[Pages S14377-S14380]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
BANKRUPTCY REFORM ACT OF 1999--Continued
Mr. LOTT. Mr. President, I ask unanimous consent that the next two
votes be 10-minute votes.
The PRESIDING OFFICER. Without objection, it is so ordered.
amendment no. 2754
The PRESIDING OFFICER. Under the previous order, there are now 4
minutes equally divided prior to the vote on or in relation to the Dodd
amendment No. 2754.
Who yields time?
Mr. KENNEDY. Mr. President, Senator Dodd and I have proposed an
amendment to address the explosion of credit card debt offered to
students on college campuses.
The amendment prohibits a credit card company from giving an
individual under the age of 21 a credit card unless the young person
has income
[[Page S14378]]
sufficient to repay the debt or a parent, guardian, or other family
member over the age of 21 shares liability for the credit card. Credit
card applications and solicitations must disclose this information to
potential consumers.
This amendment is particularly appropriate during debate on
bankruptcy reform legislation. We know that credit card debt may not be
the sole factor leading to bankruptcy, but for many individuals it is a
significant contributing factor.
Congress should be particularly concerned that since 1991, there has
been a 50-percent increase in bankruptcy filings by those under the age
of 25. In many cases, these are young men and women who are just
establishing their independence--and just starting to build a credit
history. Poor financial decisions, especially credit card mismanagement
can have long-term implications.
We know the siren song of the credit card industry is loud and clear.
In 1998, credit card issuers sent out 3.45 billion credit card
solicitations to people of all ages, including college students and
others who may not have the ability to repay their debts. In fact,
First USA recently issued a credit card to 3-year old Alessandra
Scalise. Alessandra's mother said she accurately completed and mailed
in the preapproved credit card application as a joke. There was no
Social Security number or income listed and Alessandra's occupation was
listed as ``preschooler.'' Apparently, this didn't make a difference to
First USA. Alessandra received a Platinum Visa with a $5,000 credit
limit.
This incident may be attributable to ``human error'' but there are
numerous examples of irresponsible lending practices by credit card
issuers--especially when they lend to students who don't have the
capacity to repay their debts.
For example, one Discover platinum card issuer's terms of
qualification require a minimum household income of $15,000 unless you
are a full-time student. Discover explains that an individual either
has to have a $15,000 minimum income or needs to prove that they are a
full-time student. Student applications are rejected only if they have
a bad credit history--a prior bankruptcy filing, for example--or if
their student status can not be confirmed.
During a February 1998 Banking Subcommittee hearing, Senator Sarbanes
asked credit card issuers how they determined student income. Bruce
Hammonds, senior vice chairman and chief operating officer of MBNA
Corporation responded if a student has a loan, ``that means they do not
have to pay tuition in most cases and we are looking at that tuition
payment. Then we would not count the tuition payment against them with
their income and expense analysis.'' In other words, the company
ignores the reality of tuition and views a student loan as ``free''
money--an income stream that can be used to repay credit care debt.
Not surprisingly, credit card companies have unleashed a well-
organized and pervasive campaign to attract student consumers. Credit
is available to almost any college student--no income, no credit
history, and no parental signature required. The National Bankruptcy
Review Commission received an advertisement for a 2-day workshop for
creditors entitled, ``Competing in the Sub Prime Credit Card Market,''
including a presentation entitled, ``Targeting College Students: Real
Life 101,'' with tips on how to ``target the money makers of
tomorrow.''
Students are targeted by the industry the moment they step on to a
college campus. Applications are placed in their book bags at the
student store, and tempting gifts and bonuses and low teaser rates are
used to entice them to send in the application. The American Express
Card for College Students has a teaser rate of 7.75 percent for the
first 90 days, then it more than doubles to 15.65 percent. Perks
include Continental Airlines travel vouchers. The Citibank College Card
for Students initial rate is 8.9 percent for 9 months and then it
skyrockets to 17.15 percent. The incentive? Eight American Airlines
travel coupons.
