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[Congressional Record Volume 155, Number 1 (Tuesday, January 6, 2009)]
[Senate]
[Pages S101-S103]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mrs. FEINSTEIN:
  S. 131. A bill to amend the Truth in Lending Act to provide for 
enhanced disclosure under an open end credit plan; to the Committee on 
Banking, Housing, and Urban Affairs.
  Mrs. FEINSTEIN. Mr. President, today I am introducing the Credit Card 
Minimum Payment Notification Act.
  This bill would help American consumers by requiring banks to notify 
credit card holders of the true cost if

[[Page S102]]

they choose to make the minimum payment each month.
  Americans today own more credit cards than ever before. The average 
American has approximately four credit cards. In 2007, 1 in 7 Americans 
held more than 10 cards.
  Unsurprisingly, this increase in credit card ownership has resulted 
in a dramatic increase in credit card debt.
  Over the past 2 decades, Americans' combined credit card debt has 
nearly tripled--from $238 billion in 1989 to a staggering $971 billion 
in 2008.
  Today, the average American household has approximately $10,678 in 
credit card debt, up 29 percent from 2000.
  Among credit card users, 55 percent carry a balance on their credit 
card, a 2 percent increase from last year.
  Approximately 1 in 6 families with credit cards pays only the minimum 
due every month.
  Young Americans are using credit cards to finance everything from 
daily expenses to college tuition. Forty-one percent of college 
students have a credit card, and, of those, only 65 percent pay their 
bills in full every month.
  Over the past year, as economic conditions have worsened, it has 
become even harder for families to pay off their debt. Whether it is a 
mortgage, or tuition, or medical expenses, people are finding it harder 
than ever to meet all of their expenses.
  In July of this year, 28 percent of people surveyed reported that 
their ability to pay off their credit card balances has become more 
strained.
  This increasing debt is contributing to more and more Americans 
filing for bankruptcy.
  Ever since the Bankruptcy Reform Act was enacted in 2005, non-
business bankruptcies have been increasing at a rapid pace. The numbers 
this year already show a staggering hike. Between September 2007 and 
September 2008, Americans filed over one million non-business 
bankruptcies, up 30 percent from the previous year.
  Many of these personal bankruptcies are people who are turning to 
credit cards to finance their expenses. Today's filers have even more 
credit card debt than usual--sometimes because they have been 
struggling to pay a mortgage and have started using credit cards for 
daily expenses.
  One family, the Forsyths, found themselves in financial trouble after 
moving to a new State for a better job opportunity. Unable to sell 
their old house, they rented. But when the renter stopped making 
payments, the family became overwhelmed with two mortgage payments. 
Credit cards helped at first--providing payment for food, utilities, 
and clothes--but the family quickly accumulated $20,000 in debt and was 
left with no alternative other than bankruptcy.
  The benefits offered by credit cards are attractive, but these cards 
also pose enormous financial risk. Dianne McLeod discovered this in a 
painful way after back-to-back medical emergencies depleted her 
finances. Although credit cards initially enabled her to maintain her 
lifestyle, before long these cards and two mortgages meant that she 
later found that she was spending more than 40 percent of her monthly 
income on interest payments, in addition to thousands of dollars 
annually in fees.
  Today, credit cardholders receive no information on the impact of 
carrying a balance with compounding interest. As a result, too often 
individuals make only the minimum payment. After a few years, they find 
that the interest on the debt is almost twice the amount of their 
original purchases--and they do not know what to do about it.
  I first introduced the Credit Card Minimum Payment Notification Act 
during the debate on the 2005 bankruptcy bill. As I said then, I 
believe the bill failed to balance responsibility and fairness. 
Consumers should not be so harshly penalized when they do not have the 
basic tools and information they need to make informed choices.
  The Credit Card Minimum Payment Notification Act would help prevent 
this problem by requiring credit card companies to add two items to 
each consumer's monthly credit card statement:
  A general notice that would read ``Making only the minimum payment 
will increase the interest you pay and the time it takes to repay your 
balance.''
  An individualized notice to credit card holders that specifies 
clearly on their bill how much time it will take to repay their debt 
and the total amount they will pay if they only make the minimum 
payments.
  For consumers with variable rate cards, the bill would also require 
companies to provide a toll-free number where cardholders can access 
credit-counseling services.
  The disclosure requirements in the bill would only apply if the 
consumer has a minimum payment that is less than 10 percent of the debt 
on the credit card. Otherwise, none of these disclosures would be 
required on their statement.
  Last year, a Gallup--Experian poll found that about 11 percent of 
credit cardholders consistently make only the minimum payment on their 
cards each month.
  Consider what this could mean for the average household.
  For example, the U.S. average credit card debt is $10,678. The 
average fixed credit card interest rate is approximately 12 percent. If 
the 2 percent minimum payment is all that is paid on its debt each 
month, it would take more than 31 years to pay off the bill and the 
total cost would be $21,052.66--and that's just the minimum assuming 
that the family didn't ever charge another dime on that bill.
  In other words, the family would need to pay $10,374.66 in interest 
just to repay $10,678 in original debt.
  For individuals or families with more than average debt, the pitfalls 
are even greater. $20,000 of credit card debt at the average 12 percent 
interest rate will take over 36 years and more than $28,261 to pay off 
if only the minimum payments are made.
  Twelve percent is relatively low, average interest rate. Interest 
rates around 20 percent are not uncommon on credit cards, and penalty 
interest rates can reach as high as 32 percent.
  A family that has the average debt with a 20 percent interest rate 
and makes the minimum payments will need a lifetime--over 85 years--and 
$62,158 to pay off the initial $10,678 bill. That's $51,480 just in 
interest--an amount that approaches 5 times the original debt.
  Credit cards are an important part of everyday life, and they help 
the economy operate more smoothly by giving consumers and merchants a 
reliable, convenient way to exchange funds. But the bottom line is that 
for many consumers, the two percent minimum payment is a financial 
trap.
  The Credit Card Minimum Payment Notification Act is designed to 
ensure that people are not caught in this trap through lack of 
information.
  Last month, the Federal Reserve Board approved new rules that will 
improve disclosures, but the rules do not go far enough. Under the 
rules, starting July 1, 2010, credit card companies will have to warn 
consumers about the effect of making minimum payments on the length of 
time it will take to pay off their balances. But the warnings may be 
only examples and will not show the effect on the amount that consumers 
pay over time.
  Before approving the final rules, the Federal Reserve Board 
interviewed consumers who typically carried credit card balances. Those 
consumers found disclosures most helpful when they provided specific 
information and included warnings about the amount that would have to 
be paid over time.
  The Credit Card Minimum Payment Notification Act would provide the 
straightforward disclosure that consumers find most helpful and most 
effective.
  This disclosure will ensure that consumers know exactly what it means 
for them to carry a balance and make minimum payments, so they can make 
informed decisions on credit card use and repayment.
  In addition, the burden on banks will be minimal. Calculations like 
these are purely formulaic. Credit card companies already complete 
similar calculations to determine credit risk and when they tell 
consumers what their required minimum payment is each month.
  The harsh effects of the 2005 bankruptcy bill are becoming apparent. 
During the debate over that bill, I had hoped that Congress would 
succeed in balancing the need to incentivize consumers to act 
responsibly with the promise of a fresh start for those who fell 
impossibly behind. I do not believe that that balance was reached.

