New Direction for Energy Independence, National Security, and Consumer Protection Act and the Renewable Energy and Energy Conservation Tax Act of 2007 -- Continued

Floor Speech

NEW DIRECTION FOR ENERGY INDEPENDENCE, NATIONAL SECURITY, AND CONSUMER PROTECTION ACT AND THE RENEWABLE ENERGY AND ENERGY CONSERVATION TAX ACT OF 2007--Continued -- (Senate - April 03, 2008)

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Mr. SANDERS. Mr. President, this amendment is extremely important because it addresses not only the foreclosure crisis we are seeing in this country, but it is also an issue that impacts millions and millions of Americans every single day of their lives well above and beyond the housing crisis.

What this amendment essentially says is the time is long overdue for this Congress to have the courage to stand up to the banks, credit card companies, and mortgage lenders who are charging outrageously high interest rates and ripping off the American people. I know when I go back to Vermont, I talk to people who say: Why is it I am paying 20, 25, 28 percent interest rates on my credit card? I can tell you, as a former member of the Financial Services Committee in the House, we heard horror story after horror story about payday lending.

We know mortgage brokers are, in some cases, bringing forth unscrupulously dishonest packages that drive interest rates up far beyond what should be charged in this country. This is an issue we must address, and now is the time to do that.

Specifically, this amendment would cap all interest rates at 8 percent above what the IRS charges income tax deadbeats. Currently, the IRS charges a 6-percent interest rate to Americans who are late on paying their income tax returns. 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 as well. If the Federal funds rate goes down, so does the interest rate the IRS charges late filers.

If the amendment I am offering were to become law today, all interest rates would be capped in this country at 14 percent, including subprime mortgages, credit cards, auto loans, payday loans, and income tax refund anticipation loans.

Why 14 percent? How did we come up with that magical number? Well, it is interesting. I will tell you why we came up with that number. In 1991, our former colleague, the Republican Senator from New York, the former chairman of the Banking Committee, as I recall, Al D'Amato, offered an amendment that would cap credit card interest rates at 14 percent. Senator D'Amato was not remembered as a radical extremist. He was the chairman of the committee. Here is what is interesting. That amendment to cap interest rates at 14 percent for credit cards won on the floor of the Senate by a vote of 74 to 19; it was not even close. It had strong bipartisan support.

If I might, obviously, 1991 was a while ago and many people who served are no longer here. But a number of people who served in 1991 are still here today. These are the people who voted in 1991 for the D'Amato amendment to cap credit card interest rates at 14 percent in alphabetical order: Senators Akaka, Baucus, Biden, Byrd, Cochran, Conrad, Dodd, Domenici, Grassley, Inouye, Kennedy, Kerry, Kohl, Lautenberg, Leahy, Levin, Lieberman, McCain, Mikulski, Reid, Rockefeller, Shelby, Specter, Stevens, and Warner. Those 25 Members, in 1991, voted to cap interest rates at 14 percent on credit cards.

In truth, this amendment goes beyond credit cards to other areas where people are today paying very high interest rates. Similar to my amendment, the D'Amato amendment of 1991 was also pegged slightly above the interest rates for late income tax filers. We are using the same formula D'Amato used.

Let me quote Senator D'Amato on the floor in 1991:

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.

Other people went to the floor and also spoke on this issue. Senator Lieberman spoke on it and Senator Domenici spoke on it as well.

What I say to my colleagues is, if this legislation, which passed with overwhelming support in 1991, made sense then, let me tell you, it makes a lot more sense today. 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 in 1990. So if we had over 70 Members of the Senate voting to cap interest rates at 14 percent in 1991, today the vote should be even higher because the crisis is far more severe.

Between 1989 and 2006, Americans' overall credit card debt grew by 315 percent, from $211 billion to $876 billion. All over this country, people who are not earning enough money to pay for basic needs are buying groceries and gasoline to fill up their car with credit cards. And then, in turn, what happens is they are paying 20, 25 percent interest rates, and we have the cycle of misery going around and around, where they are too poor to pay with cash, so they pay with credit, and credit card interest rates are soaring, and they go deeper into debt.

I know this is a hard vote. It is no secret to anybody in the Senate that the financial services industry is enormously powerful. But it is time for us to think about the folks back home who are going deeper into debt and to stand with them and put a cap on interest rates.

One-third of low- and middle-income families reported going into credit card debt to pay for rent, utilities, and food in 2006. That same year, Americans charged $51 billion worth of fast food on their credit card, a 29-fold increase since 2001.

All of this, and more, has allowed credit card companies to earn $90 billion in interest in 2006 alone. I will repeat that.

But credit card companies are not the only ones charging outrageous interest rates. That is why this amendment I am offering expands on the D'Amato amendment to cover all forms of loans.

For example, the Center for Responsible Lending has found some American consumers are paying interest rates for payday loans as high as 800 percent. I think all the Senators understand this. These types of outrageous interests should not be allowed to continue. When the Federal Reserve has slashed the Federal funds rate five times, from a high of 5.25 percent 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. If the Fed is cutting interest rates, how in God's name--and why--are people paying higher and higher interest rates on their credit cards, their mortgages, and in other areas?

