Mortgage Cancellation Relief Act of 2007

Mr. President, I am introducing today, along with Senator McCaskill, the Stop Unfair Practices in Credit Cards Act.

Credit cards are a fixture of American family life today. People use them to buy groceries, to rent a car, shop on the Internet, pay college tuition, and even pay their taxes. In 2005, the average family had five credit cards. American households used nearly 700 million

credit cards to buy goods and services worth $1.8 trillion. Credit cards fuel commerce, facilitate financial planning, help families deal with emergencies. But credit cards have also contributed to record amounts of household debt. Some credit card issuers have socked families with sky-high interest rates of 25 and 30 percent and higher. They have hit consumers with hefty fees for late payments, for exceeding a credit card limit, and other transactions. In too many cases, credit card issuers have made it all but impossible for working- class families to climb out of debt.

That is why in 2005, the Permanent Subcommittee on Investigations, which I chaired, on which Senator McCaskill serves, initiated an in- depth investigation into unfair and abusive credit card industry practices.

In the fall of 2006, the Government Accountability Office, the GAO, released a report which I had requested, which for the first time in years provided a comprehensive examination of the interest rates and fees being charged by credit card companies. Following the release of that report, and continuing through today, the subcommittee has been deluged with calls and letters from Americans expressing anger and frustration at the way they have been treated by their credit card companies, and sharing stories of unfair and often abusive practices. The subcommittee has been examining those allegations of unfair treatment and has identified many troubling credit card industry practices which should be banned or restricted.

Our first hearing in March focused on industry practices involving grace periods, interest rates, and fees. It revealed a number of unfair, often little-known, and sometimes abusive credit card practices, which prey upon families experiencing financial hardships, and squeezed even consumers who pay their credit card bills on time.

The legislation we are introducing today is aimed at stopping abusive credit card practices that trap too many hard-working families in a downward spiral of debt. American families deserve to be treated honestly and fairly by their credit card companies. Our bill would help ensure that fair treatment. Here are a few things our bill would do. It would stop credit card companies from charging interest on debt that is paid on time. It would crack down on abusive fees, including repeated late fees and over-the-limit fees, and fees to pay your bill.

It would also prohibit the charging of interest on those fees. It would establish guidelines on interest rate increases, including a cap on penalty interest rate hikes at no more than 7 percent. It would require that increased interest rates apply only to future credit card debt and not the debt already incurred.

Our bill will be referred to the Senate Banking Committee, which has primary jurisdiction over credit card legislation, and which has been holding its own hearing on unfair credit card practices. Our friend, Senator Dodd, the committee chairman, has a long history of fighting credit card abuses. Senator Shelby, the ranking Republican, as well as many other members of the committee, has also expressed concern about a number of credit card problems.

It is my hope our bill and the legislative record being compiled by our Permanent Subcommittee on Investigations will help the Banking Committee in its deliberations and help build momentum to enact legislation halting the unfair credit card practices that outrage American consumers. Credit card abuse is too harmful to American families, our economy, and our economic future to let these unfair practices continue.

Let me describe the key provisions of our bill in more detail. The first section of the bill would put an end to an indefensible practice that imposes little known and unfair interest charges on many unsuspecting, responsible consumers. Most credit cards today offer what is called a grace period. Cardholders are told that, if they pay their monthly credit card bill during this grace period, they will not be charged interest on the debt for which they are being billed. What many cardholders do not realize, however, is that this grace period typically provides protection against interest charges only if their monthly credit card bill is paid in full. If the cardholder pays less than 100 percent of the monthly bill--even if the cardholder pays on time--he or she will be charged interest on the entire billed amount, including the portion that was paid by the specified due date.

An example shows why this billing practice is unfair and should be stopped. Suppose a consumer who usually pays his or her credit card account in full and owes no money as of December 1 makes a lot of purchases in December. The consumer gets a credit card bill on January 1 for $5,020, due January 15. Suppose the consumer pays that bill on time, but pays $5,000 instead of the full amount owed.

