Card Act

Floor Speech

CARD ACT -- (Senate - May 12, 2009)

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Mrs. MURRAY. Mr. President, mounting debt is taking a big toll on families throughout this Nation. That is why over the past few weeks we have passed bills to stop mortgage scams and to prosecute corporate fraud and to lower fees for homeowners and help them into stable mortgages. Today we have an opportunity to continue to put Main Street first.

Over the last several months, I have heard credit card horror stories from my families all over the State of Washington. I have heard from people who paid their cards on time but saw their supposedly fixed rates skyrocket unexpectedly or who had their minimum required payment doubled with no notice.

I have heard from families who are 1 day late on their minimum payment, so the card company hiked up their rate and charged them a late fee, which put their card over their credit limit and that incurred another fee.

I have heard from people who say their credit card company raised their minimum payment, and when they called to complain, they were offered their lower minimum payment back but only if they accepted a dramatic increase in the rate.

With so many of our families struggling to make ends meet today, it is especially important that we stand up to protect families from excessive credit card fees from unexpected hikes in interest rates and minimum required payments and constantly changing credit card agreements that are designed to make a profit by keeping families in debt. That is why we need to implement the Credit Card Accountability, Responsibility and Disclosure Act, or CARD Act, to help protect consumers from predatory and misleading lending practices.

The CARD Act we are going to be considering in the Senate today requires credit card issuers to give 45 days' notice of rate increases and to provide clear disclosure of term changes when accounts are renewed. It prohibits the so-called double-cycle billing where interest is assessed on the whole debt even when one portion was paid on time. It prevents card companies from using a contract clause to raise consumers' rates at any time for any reason that they choose. And it prohibits companies from issuing credit cards to anyone under the age of 21 unless the application is cosigned by a parent or guardian or the underage consumer completes a certified financial literacy course.

We are going to bring fairness back to the system by stopping financial institutions from taking advantage of consumers with hidden charges and misleading terms. No one should have to be surprised by changes to interest rates or their minimum payments. These steps are going to help us level the playing field and are going to save families thousands of dollars a year.

This bill addresses a number of things that are keeping credit card users in debt, and it is a good start. But at the same time we strengthen protections for credit card users, we have to make sure that people are empowered to make responsible decisions about their own financial future. Put another way, it is not enough to prevent credit card companies from changing the rules when too many Americans don't even know the rules in the first place.

The reality is that over the last several years, too many Americans have made poor or very often uninformed decisions about their finances. Too many overestimated their resources, didn't read the fine print, and didn't grasp the terms of their financial responsibilities before they signed on that dotted line. In fact, we have to recognize that too many Americans, from college students all the way to senior citizens, are financially illiterate.

I recently heard from a constituent of mine in Spokane County whose daughter had applied for credit cards shortly after she turned 18 years old. She, of course, didn't have much income and had difficulty making some of those payments on time. Her mom said one of those cards had a $500 limit. But instead of the bank declining purchases that would exceed that limit, each purchase she made went through and the bank charged a $37 fee for each and every one of them. Another bank charged her $7 every day because she had a $20 overdraft. Of course, she didn't have any hope of paying down those debts on her own.

Those are problems that could have been avoided if she had simply understood her financial responsibilities and the terms of her financial agreements. That is exactly why I have introduced bipartisan legislation to make sure we help people develop the skills they need to make sound, informed financial decisions, from signing up for credit cards to taking out a mortgage to planning for your retirement.

The Financial and Economic Literacy Improvement Act of 2009 will require the Federal Government to step to the plate and become a real partner in helping Americans manage their finances and make good, informed financial decisions. It is a bipartisan bill. Senator Cochran has cosponsored it with me.

The purpose of the bill is to give young people the tools to make informed decisions about credit cards or student loans, to help them understand the importance of saving, and to have the knowledge to plan a comfortable and dignified retirement down the road.

We used to say the three Rs of school were ``reading, writing, and arithmetic.'' I think we need to add a fourth R: resource management.

Under our financial literacy bill, the Federal Government will become a strong supporter of making financial literacy education a core part of our K-12 education. The bill would authorize $125 million annually for our State and our local education agencies and their partnerships with organizations experienced in providing high quality financial literacy and economic instruction. That funding will help make financial literacy a part of our core academic classes. It will help to develop financial literacy standards and testing benchmarks and, importantly, provide teacher training. It will also help schools weave financial concepts into some of their basic classes, such as math or social studies.

The training will not end in high school. This bill makes the same investment in teaching financial literacy in our 2- and 4-year schools. Whether it is skyrocketing interest rates on credit cards or an adjustable rate mortgage you can no longer afford or a retirement plan they do not understand, I often hear the same thing from people: I wish they had taught me this in school.

Our financial literacy bill will ensure that we are teaching it in school and will help people learn those basic skills that are so necessary that will give them a leg up when they deal with their banks or credit card companies.

Let me be clear, credit is not a bad thing. When used correctly, credit can be a lifeline to the American dream. It can provide our entrepreneurs with the startup funds to become small business owners. It can help small business owners with the capital to grow into bigger businesses. And it provides families with the financial security to plan for their future.

But at this important time in our history, as we reflect on financial practices, it is very important that we work to restore our credit card responsibility for lenders and for consumers. That is why I am working to support this bill and my financial literacy legislation.

Just as families and consumers cannot afford unforeseen rate hikes and exorbitant card fees, we cannot afford for our young people today to not understand their own finances.

I congratulate Chairman Dodd on crafting the CARD Act, and I hope the Senate passes it quickly this week. I look forward to continuing to put priorities of Main Street first and following through with that next step that is so important: passing the Financial and Economic Literacy Improvement Act.

I yield the floor and suggest the absence of a quorum.

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