One of the reasons for this scam, this rip-off, is the virtual lack of regulation in this country when it comes to interest rates. For example, credit card companies are able to raise interest rates at any time for any reason. I suspect I am not the only Member of the Senate who talked to a constituent who said: I pay my credit card bill on time every single month, and I used to be paying 9 percent, but now they raised it to 14 percent. What did I do wrong? Why are they raising my interest rates?

Every Member of the Senate has, himself or herself, received, along with everybody else in this country, all these fancy prospectives that come from the credit card companies, saying zero percent interest rate or 2 percent interest rate. But they forget to tell you in big bold print what is in the little print on page 4: They can raise interest rates any time for any reason. You don't even have to be late paying your phone bill or rent. They can raise it for any reason whatsoever.

One of the interesting facts, in terms of credit cards, is people would be stunned to know that the credit card companies send out, every single year--do you know how many of these things they send out? Four billion. We are a country of 300 million people. I thought I was getting all of them but apparently not. They seem to come to my house twice a day. Apparently, others are getting them as well. They send out 4 billion of these fancy brochures, urging you to buy into the credit card thing and it costs them a fortune. But, obviously, they can afford to do that because they are ripping off the American people, and they are charging 20, 25, and 30 percent, in some cases, in interest. This is unacceptable behavior. Lenders should not be able to raise interest rates at any time for any reason.

I am not going to go into a religious theme now. I am not going to do that. But I know the Presiding Officer is a religious person and probably more familiar with the Bible than I am. But he will know that the word ``usury'' is mentioned in the Bible on many occasions. I will not quote from them, but in Leviticus chapter 25, verses 35 to 37, the issue about usury rates is, in fact, addressed.

I will talk about Dante's ``Divine Comedy.'' In the ``Divine Comedy'' by Dante, he speaks about a special place for people who charge usurious interest rates, and that is the inner ring of the Seventh Circle of Hell.

I don't particularly wish that on the banking industry and all the lobbyists who come here every day. I don't wish that on them. But I do wish they would take a deep breath and understand that this is not just an economic issue, it is a moral issue. People who are struggling to pay their bills, who are going into debt, through no fault of their own, should not have to pay 25 or 30 percent interest rates.

Mr. DURBIN. Mr. President, will the Senator yield for a question?

Mr. SANDERS. I will be very happy to yield to the Senator from Illinois.

Mr. DURBIN. I direct my question through the Chair to the Senator and thank him for offering the amendment and say to the Senator from Vermont that over a year ago, while making a phone call to someone in a financial institution in New York on an unrelated issue, the person said to me: Watch out for subprime mortgages. It did not register with me, but I should have paid closer attention. A few months ago, while making a similar call to a financial institution in New York, the fellow said: Watch out for credit cards because people are shifting their debt now into credit card debt with the sky-high interest rates.

Many people listening may ask what is this about. This is supposed to be about housing. It is not about housing. It is about the credit vulnerability of America. Housing is the first canary in the cage the Senator shared, if he will allow me to use that analogy. Credit cards will quickly follow.

I say to the Senator from Vermont, when we debated bankruptcy reform on the floor of the Senate 3 or 4 years ago, the credit card industry was pushing that bill because they wanted credit card debt to survive bankruptcy so you could carry it to the grave. I put a provision in that bill that said on a monthly statement for a credit card asking for a minimum monthly payment, you have to disclose to the person holding the credit card how long it would take them to pay off the balance if they paid the minimum monthly payment. The credit card industry refused, saying it was technically impossible to calculate. Does anybody believe that?

I say to the Senator from Vermont, they had a feature on ``NOVA,'' which I think is an extraordinary program, about credit cards. They heralded this one man who is the guru of credit cards who dreamed up lowering the percentage of minimum monthly payments from 5 percent a month to 2 percent because he created an endless stream of debt. If you pay 2 percent, you will never catch up with yourself. You will pay debt forever.

So those who think this amendment of the Senator from Vermont is unrelated to our conversation about housing are wrong.

The last point I will make is, I thank the Senator from Vermont for mentioning payday loans. They rip off members of the military like no other entity in America, and they are a blight on America's credit horizon.

I thank the Senator for offering this amendment. My question is, Can I sign on as a cosponsor?

Mr. SANDERS. With pleasure. I thank the Senator from Illinois.

Mr. President, I will conclude because the Senator from Illinois made the point better than I can make it. Every Member of the Senate knows this is a huge issue. In their heart, every Senator knows there is something immoral, that there is something outrageous about hard-working people paying 25, 30 percent, especially at a time when the Fed is lowering interest rates.

I say to my colleagues, it is no great secret. The financial services industry is very powerful. We all know that. They make huge campaign contributions. They have a lot of power here. But I hope that on this amendment, we have the courage to stand up to them.

In concluding, I remind my colleagues that in 1991, when Senator D'Amato offered a similar amendment, there was overwhelming bipartisan support. The American people want us to act on this issue. As the Senator from Illinois indicated, this is directly related to the housing crisis, and I think it is time we move forward and put a cap on interest rates.

I yield the floor.

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