Most people assume that the next bill would be for the $20 in unpaid debt, plus interest on that $20. But that commonsense assumption is wrong. That is because current industry practice is to charge the consumer interest not only on the $20 that wasn't paid on time, but also on the $5,000 that was paid on time. Let me say that again. Industry practice is to force the consumer to pay interest on the portion of the debt that was paid on time. In other words, the consumer would pay interest on the entire $5,020 from the first day of the billing month, January 1, until the day the $5,000 payment was made on January 15, compounded daily. So much for a grace period. After that, the consumer would be charged interest on the $20 past due, compounded daily, from January 15 to the end of the month.

The end result would be a February 1 bill that more than doubles the $20 debt. Using an interest rate of 17.99 percent, for example, in just one month, the $20 debt would rack up interest charges of more than $35.

Charging $35 of interest over one month on a $20 credit card debt is indefensible, especially when applied to a consumer who paid over 90 percent of their credit card debt on time during the grace period. Our legislation would end this unfair billing practice by amending the Truth in Lending Act to prohibit the charging of interest on any portion of a credit card debt that is paid on time during a grace period. Using our example, this prohibition would bar the charging of interest on the $5,000 that was paid on time, and result in a February balance that reflects what a rational consumer would have expected: the $20 past due, plus interest on the $20 from January 1 to January 31.

The second section of our bill would address a related unfair billing practice, which I call ``trailing interest.'' Charging trailing interest on credit card debt is another widespread, but little known industry practice that squeezes responsible and largely unsuspecting consumers for still more interest charges.

Going back to our example, you might think that once the consumer gets gouged in February by receiving a bill for $55 on a $20 debt, and pays that bill on time and in full, without making any new purchase, that would be the end of that credit card debt for the consumer. But you would be wrong. It would not be the end.

Even if, on February 15, the consumer paid the February 1 bill in full and on time--all $55--the next bill would likely have an additional interest charge related to the $20 debt. In this case, the charge would reflect interest that would have accumulated on the $55 from February 1 to 15, which is the time from when the bill was sent to the day it was paid. The total interest charge in our example would be about 38 cents. While some credit card issuers will waive trailing interest if the next month's bill is less than $1, a common industry practice is to fold the 38 cents into the next bill if a consumer makes a new purchase.

Now 38 cents isn't much in the grand scheme of things. That may be why many consumers don't notice this extra interest charge or bother to fight it. Even if someone had questions about the amount of interest on a bill, most consumers would be hard pressed to understand how the amount was calculated, much less whether it was correct. But by nickel and diming tens of millions of consumer accounts with trailing interest charges, credit card issuers reap large profits.

This little known billing practice, which squeezes consumers for a few more cents on the dollar, and targets responsible cardholders who pay their bills on time and in full, goes too far.

If a consumer pays a credit card bill on time and in full--paying 100 percent of the amount specified by the date specified in the billing statement--it is unfair to charge that consumer still more interest on the debt that was just paid. Our legislation would put an end to trailing interest by prohibiting credit card issuers from adding interest charges to a credit card debt which the consumer paid on time and in full in response to a billing statement.

A third problem examined by the subcommittee involves a widespread industry practice in which credit card issuers claim the right to unilaterally change the terms of a credit card agreement at any time for any reason with only a 15-day notice to the consumer under the Truth in Lending Act.

As the National Consumer Law Center testified at our hearing, this practice means that smart shoppers who choose a credit card after comparing a variety of card options are continually vulnerable to a change-in-terms notice that alters the favorable terms they selected, and provides them with only 15 days to accept the changes or find an alternative. By asserting the right to make unilateral changes to credit card terms on short notice, credit card issuers undermine not only the bargaining power of individual consumers, but also principles of fair market competition. Such unilateral changes are particularly unfair when they alter material terms in a credit card agreement such as the interest rate applicable to extensions of credit.

