Tester urges Senate to reform credit card industry

Senator shares stories from Montana to build support for reform bill

(WASHINGTON, D.C.) – Armed with personal stories from Montanans hurt by credit card companies, Senator Jon Tester urged his colleagues in Congress to reform the credit card industry.

Tester, a member of the Senate Banking Committee, helped write the Credit Card Accountability Responsibility and Disclosure Act, also known as the Credit CARD Act.

The full Senate is expected to vote on the Credit CARD Act next week.

Tester included language in the bill to ban the practice of increasing interest rates on customers even if they pay their credit card bills on time.  In the credit card industry, that practice is known as “universal default.”

“They may call that universal default,” Tester said during a speech on the Senate floor.  “But where I come from in Montana, we call that a rip off.”

On the Senate floor, Tester read two letters from Montanans who wrote about their experiences with credit card companies.  The first letter, from a Belgrade small business owner, said his interest rate rose to 27 percent.  The second letter, from a Glacier County resident, asked Tester to “stand up to the banks when it comes to credit card regulation and oversight that the consumers need.”

“I’m all for personal responsibility,” Tester said.  “ Folks need to make good on their purchase obligations.  But plastic personal debt can be very dangerous and addictive.  Ordinary Americans can get in over their heads very quickly.  And that’s why the Senate needs to pass common-sense legislation to protect consumers from abuse.”

Tester said the Credit CARD Act “puts common sense and honesty back into the credit card industry.”

In addition to banning the practice of universal default, the measure also:

• Gives cardholders an additional week to pay their bills (by requiring credit card statements to be mailed three weeks before the bill is due rather than the current two weeks).
• Limits fees and penalties (by outlawing interest on transaction fees such as late fees and over-limit fees, and prohibiting companies from charging fees for customers who pay their credit card bills via phone, over the internet, or by mail). 
• Bans credit card companies from exploiting young Americans (by requiring most credit card applicants under the age of 21 to get a signature from someone willing to take responsibility for the debt, and limiting credit card offers to customers between the ages of 18 and 21).

Tester’s remarks on the Senate floor appear below.

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U.S. Senator Jon Tester
Floor Remarks
Credit CARD ACT
May 7, 2009

Madame President, I rise this morning to speak about an important plan to protect American consumers. 

Specifically, I call on the Senate to pass tough new reforms of the credit card industry.  I’ve been working for months with my colleagues on the Senate Banking Committee to write this important new legislation.  I’m proud to have played a part in Chairman Dodd’s bill, the Credit CARD Act.  

This bill includes legislation I introduced last year to outlaw what is called “universal default.”  That’s the term given when the credit card companies raise interest rates on customers if their credit scores fall for any reason – even if those customers pay their credit card bills on time.   They may call that universal default.  But where I come from in Montana, we call that a rip off.

This reform legislation puts common sense and honesty back into the credit card industry.  It will establish a new set of standards at a time when hardworking, honest folks are getting squeezed in this tough economy. 

Simply put, Montanans are not happy with the credit card companies.  All of us are getting fed up with hidden fees, high interest rates, and confusing small print.  Every day, I get calls, letters and emails from folks back home who want the Senate to take action to rein in these predatory practices of the credit card industry.  I have here in my hand a few of those examples.

The first one is from a man in Belgrade, Montana—in Gallatin County—and he writes this—and I will quote at length:

“These institutions have bilked us.  They took the bailout money and had no qualms about undertaking more irresponsible actions to loot the American taxpayers and consumers again.  I will use myself—a small business owner so small you might call us a nano-business—as an example.  Four or five months ago, we hit a bump in the road and got behind with [our credit card company].  Knowing that this was going to be a temporary situation pending the closing on the sale of some property we owned, I stayed in at least weekly contact with [our credit card company] to keep them informed and assured them that we had every intention of meeting our obligation, which we did.  What happened then is almost unbelievable.  My interest rate was increased to over 27 percent.   I was charged various fees for being late that amounted to over $1,100… What really made me feel ripped off is that I had been a card holder [with that company] for 26 years!!!”

Madame President, I’m all for personal responsibility.  Folks need to make good on their purchase obligations.  But plastic personal debt can be very dangerous and addictive.  Ordinary Americans can get in over their heads very quickly.  And that’s why the Senate needs to pass common-sense legislation to protect consumers from abuse.

Another lady wrote me from Glacier County, Montana, and said this:

“I hope you will be willing to stand up to the banks when it comes to credit card regulation and oversight that the consumers need.  In our home, we just saw interest rates on many of our credit cards jump for no reason… How are we supposed to be participating in an economic recovery when our cash is being siphoned off for these unfair charges?  You have a chance to do something about it. I hope that you will.”

I, too, hope that we will.  I hope that the Senate will pass the Credit CARD Act.   This bill will ban universal default, the jacking-up of interest rates even when the account in question is in good standing.  It will protect consumers who pay their bills on time by outlawing interest charges on debt paid on time.  It gives consumers another week to pay their monthly bills.  And it limits fees and penalties.  It ensures that cardholders will know the small print.  And it protects young Americans, who are often most vulnerable, from predatory practices by the credit card companies. 

I voted against the Wall Street bailout because handing bags of money to big Wall Street bankers and hoping the money would trickle down to Main Street small businesses and working families made no sense to me.  Now, we see some of the same recipients of taxpayer bailouts jacking around the regular working folks who make this country run and who are having a hard time in this tough economy brought on by mismanagement here and by crooked deals on Wall Street.

Madame President, it’s important to note that not everyone in the banking industry is guilty of gross exploitation of American consumers.  But the bad actors on Wall Street and the credit card companies need to be reined in and the rights of the regular public need to be protected. 

I am pleased that President Obama had the credit card executives down to the White House the other day to encourage them to treat the consumers fairly.  I call on the Senate to step up to the plate and deliver meaningful legislation that will put in place common sense consumer protections. 

Thank you, Madame President.  I yield the floor.