Brian is a student at the University of Minnesota. He said,
They gave me a free T-shirt and a water bottle to apply for
their credit cards. My clever plan? To sucker them out of
their prizes and cut up the cards. $4,000 later . . . I
stopped spending . . . In my glory days, I was like King
Midas, pointing to things and turning them into my own . . .
For me, the worst temptation was food . . . While listening
to tunes on your new stereo and munching take out food, the
monthly payment seems easy to pay, especially when you can
get a cash advance to cover it.
The ads are tempting, too. One ad directly targeting students reads:
``Free from parental rule at last. Now all you need is money. Cha-
Ching! Get 3 percent cash back on everything you buy.''
The Internet is the new frontier for credit card advertising to
students. When a student clicks on ``www.studentcreditcard.com'' he or
she finds a treasure trove of shopping offers and discounts, as well as
the assurance of 3 percent cash back. Students are told that, ``It's
totally simple. Spend $200 on an item with your card and you have an
extra six bucks in your pocket. Spend another $400, that's $12. It adds
up fast when you use The Associates Student Credit Card for all your
purchases.''
The web site includes some information on establishing a good credit
record, but nothing compared to the bonuses and incentives for student
consumers.
Not surprisingly, college students respond to solicitation by credit
card companies. A recent study by Nellie Mae found that 60 percent of
undergraduates have credit cards and 21 percent have 4 or more cards.
The median credit card debt among students is $1,200 and 9 percent of
students have debt between $3,000 and $7,000. Five percent of students
have credit card debt exceeding $7,000.
Other studies replicate similar findings. A June 1998 national survey
by the Education Resources Institute--``Credit Risk or Credit
Worthy''--found that 55 percent of students obtained their first card
during their first year of college and a significant proportion
received their first credit card while still in high school.
The study argues that many students use credit cards reasonably, but
the facts and statistics are disturbing. Fifty-two percent of students
say that one of the most important reasons to have a credit card is to
``build a credit history'' and 45 percent say it's to use in an
emergency, but the survey shows that 77 percent of all student credit
card purchases were for ``routine personal expenses''--a category that
may include a wide-range of items.
While attending Villanova, Meghan charged $15,000 on her credit
cards. When she and her friends first applied for the cards they
decided to keep them for emergencies, only. But, according to Meghan,
they would ``end up buying things . . . or taking cash advances just to
live on.'' Meghan planned to get a job to pay off her debt, but that
didn't happen. Instead, her mother paid-off the balance on the card--
twice.
What's particularly troubling is that many students who use their
credit cards when they ``run out of checks'' or are ``on Spring Break''
don't realize the financial implications of credit. In a September 1999
article, Joan Bodnar, senior editor of Kiplinger's Personal Finance
Magazine wrote, ``Kids tend to equate credit cards with free money--in
a recent survey of college students, fewer than half of those
interviewed knew the interest rate on their cards.''
Similarly, a 1993 American Express/Consumer Federation of America
study of college students revealed that college juniors and seniors
only have a ``fair'' understanding of financial services products, and
few appear to understand an annual percentage rate. A similar study of
high school seniors reveals that they have a ``poor'' understanding of
such products.
The result? College students with no income and good intentions often
find themselves in debt with no way out. For example, of the 20 percent
of students who report an average balance greater than $1,000, half of
those students have four or more credit cards and only 18 percent pay
off their outstanding balances every month. In addition, 48 percent of
these students have other debt and nearly one-third have charged
tuition and fees.
The economic and emotional consequences of credit card debt can be
devastating--even deadly--for many students. Tricia Johnson received a
desperate call from her daughter, Mitzi, a student in her first year at
the University of Central Oklahoma. Mitzi had lost her part-time job
and was
[[Page S14379]]
afraid she could not pay her debts. Mrs. Johnson tried to comfort her
distraught daughter. But, later that night, Mitzi committed suicide.
She had accumulated $2,500 in credit card debt, but her weekly income
rarely exceeded $65. When the police found Mitzi, credit cards were
spread across her bed.
Janie O'Donnell--the mother of Sean Moyer, a National Merit Scholar
attending the University of Oklahoma--had the same devastating
experience. In 1998, Sean told his mother he had no idea how to get out
of his financial mess, and he did not see much of a future for himself.