That is why our bill would impose two types of limits on credit card interest rate hikes. First, for consumers who comply with the terms of their credit card agreements, the bill would prohibit a credit card issuer from unilaterally hiking an interest rate that was represented to, and included in the disclosures provided, to a consumer under the Truth in Lending Act, unless the consumer affirmatively agreed in writing to the increase at the time it is proposed. This prohibition is intended to protect responsible consumers who play by the rules from a sudden hike in their interest rate for no apparent reason--a complaint that the subcommittee has heard all too often. Under our bill, issuers would no longer be able to unilaterally hike the interest rates of cardholders who play by the rules.

The bill's second limit would apply to consumers who, for whatever reason, failed to comply with the terms of their credit card agreement, perhaps by paying late or exceeding the credit limit. In that circumstance, credit card issuers would be permitted to impose a penalty interest rate on the account, but the bill would place a cap on how high that penalty interest rate could go.

Specifically, the bill would limit any such penalty rate hike to no more than a 7 percent increase above the interest rate in effect before the penalty rate was imposed. That means a 10 percent rate could rise no higher than 17 percent, and a 15 percent rate could not exceed 22 percent. This type of interest rate limit is comparable to the caps that today operate in many adjustable mortgages. The effect of the credit card cap would be to prohibit penalty interest rates from dramatically increasing the interest rate imposed on the cardholder, as happened in cases examined by the subcommittee where credit card interest rates jumped from 10 percent or 15 percent to as much as 32 percent. Penalty interest rate hikes that double or triple existing interest rates are simply unreasonable and unfair.

If a credit card account were opened with a low introductory interest rate followed by a higher interest rate after a specified period of time, it is intended that the penalty rate cap proposed in the bill would apply to each of those disclosed rates individually. For example, suppose the credit card account had a 0 percent introductory rate for 6 months and a 12 percent rate after that. Suppose further that, during the 6-month introductory period, the cardholder exceeded the credit limit. The bill would allow the card issuer to impose a penalty interest rate of up to 7 percent for the rest of the 6 month period. Once the 6-month period ended, it is intended that the 12 percent rate would take effect. If the consumer were to again exceed the limit, it is intended that any penalty rate imposed upon the account be no greater than 19 percent.

If a card issuer were to analyze an account and conclude that a penalty rate increase of up to 7 percent would be insufficient to protect against the risk of default on the account, the issuer could choose to reduce the credit limit on the account or cancel the account altogether. If the card issuer chose to cancel the account, it is intended that the consumer would retain the right to pay off any debt on the account using the interest rate that was in effect when the debt was incurred.

The point of the bill's penalty interest rate cap is to stop penalty interest rate hikes which are disproportional; which too often stick families with sky-high interest rates of 25 percent, 30 percent, and even 32 percent; and which too often make it virtually impossible for working American families to climb out of debt.

Still another troubling practice involving credit card interest rate hikes is the problem of retroactive application. Industry practice today is to apply an increased interest rate not only to new debt incurred by the cardholder, but also to previously incurred debt.

Retroactive application of a higher interest rate means that pre- existing credit card debt suddenly costs a consumer much more to repay. Take, for example, a $3,000 credit card debt that a consumer was paying down each month with timely payments. Suddenly, the cardholder falls ill, misses a payment or pays it late, and the card issuer increases the interest rate from 15 percent to 22 percent. If applied to the existing $3,000 debt, that higher rate would require the cardholder to make a much steeper minimum monthly payment and pay much more interest than originally planned. That is often enough to sink a working family into a deepening spiral of debt from which they cannot recover.

By making it a common practice to institute after-the-fact interest rate hikes for existing credit card debt--in effect unilaterally changing the terms of an existing loan--the credit card industry has unfairly positioned itself to reap greater profits at consumers' expense. Our bill would fight back by limiting the retroactive application of interest rate hikes to lessen the financial impact on American households. Specifically, our bill would provide that interest rate hikes could be applied only to future credit card debt and not to any credit card debt incurred prior to the rate increase. Instead, any earlier debt would continue to accrue interest at the rate previously in effect.

The first set of provisions in our bill addresses unfair practices related to interest rates. The next set of provisions targets unfair practices related to fees imposed on cardholders by credit card companies.

