14 percent happens to be the same level that former Senator Al D'Amato chose when he offered an amendment in 1991 to cap credit card interest rates. Al D'Amato, Senator from New York, offered that amendment.
Do you know what the vote was on that bipartisan amendment, offered by the Republican Senator from New York? That amendment passed the Senate by a vote of 74 to 19--74 to 19--a huge bipartisan vote. And among those Members who are today in the Senate, and who cosponsored that amendment, were Senators SPECTER, LIEBERMAN, and DOMENICI, among others. Unfortunately, that amendment ended up not being signed into law.
Like my amendment, the D'Amato amendment was also pegged slightly above the interest rates for late income tax filers. I have the feeling that in my career in the Senate I will not often be quoting former Senator D'Amato, probably won't be doing that, but let me quote what Senator D'Amato said on the Senate floor in 1991. This is what he said.
Fourteen percent is certainly a reasonable rate of interest for banks to charge customers for credit card debt. It allows a comfortable profit margin, but keeps banks in line so that interest rates rise and fall with the health of the economy.
He was then the chairman of the Banking Committee.
I say to my colleagues that if the Senate in 1991 thought that interest rates should be capped, trust me, we should at least do as much today, because the problem is in fact much more severe.
A recent report, published by Tamara Draut, the Director of the Economic Opportunity Program at Demos, found that one-third of all credit card holders in this country are paying interest rates above 20 percent and as high as 41 percent--more than double what they paid in interest rates in 1990. In other words, if we had a problem then, the problem today is much more severe.
Between 1989 and 2006, Americans' overall credit card debt grew by 315 percent from $211 billion to $876 billion. One-third of low- and middle-income families reported going into credit card debt to pay for rent, utilities, and food in 2006.
Now, I don't know about Nebraska, but I will tell you that in the State of Vermont there are a lot of people who are buying their food with credit cards. They do not have the cash. They have to go in debt to buy food and pay for other basic necessities. All of this--high interest rates--has resulted in credit card companies earning $90.1 billion in interest in 2006 alone--credit card companies ripping off the American people and earning huge profits.
But credit card companies aren't the only ones charging outrageous interest rates, and that is why my amendment expands on the D'Amato amendment to cover all forms of loans. For example, the Center for Responsible Lending has found that some American consumers are paying interest rates for payday loans as high as 800 percent. And if you want to know why these outrageous levels of interest on credit cards and payday loans are relevant to the debate on foreclosure, let me quote from two articles on the subject. The first is a recent Reuters article entitled ``Pay Day Loans Exacerbate Housing Crisis.'' According to this article:
As hundreds of thousands of American homeowners fall behind on their mortgage payments, more people are turning to short-term loans with sky-high interest rates just to get by. While figures are hard to come by, evidence from nonprofit credit and mortgage counselors suggests that the number of people using these so-called ``pay day loans'' is growing as the U.S. housing crisis deepens, a negative sign for economic recovery.
The second article is from a recent front-page story from USA Today. The title of the article says it all. ``Facing losses on bad loans, banks boost credit card rates.'' According to the article:
Even as the Federal Reserve has aggressively slashed short-term interest rates, banks are raising rates on credit cards.
Federal Reserve lowering; banks increasing. This should not happen. When the Federal Reserve has slashed the Federal funds rate five times, from a high of 5.25 percent down to 2.25 percent, credit card interest rates should be going down, not up.
Interest rates for payday loans should be going down, not up. Mortgage interest rates should be going down, not up.
The PRESIDING OFFICER. If the Senator can suspend for just a second?
Mr. SANDERS. I ask unanimous consent for an additional 2 minutes, please.
The PRESIDING OFFICER. Without objection, it is so ordered. Please proceed.
Mr. SANDERS. Unfortunately, in many cases interest rates for consumers are going up at the worst possible time. One of the reasons for this is the virtual lack of regulation when it comes to interest rates. For example, credit card companies are able to raise interest rates at any time for any reason, and recently that is exactly what, for example, the Bank of America has done. According to a recent Business Week article:
Bank of America sent letters notifying some responsible card holders that it would more than double their rates to as high as 28 percent, without giving an explanation for the increase. Fine print at the end of the letter advised calling a 800 number for the reason, but consumers who called said they were unable to get a clear answer. What is striking is how arbitrary the Bank of America rate increases appear, credit industry experts say.
This is unacceptable. Lenders should not be able to raise interest rates at any time for any reason.
There are Biblical references to what can be described as usury; that when people are down and in need of money, there is a strong moral objection to charging them sky-high interest rates.
In the ``Divine Comedy'' by Dante, there is reserved a special place for people who charge usurious interest rates, the inner ring of the Seventh Circle of Hell.
I don't wish this on the credit card companies or the mortgage lenders, but this is what I do say. In this country today, especially as interest rates go down from the Fed, it is an outrage that millions of our fellow Americans are paying 25 percent or 30 percent interest rates, and our amendment would begin to address this issue. The time is long overdue for us to move in that direction. I ask at the appropriate time for the support of my colleagues.
Source