Sean had moved home to save money and pay off the $10,000 he owed Visa
and Master Card. A week later, he committed suicide.
A study by the University of Minnesota in 1996, suggests that credit
card debt by students often goes hand in hand with stress and
depression. Two-thirds of students who said they were taking medication
for depression had more than $1,000 in credit card debt. The study also
found that as credit card debt increased, the student's grade point
average went down. In 1998, a University of Indiana administrator said,
``we lose more students to credit card debt than to academic failure.''
Tennessee legislators were disturbed by a study that revealed a large
number of Tennessee bankruptcy filers to be surprisingly young, and
they are taking action. Several bills were introduced, and the state
Senate passed legislation that gives students an opportunity to remove
their name from solicitation lists.
It's time for Congress to take action as well. The purpose of the
amendment before the Senate is to ensure responsible lending by credit
card companies to students. In fact some credit card issuers are
adhering to self-imposed restrictions that are more narrow than the
Dodd/Kennedy amendment. For example, Dorinda Simpson, CEO of American
Partners Federal Credit Union testified that when issuing student
credit cards, they set a $500 credit limit and require a co-signor ``so
parents know up front what we are loaning to that college student.''
This amendment doesn't go that far. It requires credit card companies
to either establish that a student has the income to repay the debt or
have a co-signor.
The requirements aren't overly burdensome. They won't disadvantage
20-year-olds in the military--they have an income. They won't
disadvantage a student with deceased parents--another person may co-
sign or the student may have income. They won't disadvantage a 19 year-
old, non-college student who is between jobs--that person may have
unemployment compensation or another form of income.
And, finally, this amendment is not a form of lending discrimination.
When similarly situated individuals aren't treated equally, that's
discrimination. When underwriting standards are based on perception
instead of facts, that's discrimination. But, requiring credit card
issuers to stop preying on college students they know don't have a
means to repay debt--that is ensuring responsible behavior.
I urge my colleagues to support this amendment.
Mr. DODD addressed the Chair.
The PRESIDING OFFICER. The Senator from Connecticut.
Mr. DODD. Mr. President, very briefly, the amendment that I have
offered, along with Senator Kennedy, does the following: It says for
persons between the ages of 18 and 21, you must either prove you have
the ability to pay or to have a parent, guardian or some qualified
person cosign your credit card application. The reason for this
provision is because there is an alarming increase.
Mr. SARBANES. Mr. President, the Senate is not in order.
The PRESIDING OFFICER. The Senate will please be in order. Will
Senators having conversations please take them into the Cloakroom.
The Senator from Connecticut.
Mr. DODD. Thank you, Mr. President.
There is an alarming increase in the number of young people who are
being swamped with credit card applications where with merely their
signature and the showing of a student ID they can receive credit of up
to $10,000. In fact, today, the average college student, who does not
pay their monthly balance, has a credit card obligation of $2,000. And
one-fifth of those have credit card obligations of $10,000 or more. We
are being told now that one of the largest reasons for disenrollment in
higher education is because of credit card debt.
My amendment merely says that between the ages of 18 and 21, you must
either prove you have the ability to repay or you must have a
cosignature by a parent, guardian, or other qualified individual with
the means to repay. It is not outrageous to ask credit card companies
to require this kind of information. Students are receiving, on the
average, 50 credit card applications in their first semester of
college.
We set the age of 21 for legal consumption of alcohol in this
country. The IRS has a presumption of age 23, if you are in college, in
terms of student obligations in loans.
By merely requesting that the credit card companies ask for this
basic information, we can slow down this alarming increase in the
number of young people who are incurring tremendous debts. Many of
these kids are dropping out of school as a result of these debts.
Mr. President, I urge adoption of this amendment to stop this
alarming trend of too many young people, while at too young an age,
incurring unreasonable credit card debts.
The PRESIDING OFFICER. The time has expired.
I must say before the Senator speaks, the Senate is not in order.
Will the Senate please come to order.
The Senator from Utah.