The need for proconsumer fee protections is illustrated by the story of Wes Wannemacher of Ohio, a witness featured at the subcommittee's March hearing. In 2001 and 2002, Mr. Wannemacher charged about $3,200 on a new Chase credit card to pay for expenses mostly related to his wedding. Over the next 6 years, he paid about $6,300 toward that debt, yet in February 2007, Chase said that he still owed them about $4,400.

How could Mr. Wannemacher pay nearly double his original credit card debt and still owe $4,400? As he explained in his testimony, in addition to repaying the original debt of $3,200, Mr. Wannemacher was socked with $4,900 in interest charges, $1,100 in late fees, and 47 over-limit fees totaling $1,500, despite going over his $3,000 credit limit by a total of $200. These facts show that Mr. Wannemacher paid $2,600 in fees on a $3,200 debt. In addition, those fees were added to his outstanding credit card balance, and he was charged interest on the fee amounts, increasing his debt by hundreds if not thousands of additional dollars. There is something so wrong with this picture, that Chase didn't even defend its treatment of the account at the subcommittee hearing; instead, Chase forgave the $4,400 debt that it said was still owing on the Wannemacher credit card.

It is no secret that credit card companies are making a great deal of money off the fees they are imposing on consumers. According to GAO, fee income now produces about 10 percent of all income obtained by credit card issuers. The GAO report which I commissioned on this subject identified a

host of different fees that have become common practice, including fees for transferring balances, making a late payment, exceeding a credit limit, paying a bill by telephone, and exchanging foreign currency. According to GAO, late fees now average $34 per month and over-limit fees average $31 per month, with some of these fees climbing as high as $39 per month. As Mr. Wannemacher discovered, these hefty fees are not only added to the credit card's outstanding balance, they also incur interest. The higher the fees climb, the higher the balances owed, and the higher the interest charges on top of that.

Charging interest on money borrowed is certainly justified, but squeezing additional dollars from consumers by charging interest on transaction fees goes too far. Steep fees already deepen household debt from credit cards; those fees should not also generate interest income for the credit card issuer. Our bill would ban this industrywide practice by prohibiting credit card issuers from charging or collecting interest on the fees imposed on consumers.

Mr. Wannemacher exceeded the $3,000 limit on his credit card on three occasions in 2001 and 2002 for a total of $200. Over the following 6 years, however, he was charged over-the-limit fees on 47 occasions totaling about $1,500. In other words, Chase tried to collect over-the- limit fees from Mr. Wannemacher that were seven times larger than the amount he went over the limit.

At our March hearing, Chase did not attempt to defend the 47 over- the-limit fees it imposed; instead, it announced that it was changing its policy and would join with others in the industry in imposing no more than three over-the-limit fees in a row on a credit card account with an outstanding balance that exceeded the credit limit. While Chase's voluntary change in policy is welcome, it doesn't go far enough in curbing abusive practices related to over-the-limit fees.

First, if a credit card issuer approves the extension of credit that allows the cardholder to exceed the account's established credit limit, the issuer should be allowed to impose only one over-the-limit fee for that credit extension. One fee for one violation--especially when the card issuer facilitated the violation by approving the excess credit charge.

Second, the fee should be imposed only if the account balance is over the credit limit at the end of the billing cycle. If a cardholder exceeds the limit in the middle of the billing cycle and then takes prompt action to reduce the balance below the limit, perhaps by making a payment or obtaining a credit for returning a purchase, there is no injury to the creditor and no justification for an over-the-limit fee.

Third, a credit card issuer should impose an over-the-limit fee only when an action taken by the cardholder causes the credit limit to be exceeded, and not when a penalty imposed by the card issuer causes the excess charge. The card issuer should not be able to pile penalty upon penalty, such as by assessing a late fee on an account and then, if the late fee pushes the credit card balance over the credit limit, also imposing an over-the-limit fee.

In addition, the bill would require credit card issuers to offer consumers the option of establishing a true credit limit on their account--a credit limit that could not be exceeded, because the account would be programmed to refuse approval of any extension of credit over the established limit. In too many cases, credit card issuers no longer provide consumers with the option of having a fixed credit limit, preferring instead to enable all of their cardholders to exceed their credit limits only to be penalized by a hefty fee, added interest, and, possibly, a penalty interest rate.

