Senate Proceeding 05-13-09 on May 13th, 2009 :: 0:02:45 to 0:18:35
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Tom Harkin: by the distinguished chairman of the banking committee, senator dodd. it would reform of a credit card industry whose practices have increasingly predatory and abusive. i've heard from many hundreds of eyiowans who have been victimized by credit card companies. these are good people who in the

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Speech By: Tom Harkin

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Tom Harkin: current economic downturn have had no choice but to resort to their credit cards in order to put food on the table or to make a car payment or even help pay for college tuition. as a result, they've found themselves on the selfin receiving end of a whole rai of unfair and often outright abusive practices, things like double

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Tom Harkin: billing, arbitrary interest rate increases. so i applaud the dodd-shelby legislation for cracking down on some of these abuses. i think the legislation is a good first step. however, this bill still credit card companies to charge excessive and for millions of

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Tom Harkin: americans ruinous interest rates. currently one-third of all credit cardholders in the united states are being forced to pay interest rates above 20%, sometimes as high as 41%. one-third of all credit cardholders forced to pay interest rates above 20%,

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Tom Harkin: sometimes as these interest rates are grossly excessive. it is tool to set a reasonable -- it is time to set a reasonable limit on what credit card companies can charge. madam president, in times past, an interest rate of 20% or or 40% would have been cdemned by religious leaders of all

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Tom Harkin: faiths as being the usury. people daring charge these intere rates would have been prosecuted for loan sharking. but today the credit card industry tells us that charging people these grossly excessive interest rates are both fair and necessary. well, i totally disagree. it is not fair, and it is not

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Tom Harkin: necessary. what's more, as many iowans have pointed out to me, the many financial institutions that are victimizing and squeezing ordinary, hard-working americans have already received billions of dollars from the taxpayers. now these institutions are lending money -- that money -- that money that came from

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Tom Harkin: taxpayers -- they're lending that money to people at interest rates as high as 41%. please, someone tell what is e log no wonder people are upset all over this country. you take their hard-earned tax dollars, we ghif it to these big institutions. they have a credit card and in hard times they have to use that credit card for some

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Tom Harkin: necessities. now they're being charged, 20%, 25%, 30% interest. well, it's sweet financial institutions. it is just nothing old-fashioned ripoff of consumers. for these reasons i have joined with senators sanders and whitehouse, leahy, durbin, levin to offer an amendment to cap

0:05:53 to 0:06:15( Edit History Discussion )

Tom Harkin: credit card interest rates 15%, just cap them. in other words, yes, that's exactly what i'm saying. no credit card could charge more than now, why do we pick 15% as an appropriate top rate? well, thanks to a law, madam president, passed by this

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Tom Harkin: congress 30 years ago here at the time when we passed it. and you know what we did? we put a cap of 15% on the maximum credit charges that a cred customers. 15% -- 30 years ago.

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Tom Harkin: now we left a loophole for special circumstances -- not a loophole but a thing -- a valve, a safety valve for special circumstances. this rate cap of 15% has protected millions of c at credit i belong to a credit union right here in the senate.

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Tom Harkin: i always belonged -- i belond to one in the house when i was in the house. before that, when i was in the navy, i bonged to the navy federal credit union. these credit unions have performed a viable, good service to millions of americans, without harming the safety or soundness of the institutions.

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Tom Harkin: and without negatively impacting access union members. i've been a member o of credit unions, as i said, all my adult life. i've never seen the amount of credit to borrowers. yo need a car? you've been able consumer loans from credit

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Tom Harkin: unions. i would also point out, madam president, not one single credit union -- not one -- had to line up with the big banks begging for a bailout, not one credit union. and yet they were capped interest rates. interesting credit unions have remained

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Tom Harkin: strong and stable despite the meltdown in much of our financial system. chris culver was recently asked about the effect of the interest rate cap on his institutions, 15% cap. he answered -- quote -- "it hasn't been an issue. credit unions are still able to thrive."

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Tom Harkin: now, of course, there maybe some special circumstances under which an interest rate above is temporarily necessary. currently, credit unions are allowed to charge higher interest rates if their regulator, which is the national credit union administration, determines that this is necessary to maintain the safety

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Tom Harkin: and soundness of the institutions. at the present time, the the nationa credit union administration, allows credit unions to charge interest rates as high as -- get this -- as high as 18%. though most continue to have a top rate that's actually much lower, much lower than that, and some of

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Tom Harkin: them lower than 15%. some as low as 12%. 11 well, our amendment amendment includes a similar reasonable exception. it would allow credit card companies to charge interest rates higher than 15% in circumstances where federal

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Tom Harkin: regulators determine that higher rates are necessary to protect the safety and soundness of financial institutions. madam president, it seems like this is deja vu all over again for me. i've been advocating for a 15% cap since i was an attorney for the iowa consumers league in 1973.

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Tom Harkin: fresh out of law school. i was a lawyer for the iowa consumers league, and we were trying to get the legislature at that time to put a cap of 15% on credit cards. so this issue's been around for a long time as a legal aid lawyer at that time, i saw firsthand the devastation and hardship caused to iowa families by excessive

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Tom Harkin: interest rates charged by credit card companies and others. now, again, many of these iowans turned to their credit car -- turn to their credit cards in a time of crisis, a medical emergency, for example. but because of the prohibitive interest rates, they found themselves falling further further behind in their payments payments. some were forced into bankruptcy bankruptcy.

