Statements on Introduced Bills and Joint Resolutions

Floor Speech

STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS -- (Senate - December 05, 2007)

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Mr. WYDEN. Mr. President, credit card debt is hitting American families like a wrecking ball, with our families already being hammered by skyrocketing fuel prices and the subprime mortgage mess. We have seen credit card debt go up almost 25 percent in the last 3 years. I have brought to the floor a typical credit card agreement that millions of our citizens enter into. It is 44 pages long. You can't see it from the chair, but it goes on and on and on with small print. It is very obvious to me that buried in all of this legalese, buried in all of this technical jargon, is a variety of sneaky terms that end up hurting consumers because it is not possible to understand what is in much of the key provisions of these agreements. For example, we understand folks in New Jersey, Oregon, or anywhere else pay a lot of attention to the interest rate provision. They pay a lot of attention to the annual fee provision. But they don't notice a lot of the little disclosures that end up hidden in the legalese that can end up making the real cost of credit significantly higher.

Last week, I met with students across the State of Oregon. A lot of them, with the financial aid cutbacks, are now walking on an economic tightrope. They balance their food bills against their fuel bills and their fuel bills against their housing costs. They are on an economic tightrope. They are getting buried in credit card debt. Very often they find, for example, that if they have a credit card, and they are late on another payment with someone else, their credit card interest rate ends up going up as a result.

There may be a small provision in their existing credit card agreement that allows it, but nobody, for the most part, knows about it.

Students would say their interest rates would double almost overnight with virtually no notice. They would not be given any clear communication about what is going on. They would just find their costs would arbitrarily skyrocket, and they would again be unable to pay their bills.

Now, I recognize in a free society folks have a constitutional right to be foolish, to rack up charges that would not be wise, but they can do so anyway in a free society. I do not think most people will do that, certainly not the students I met with in Oregon last week, if it is possible to understand the terms of these credit cards in straightforward, plain and simple English rather than see the key provisions buried in all kinds of legalese that you would have to be a wizard to sort out.

So I am proposing today, with the support of our colleague, Senator Obama from Illinois, that the Federal Reserve, which has great expertise in this area, set up a safety rating system for credit cards--not one that evaluates credit card companies on provisions that are appropriately evaluated in the marketplace, but on safety matters--for example, whether a credit card company gives the consumer adequate notice before they change terms; whether, for example, they highlight the key kinds of changes rather than bury them in the small print.

I think the Federal Reserve, with the technical expertise they have and the independent judgment they bring to these financial questions, is the ideal place to develop and operate a safety rating system. Such a system has worked quite well for new cars. When you have a rating system for cars, people can understand how they would be protected in a crash. The legislation I am offering will tell people whether credit card companies are treating them fairly and disclosing the key provisions so that a free market can work.

So under the rating system I propose today with Senator Obama, it would be required for credit card companies to put on the card itself, put on the various promotional materials they are using, stars which, in effect, would be granted on the basis of the Federal Reserve's independent judgment as to whether the key safety criteria are being met.

I am very hopeful that at a time when our citizens are being pounded by powerful economic forces, particularly in the energy and housing field, there could at least be bipartisan agreement that the Senate could support transparency, disclosure, changes in the credit card business, so our consumers--and millions are using these credit cards during this holiday season--can understand the agreements they are getting into.

The students I met with last week are taking steps now to better police what is going on in the credit card field. On several campuses in Oregon, they have moved the credit card companies off campus. Yet the credit card companies continue to flood the students with promotional material.

I was told, for example, about one program where students were brought into a room where money was essentially floating in the air, where it was as if you would be going to a financial paradise if you just signed up for one of these credit card agreements.

I am not proposing heavy-handed regulation. I am not proposing one-size-fits-all government. I am proposing that an agency with the expertise to make sure there is disclosure, that the forms and agreements are printed in simple English--that that kind of information be rewarded in the marketplace. If companies are not willing to do it, the American people could find that out as well.

That is the kind of simple, straightforward approach--with disclosure, transparency, in simple English--that makes sense for the digital age. With the Federal Reserve completing that first safety rating, all Americans could get that kind of information quickly and conveniently. That is what is in the interest of the American people with respect to this credit card debt issue at a critical time.

I hope my colleagues will support the legislation I introduce today with Senator Obama.

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