03.24.09

Leahy Joins Effort To Curb Excessive Interest Rates For Credit Cards

WASHINGTON (Tuesday, March 24, 2009) – With the looming economic recession affecting more American families, the Senate Judiciary Subcommittee on Administrative Oversight and the Courts held a hearing Tuesday to examine “Abusive Credit Card Practices and Bankruptcy.”  Senator Patrick Leahy (D-Vt.), who chairs the full Judiciary Committee, is a cosponsor of legislative proposals to curb abusive lending practices from the nation’s credit card companies.

“At a time when corporate executives are collecting millions of dollars in bonuses, many American families are struggling to make ends meet,” said Leahy.  “Our current credit structure disadvantages many Americans and makes it harder for them to get out of debt.  In addition, the current economic crisis has made it more difficult for hard-working families to pay their bills.  I believe time is long overdue for more transparent and equitable credit card practices.”

A series of Judiciary Committee hearings chaired by Leahy last year examined past and recent Supreme Court decisions that have curbed consumer rights and protected corporate misconduct.  Among the cases examined during these hearings was Marquette v. First of Omaha Service Corp., which paved the way for exorbitant credit card fees.

The hearing Tuesday featured testimony from a Rhode Island resident, whose interest rate on a major credit card more than doubled in just two months.  Douglas Corey, who had been making regular payments for five years on a major credit card, testified that after two months in which he paid less than the minimum, his interest rate jumped from 12.74 percent to 28.99 percent.  He was also charged a $39 late payment fee.  Corey was recently laid off from his job as a marketing manager.

Leahy is an original cosponsor of legislation to provide a comprehensive overhaul of the credit card system by improving billing, marketing and disclosure practices.  He is also a cosponsor of the Interest Rate Reduction Act, which was introduced by Senator Bernie Sanders (I-Vt.).  The legislation would set a national consumer interest rate ceiling of 15 percent.

Subcommittee Chairman Sheldon Whitehouse (D-R.I.) chaired the hearing.  Whitehouse is the author of the Consumer Credit Fairness Act (CCFA).  The legislation would disallow claims made in bankruptcy proceedings against consumers by creditors charging excessive interest rates and fees.  Witness testimony and a live webcast of the hearing are available online.

 

Statement of Senator Patrick Leahy

Chairman, Senate Judiciary Committee

Hearing on “Abusive Credit Card Practices and Bankruptcy”

Before the Subcommittee on Administrative Oversight and the Courts

March 24, 2009

Thank you, Mr. Chairman, for holding this important hearing to examine the effects of abusive credit card practices on bankruptcy filings.  

Hundreds of Vermonters have contacted my office in recent months voicing concerns about the credit card industry.  People have shared stories about credit card companies raising interest rates arbitrarily, charging usurious fees, and refusing to work cooperatively with their clients.  Most troubling, the biggest offenders appear to be large, national banks that gladly accepted the mercy of taxpayer bailout money when they were in trouble. 

At a time when corporate executives are collecting millions of dollars in bonuses, many American families are struggling to make ends meet.  Our current credit structure disadvantages many Americans and makes it harder for them to get out of debt.  In addition, the current economic crisis has made it more difficult for hard-working families to pay their bills.  I believe time is long overdue for more transparent and equitable credit card practices.

Last Congress, I cosponsored Senator Akaka’s bill to require enhanced disclosure to consumers regarding the consequences of making only minimum required payments in the repayment of credit card debt. 

And this year, I am an original cosponsor of Senator Dodd’s Credit Card Accountability Responsibility and Disclosure Act, which would provide a more comprehensive overhaul of the credit card system by improving a number of billing, marketing, and disclosure practices. 

Many others also are working on legislation to address the multitude of problems in the credit industry.  Senators Whitehouse and Durbin have introduced the subject of today’s hearing -- Consumer Credit Fairness Act -- which would disallow bankruptcy claims from credit card companies where the unpaid balances resulted from an extremely high annual percentage rate.  In addition, I have joined Senators Sanders, Durbin, Levin, Harkin, and Whitehouse in cosponsoring the Interest Rate Reduction Act, which would set a national consumer interest rate ceiling of 15 percent.  

Again, I thank you, Mr. Chairman, for holding this hearing today.  I look forward to hearing from our witnesses today about how the bankruptcy code should handle personal and business credit card debts.  As the economy continues to remain soft, more families and firms will find themselves the deeper in debt.  They should not find themselves pushed closer to the brink to bankruptcy because of outrageous interest rates and fees piling up on their credit cards.

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