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Tom Harkin: well, it's no differentoday. as i hundreds of letters and e-mails from iowans who've been victimized by credit card companies' abusive practices. for example, madam president, let me share an all-too-common story from one of my iowa constituents, and i will read it verbatim as she wrote it. quote -- "i

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Tom Harkin: a pretty good job for which i am very thankful. i have three credit cards recently i received notices from two of them that they were raising my interest rate due to economic conditions. i don't mean a little. i mean

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Tom Harkin: and she capitalized "a "capital one" -- we all know who capital one on is, credit rds -- "capitol one sent me a notice that they were raising my rate from 13.9% to 23.99%. i had the option of myocardial and paying off the existing balance at my current

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Tom Harkin: rate o the other one is washington mutual. they were recently purchased by j.p. morgan chase." now, we all know about j.p. morgan chase. "i received a not couple of weeks ago that my rate was going from" get this --

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Tom Harkin: "10.4% to3.99% now, you wonder, here's j.p. morgan chase, operating through washington mutual, increasing their interest trite capital one" -- i believe they're located in chicago, i

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Tom Harkin: may be wro increasing their rate to 21.99%. why are they off 1%? why a maybe a little collusion here? somebody talking to one snore what's going on here? i thought there was supposed to be some competion. it looks like they're all ganging up to charge the same high interest rate. at any rate, let me continue to

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Tom Harkin: read from her letter. "the rate from going from 10.4% to 23.99%. i have never missed a payment or been late on either one of these. tonight i called j.p. morgan chase and they told me i missed the deadline to say i wanted to decline the changes in

0:13:09 to 0:13:31( Edit History Discussion )

Tom Harkin: myocardialholder a-- in my. cardholder agreement. i said i wanted to close my account and pay off the existing balance at the 10.4%. they i could see it if hi missed any payments or -- if i had missed any payments or even paid a day late, but i have not. this is just wrong." end of her letter. imagine that.

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Tom Harkin: she actually had theherewithal to pay it off with the 10.4% and j.p. morgan said no, you missed the deadline. you know, we all get mail. we all get this junk mail and all that stuff from credit card companies. you know, i just throw them away. you know you know, well, maybe there's some notice in there that, oh, if it's not a bill, maybe they sent you a notice that maybe you have to do something.

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Tom Harkin: who reads all that junk mail? nine times out of ten it's some kind a promotion that they're promoting. you can get a free airline pass or you can get a cut rate on going to cancun or something like that you get all that junk. and then they slip in there another little letter that says oh, by the way, if you don't

0:14:14 to 0:14:36( Edit History Discussion )

Tom Harkin: cancel your previous agreement, we're going to do this, this and this. good luck in finding that out. well, madam president, this constituent who wrote me would clearly benefit from the provisions in the dodd-shelby bill that would prohibit retroactive rate increases on existing balances and accounts with no late payments. but the larger issue remains:

0:14:37 to 0:14:57( Edit History Discussion )

Tom Harkin: why should any bank be allowed to charge an interest rate of 24% under any circumstances? under any why should banks be allowed to charge other customers interest rates as high as 41%? 41%? well, as i said, madam president, i support the

0:14:58 to 0:15:18( Edit History Discussion )

Tom Harkin: derlying bill, but the bill will continue to let them charge those kinds of interest rates. now, the bill does clean up some of the other stuff and that's why i'm suppo this does not enough of the problem and that is we interest rates to be charged

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Tom Harkin: credit cards. now, we know why i these interest rates -- charging these interest rates. they can get by with it. it's legal. if the credit unions can survive and provide credit and issue credit cards to their holders and survive on 15%, are you telling me these big companies can't? of course they can. but guess what?

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Tom Harkin: they probly wouldn't be able to pay their executives, you know, $50 million a year in -- in salaries and bonuses or -- $50 million? i'm being a piker. probably $200 million or $300 million a year. that's what they're paid. and so to -- to keep up this

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Tom Harkin: lavish lifestyle for their executives, for their corporate offices, they charge 20%, 30%, 40%. well, as i said, take a lesson from the credit unions. take a lesson. limit on, and that's why i -- i -- i just can't emphasize

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Tom Harkin: enough, unless and until we cap interest rates, we're still going to have these problems because people will get credit cards, they'll get into dire straight, this is of p their credit card, something else happens they're racked up with these high interest rates.

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Tom Harkin: now, the other thing that credit cards -- companies are doing is they're charging these high interest rates in order to be able to give credit cards to just about anyone. people get credit cards sent to them without any kind of credit checks, whether or not they ca can -- their real credit worthy. they get all these kinds of credit cards out there. people who are like my

0:17:06 to 0:17:27( Edit History Discussion )

Tom Harkin: constituent, who areesponsible and who pay their bills on time which they do pay on time and never get behind are penalized because credit card companies are so lax and whom -- with who they give -- with whom they give these -- to whom they give these credit cards. and so we all pay for i well, the credit card companies

0:17:28 to 0:17:48( Edit History Discussion )

Tom Harkin: ought to be a little bit more circumspect about who they ge their credit cards to. and again, they should take a lesson from the credit unions. so, madam president, as i i support the underlying bill but we must seize this opportunity to address the single most widespread and destructive abuse in this

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Tom Harkin: industry and that is grossly excessively high interest rates. and that's support this amendment, and i urge my colleagues to vote for the sanders-harkin-leahy-whitehouse- durbin-levin amendment on this bill. with that, madam president, i yield th absence of a quorum. the presiding officer: the clerk

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Tom Harkin: will call the roll.