December 05, 2007

Wyden Introduces Credit Card Safety Star Act

Wyden: "Credit card debt is hitting American families like a wrecking ball"

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 sub-prime mortgage mess, we have seen credit card debt go up almost 25% in the last three years.

I have brought to the floor today, Mr. President, a typical credit card agreement that millions of our citizens enter into, and it is 44 pages long, Mr. President. You can't see it, obviously, from the chair, but it goes on and on and on with small print. It is very obvious to me, Mr. President, 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's not possible to really understand what is in much of the key provisions of these agreements.

For example, I think we understand that folks in New Jersey or 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're on an economic tightrope, and they are just getting buried in credit card debt. Very often they find, for example, that if they have a card and they're late on another payment, their credit card ends up going up in the charges. 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 that their interest rates would double almost overnight with virtually no notice. They wouldn't be given any clear communication, Mr. President, and colleagues, about what's going on. They would just arbitrarily find that the costs would skyrocket and they would again be unable to pay their bills.

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

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 or not 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 the 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 that I'm offering them will tell people whether or not credit card companies are treating them fairly and disclosing the key provides so that a free market can work. So, under the rating system that I propose today with Senator Obama, it would be possible for credit card companies to put on the card itself, on the various promotional materials that they're using, stars that would be granted on the basis of the Federal Reserve's independent judgment as to whether the key safety criteria are being met.

Mr. president, I'm very hopeful that at a time within our citizens are being pounded by economic forces particularly in the energy and housing field, that there could be bipartisan agreement that the United States Senate could support transparency, disclosure, changes in the credit card business so that our consumers, and the millions that are using the credit cards during this holiday season, can understand the agreements they're getting into.

The students that 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 they continue to flood the students with promotional material. I was told, for example, about one program where students were brought in to a room where money was essentially floating in the air, where it was if you would be going to a financial paradise if you just signed up for one of these credit card agreements.

I'm not proposing heavy handed legislation, and I am not proposing one-size-fits-all government, I'm proposing an agency with the expertise to make sure that there is disclosure, that the forms and agreements are printed in simple English, that that kind of information be rewarded in the marketplace and if companies are not willing to do it, that the American people could find that out, as well. That's the kind of simple, straightforward approach -- disclosure, transparency, simple English -- that makes sense for the digital age where all Americans could get that information quickly and conveniently. That is in the interest of the American people with respect to the credit card debt issue at a critical time, Mr. President. I hope my colleagues will support the legislation I introduce today with Senator Obama.

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