Mr. HATCH. Mr. President, this amendment unfairly discriminates
against young adults, and I think it should be opposed. Adults between
the ages of 18 and 21 can defend our country in the military. Yet under
this amendment, they will not be able to even get a credit card without
overcoming regulatory obstacles in their way.
Many young adults, some of whom are students and are supporting young
families, need access to credit cards to make their lives just a little
bit easier. So I oppose this paternalistic amendment.
I remember what it was like to work in a low-paying job as a janitor.
I can appreciate the benefits that being able to obtain credit will
provide to hard-working young adults.
Keep in mind, many in this group oppose parental consent for
abortion, and you are going to impose parental consent on young adults
who may be working, who may have families, who may be in the military,
who may be as responsible as anybody else. It just plain isn't right. I
do not think we should vote for that.
So I move to table the amendment and ask for the yeas and nays.
The PRESIDING OFFICER. Is there a sufficient second?
There appears to be.
The yeas and nays were ordered.
The PRESIDING OFFICER. The question is on agreeing to the motion to
table amendment No. 2754. The yeas and nays have been ordered. The
clerk will call the roll.
The legislative clerk called the roll.
Mr. FITZGERALD (when his name was called). Present.
Mr. NICKLES. I announce that the Senator from Arizona (Mr. McCain) is
necessarily absent.
Mr. REID. I announce that the Senator from South Carolina (Mr.
Hollings) is absent because of a death in family.
The result was announced--yeas 59, nays 38, as follows:
[Rollcall Vote No. 359 Leg.]
YEAS--59
Abraham
Allard
Ashcroft
Bennett
Biden
Bond
Brownback
Bryan
Bunning
Burns
Chafee, L.
Cleland
Cochran
Collins
Coverdell
Craig
Crapo
DeWine
Domenici
Enzi
Feingold
Frist
Gorton
Gramm
Grams
Grassley
Gregg
Hagel
Hatch
Helms
Hutchinson
Hutchison
Inhofe
Johnson
Kohl
Kyl
Lincoln
Lott
Lugar
Mack
McConnell
Murkowski
Nickles
Robb
Roberts
Roth
Santorum
Sessions
Shelby
Smith (NH)
Smith (OR)
Snowe
Specter
Thomas
Thompson
Thurmond
Torricelli
Voinovich
Warner
NAYS--38
Akaka
Baucus
Bayh
Bingaman
Boxer
Breaux
Byrd
Campbell
Conrad
Daschle
Dodd
Dorgan
[[Page S14380]]
Durbin
Edwards
Feinstein
Graham
Harkin
Inouye
Jeffords
Kennedy
Kerrey
Kerry
Landrieu
Lautenberg
Leahy
Levin
Lieberman
Mikulski
Moynihan
Murray
Reed
Reid
Rockefeller
Sarbanes
Schumer
Stevens
Wellstone
Wyden
ANSWERED ``PRESENT''--1
Fitzgerald
NOT VOTING--2
Hollings
McCain
The motion was agreed to.
Mr. REID. I move to reconsider that vote.
Mr. BROWNBACK. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
Mr. REID. I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. BREAUX. I ask unanimous consent that the order for the quorum
call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. BREAUX. Mr. President, I ask the attention of the managers. I
understand there is an informal agreement to allow myself and my
colleague, Senator Frist, to proceed for 5 minutes as in morning
business. If that is the case, I ask unanimous consent I be allowed to
proceed as in morning business for 5 minutes followed by my colleague
from Tennessee with the same request.
Mr. DODD. Reserving the right to object, is that with the
understanding that at the conclusion of the 10 minutes I have the
opportunity to offer my amendment?
Mr. REID. Reserving the right to object, if the Senator will
withhold, we are attempting to get unanimous consent agreement so we
can move on.
Mr. DODD. If the Senator from Tennessee and the Senator from
Louisiana want to proceed, that is fine.
Mr. REID. If we get unanimous consent, the Senator can interrupt.
The PRESIDING OFFICER (Mr. Brownback). The Senator from Louisiana is
recognized for 5 minutes.
____________________