[[Page S103]]

  I continue to believe that consumers need a meaningful disclosure 
informing them of the effects of making minimum payments.
  Today, as Americans face increasing struggles with debt and expenses, 
the bill is needed more than ever. I urge my colleagues to support this 
legislation.
  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, as follows:

                                 S. 131

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Credit Card Minimum Payment 
     Notification Act of 2009''.

     SEC. 2. ENHANCED DISCLOSURE UNDER AN OPEN END CREDIT PLAN.

       Section 127(b) of the Truth in Lending Act (15 U.S.C. 
     1637(b)) is amended by adding at the end the following:
       ``(13) Enhanced disclosure under an open end credit plan.--
       ``(A) In general.--A credit card issuer shall, with each 
     billing statement provided to a cardholder in a State, 
     provide the following on the front of the first page of the 
     billing statement, in type no smaller than that required for 
     any other required disclosure, but in no case in less than 8-
     point capitalized type:
       ``(i) A written statement in the following form: `Minimum 
     Payment Warning: Making only the minimum payment will 
     increase the interest you pay and the time it takes to repay 
     your balance.'.
       ``(ii)(I) A written statement providing individualized 
     information indicating the number of years and months and the 
     total cost to pay off the entire balance due on an open-end 
     credit card account, if the cardholder were to pay only the 
     minimum amount due on the open-end credit card account, based 
     upon the terms of the credit agreement.
       ``(II) For purposes of this clause only, if the open-end 
     credit card account is subject to a variable rate--

       ``(aa) the creditor may make disclosures based on the rate 
     for the entire balance as of the date of the disclosure and 
     indicate that the rate may vary; and
       ``(bb) the cardholder shall be provided with referrals or, 
     in the alternative, with the toll free telephone number of 
     the National Foundation for Credit Counseling (or any 
     successor thereto) through which the cardholder can be 
     referred to credit counseling services in, or closest to, the 
     cardholder's county of residence, which credit counseling 
     service shall be in good standing with the National 
     Foundation for Credit Counseling or accredited by the Council 
     on Accreditation for Children and Family Services (or any 
     successors thereto).

       ``(B) Definition of open-end credit card account.--In this 
     paragraph, the term `open-end credit card account' means an 
     account in which consumer credit is granted by a creditor 
     under a plan in which the creditor reasonably contemplates 
     repeated transactions, the creditor may impose a finance 
     charge from time to time on an unpaid balance, and the amount 
     of credit that may be extended to the consumer during the 
     term of the plan is generally made available to the extent 
     that any outstanding balance is repaid and up to any limit 
     set by the creditor.
       ``(C) Exemptions.--
       ``(i) Minimum payment of not less than ten percent.--This 
     paragraph shall not apply in any billing cycle in which the 
     account agreement requires a minimum payment of not less than 
     10 percent of the outstanding balance.
       ``(ii) No finance charges.--This paragraph shall not apply 
     in any billing cycle in which finance charges are not 
     imposed.''.
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