MR. AKAKA Mr. President, I rise in opposition to the bankruptcy legislation. The financial services industry has become increasingly complex with new technology, products, and services. However, this dated legislation has not had significant changes made to it since the 107th Congress.
Predatory lending has surged since the initial development of the this bankruptcy legislation. In the early 1990s, there were fewer than 200 payday lenders nationwide. Now, there are more than 20,000. Payday lenders made 100 million loans in 2003. These loans represent more than $40 billion. Most alarmingly, according to the Consumer Federation of America, interest rates on these loans begin at 390 percent.
Yet, Congress has failed to act to prevent the exploitation of working families that are short on cash due to unexpected medical expenses or other needs. I am afraid that the passage of this legislation will further reduce the risk for predatory lenders, and as a result, they will aggressively market their products even more. We must act to protect consumers from these unscrupulous lenders. I remain committed to restricting all forms of predatory lending, including payday loans, and to providing consumers with alternative affordable short-term loans.
Access to credit has increased significantly and household debt has skyrocketed as a result. Revolving debt, mostly compromised of credit card debt, has risen from $54 billion in January 1980 to more than $780 billion in November 2004. A U.S. Public Interest Research Group and Consumer Federation of America analysis of Federal Reserve data indicates that the average household with debt carries approximately $10,000 to $12,000 in total revolving debt. This legislation tightens the grip that creditors have on consumers, but it fails to restrict the aggressive marketing practices of credit card companies.
In addition, this bankruptcy bill fails to provide adequate, timely, and meaningful disclosures for consumers. As we make it more difficult for consumers to discharge their debts in bankruptcy, we have a responsibility to provide additional information so that consumers can make better informed decisions. S. 256 includes a requirement that credit card issuers provide a generic warning about the consequences of only making the minimum payment. This provision fails to provide the detailed information for consumers on their billing statements that my amendment would have provided. My amendment would have given consumers the detailed personalized information necessary for them to make better informed choices about their credit card use and repayment. It would have required companies to inform consumers of how many years and months it would take to repay their entire balance and the total cost in interest and principal, if the consumer makes only the minimum payment. The amendment would also have required consumers to be provided with the amount they need to pay to eliminate their outstanding balance within 36 months. Finally, my amendment would have required that creditors establish a toll-free number so that consumers can access trustworthy credit counselors. Unfortunately, this amendment was defeated.
I appreciate the willingness of the Chairman of the Banking Committee, Senator Shelby, to continue to work with me on this very important consumer awareness issue.
Mr. President, I also proposed an amendment that would have required credit card companies to make concessions to individuals in debt management plans so that credit counseling could be a viable alternative to bankruptcy. Unfortunately, that amendment was also defeated.
I fear that this bill will end up significantly harming families that have suffered financially due to illnesses, the loss of a job, or the death of a loved one. I supported other reasonable amendments intended to protect low-income families, the elderly, and other vulnerable populations from this overly restrictive legislation. However, these amendments also failed.
Instead of making improvements to the legislation, an old, outdated bill has been approved by the Senate. It is low-income working families that will be hardest hit by this anti-consumer legislation. After passage of this legislation, we will need to take additional steps to prevent further exploitation of consumers by unscrupulous lenders and to improve relevant and useful information about credit to consumers. I will continue to fight to protect working families from predatory lenders and overly aggressive creditors. Thank you Mr. President.
