Statements On Introduced Bills And Joint Resolutions

Floor Speech

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By Mr. WYDEN:

S. 900. A bill to require the establishment of a credit card safety star rating system for the benefit of consumers, and for other purposes; to the Committee on Banking, Housing, and Urban Affairs.

Mr. WYDEN. Mr. President, as the credit crisis has gripped the nation, more and more families are relying on their credit cards to help them weather the storm. Unfortunately, as more folks use their credit cards, many more consumers are falling victim to the industry's abusive practices.

I am pleased that my colleagues in both the Senate and House are working hard to swiftly fix some of the most egregious existing practices. Like many of my colleagues, I agree that some of the credit card industry's practices are unconscionable. For example some provisions today allow issuers to raise the interest on a consumer to astronomical rates just because of a drop in their credit score or a missed payment on another, unrelated credit card. That's like having your home mortgage go into default because you missed a payment on your car loan. It is not fair and it's predatory.

Clearly, competition in the credit card industry is not working for consumers. Card issuers are not competing on the merits of their cards because consumers are still not able to make good comparisons on the overall cost of using their products. Consumers tend to focus on the interest rate and annual fees, not realizing that many of the little disclosures hidden in the legalese of their contracts can make the real cost of credit significantly higher.

Some practices are truly abusive and it may be best for Congress to eliminate those. However, while eliminating these practices would help protect some of the most vulnerable consumers, it would not solve the underlying systematic problem. For each abusive practice that Congress eliminates, another will pop up. That is why there must be a way to arm consumers with the information they need before they sign up for a credit card in order to reject such unfair practices.

With the financial future of so many Americans now dependent upon the unreadable jargon in credit card documents, consumers need to understand what they are getting into.

That is why I am introducing the Credit Card Safety Star Act of 2009. Last Congress, I introduced this legislation with then-Senator Obama because we both agreed that consumers need a simple way to cut through the unreadable jargon in agreements. My bill creates a safety rating system for credit cards, like the five-star crash rating system for new cars. The rating system for cars helps people understand how their car will protect them in a crash; my bill will help people understand if they can expect their card issuer to treat them fairly or kick them when they are down. Five-star cards would be the safest while one-star cards would be the least safe.

Cards are rewarded for terms that are consumer friendly and get knocked for the tricky terms that tend to get consumers in trouble.

For example, card issuers that can change the terms at any time for any reason or those that make consumers go into default based on credit ratings or other accounts would automatically receive a one-star rating.

However, card issuers that innovate new ways to make their agreements more consumer friendly could get points to out-compete others in the industry. For example, credit cards that give 90 days notice before the issuer intends to change terms, with the option for consumers to opt out, would get a point.

Under my system, card issuers would have to display the ratings on all their marketing materials, billing statements, agreement materials and on the back of the card itself. Consumers would also be able to see the ratings for their card and how their card got that rating on a stand-alone Federal Reserve website.

The Federal Reserve will be responsible for updating the star system and making sure that if new terms or practices come to market, those terms or practices are assigned an appropriate rating.

Additionally, my legislation creates a Credit Card Safety Star Advisory Commission which would study the effectiveness of the star rating system. The Commission would also implement a study that would examine whether it would be better to eliminate certain unfair practices rather than simply giving them a rating under my system.

My bill is designed to work in tandem with the other legislation that has already been introduced. While the Credit Card Safety Star Act will not ban any particular practices, it is designed to update if certain practices are banned.

While my legislation is not a silver bullet to solve all the problems in the credit card industry, it can provide a way forward that will arm consumers with usable information about the tricky terms in these agreements.

I believe it is time to put the free market to the test and see whether we can help consumers make better choices while also encouraging issuers to abandon some of these abusive practices and compete for consumers' business by offering them fair terms they can understand.

Mr. President, I ask unanimous consent that the text of the bill be printed in the RECORD.

There being no objection, the text of the bill was ordered to be printed in the RECORD

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