WASHINGTON - While President Barack Obama held a town hall meeting in Rio Rancho pushing for credit card reform, U.S. Senator Tom Udall was fighting for the passage of the Credit Card Accountability, Responsibility and Disclosure (CARD) Act in the Senate. This legislation stops unfair or dishonest practices used by some credit card corporations and requires greater disclosure of credit card terms. It also prevents card companies from raising rates unfairly or retroactively.
"Credit card debt is more than an economic issue," Udall said on the floor of the Senate. "It is a families issue and a children's issue. In 2004, families with minor children were more than three times as likely to file for bankruptcy as their childless friends. More children lived through their parent's bankruptcy than their parent's divorce, and these children risk losing a stable home and a shot at college. This legislation will help protect those children, and I was proud to join with President Obama in supporting it."
Over the last three decades, as credit card companies have taken advantage of loose rules to aggressively market their product, credit card debt has gone up 360 percent and debt-related bankruptcies have skyrocketed. One study has shown that one-third of bankruptcies are caused by credit card debt.
Among other provisions, the CARD Act would:
· Outlaw "universal default," a practice by which card companies raise interest rates on every one of a customer's accounts in response to a default on one account, even if that default is on an account with a different lender;
· Prevent arbitrary interest rate increases;
· Stop interest rate charges on debt that is paid on time;
· Require a 45-day notice before an interest rate increase; and,
· Require card companies to inform customers when card terms have changed and to reveal due dates and late payment penalties in a customer's billing statement.
Senator Udall's complete statement from the Senate floor is below. To see the speech, click here.
M. President,
I want to thank Chairman Dodd for his hard work on this legislation. He deserves a great deal of credit for putting the issue on Congress's agenda and for producing a very strong bill.
Nobody in this body-or in this country-needs to be told about the effect of subprime mortgages on America's families. We have seen the impact that unsustainable mortgage debt has had on our economy. And we know the pain it has caused.
But while mortgage debt grew by 200 percent over a quarter century, credit card debt grew by more than 350 percent. Studies suggest that credit card debt plays an even larger role than mortgages in causing personal bankruptcies.
And even the explosion in mortgage debt has a lot to do with credit cards. Many Americans took predatory mortgages because they needed a way out of massive credit card debt. A mortgage might have done them in, but their story started with a credit card.
Credit card debt is more than an economic issue. It is a families issue and a children's issue.
The explosion in credit card debt has taken a toll on all Americans, but children have been hit the hardest. In 2004, families with minor children were more than three times as likely to file for bankruptcy as their childless friends. And more children lived through their parent's bankruptcy than their parent's divorce.
We know that bankruptcy has a devastating impact on families. Children in bankrupt families lose the comfort of a stable home. They can lose their ability to go to college. And they might lose even more. Credit counselors report that families struggling with excessive debt are more likely to experience domestic abuse.
The explosion in credit card debt in this country was not the result of reckless spending by American families. Family spending on luxuries is roughly what it was thirty years ago. The face of debt in this country is not an irresponsible teenager; it is a mother in over her head.
Nor is our debt problem simply a matter of supply and demand. American consumers have not suddenly decided that they like high fees, harsh penalties and skyrocketing interest rates. These expensive provisions are hidden in the fine print of card applications mailed to vulnerable communities.
Card companies call this outreach. I call it deception.
The reforms we are considering today will not disrupt the system. They will not stop credit card companies from providing credit. Any company that wants to help consumers live within their means has nothing to fear from this legislation. Any company that wants to offer a service to American consumers has nothing to fear.
But if you are planning to mislead customers, this bill will stop you.
If you are planning to offer low rates and charge high ones-we will stop you.
If you are planning to trick customers into paying fees and penalties-we will stop you.
And if you are planning to profit from the misery of American families-we will stop you.
Frankly-it's about time.
Now, before I close I want to quickly address an amendment offered by the senior Senator from Colorado. The amendment requires that Americans requesting their credit report also receive their credit score.
For six years, credit agencies have violated the intent of Congress by failing to provide this information. Legislation passed six years ago required them to provide one credit report each year for free. But these credit reports do not have to include the one piece of information that is most crucial and easiest to understand-the customer's credit score. The Udall Amendment will help Americans manage their credit without burdening credit agencies or anybody else. It is a good idea-I support it-and I encourage all my colleagues to support it.
Thank you, M President. I yield the floor.