There is more. Another unfair but common fee is what I call the ``pay-to-pay fee.'' It is the $5 to $15 fee that many issuers charge consumers to pay their credit card bill on time by using the telephone. To me, charging folks a fee to pay their bills is a travesty. My bill would prohibit a credit card issuer from charging a separate fee to allow a credit cardholder to pay all or part of a credit card balance.

Another fee that has raised eyebrows is the one charged by credit card issuers to exchange dollars into or from a foreign currency. A number of issuers today charge an amount equal to 2 percent of the amount of currency being exchanged in addition to a 1-percent ``conversion fee'' charged by Visa or Master Card, for a total of 3 percent Our bill responds by requiring foreign currency exchange fees to reasonably reflect the actual costs incurred by the creditor to perform the currency exchange, and requiring regulators to ensure compliance with that standard.

In addition to unfair practices involving interest rates and fees, the subcommittee investigation uncovered several unfair industry practices involving how credit cardholder payments are applied to satisfy finance charges and other credit card debt. One such practice that has caught the subcommittee's attention is the industrywide practice of applying consumer payments first to the balances with the lowest interest rates.

Right now, a single credit card account often carries balances subject to multiple interest rates. Credit cards typically use one interest rate for purchases, another for cash advances, and a third for balance transfers. Many card issuers also offer new customers low introductory interest rates, such as 0 or 1 percent, but limit these ``come on'' rates to a short time period or to a balance transferred from another card. Moreover, many of these interest rates may vary over time, since it is a common practice to offer variable interest rates that rise and fall according to a specified rate or index.

When a consumer payment is made, credit card issuers currently have complete discretion on how to apply that payment to the various balances bearing different interest rates. Consumers are typically given no option to direct where their payments are applied. Today, virtually all credit card issuers apply a consumer payment first to the balance with the lowest interest rate. After that balance is paid off, card issuers apply the payment to the balance with the next lowest interest rate, and so on.

This payment practice clearly favors creditors over consumers. It allows the card issuers to direct payments first to the balances that provide them with the lowest returns, and minimize payments to the balances bearing the highest interest rates so those balances can accumulate more interest for a longer period. Consumers who want to pay off a cash advance bearing a 20 percent interest rate, for example, are told that they cannot make that payment until they first pay off all other balances with a lower interest rate.

Our bill would replace this unfair industrywide practice with a proconsumer approach. Reversing current industry practice, the bill would require cardholder payments to be applied first to the balance bearing the highest interest rate, and then to each successive balance bearing the next highest rate, until the payment is used up. The bill would also require credit card issuers to apply cardholder payments in the most effective way to minimize the imposition of any fees or interest charges to the account.

In addition, the bill would prohibit credit card issuers from imposing late fees on consumers if the issuer was itself responsible for the delay in crediting the payment. For example, if a card issuer changed the mailing address for payments, had to shut down its mail sorting equipment for repairs, or mistakenly routed a consumer payment to the wrong department, the issuer would not be allowed to assess a late fee on the cardholder for the resulting late payment. Instead, if the card issuer caused the late payment, it would be barred from assessing a late fee on the consumer.

In addition to provisions to improve practices related to interest rates, fees, and consumer payments, the bill would add two new definitions to the Truth in Lending Act, intended to further address concerns related to unfair credit card practices.

The first definition involves use of the term, ``prime rate.'' Many credit card issuers today use variable interest rates that are linked to the ``prime rate'' or ``prime interest rate'' and vary over time. For example, a disclosure may indicate that a credit card will bear an interest rate equal to the prime rate plus a specified number of percentage points. Since the 1950s, the term ``prime rate'' has been commonly understood to mean the lowest interest rate offered by U.S. banks to their

most creditworthy borrowers. That is how the term is defined, for example, in Webster's Collegiate Dictionary.

The problem, however, is that no current statute or regulation defines the prime rate referenced in credit card disclosures under the Truth in Lending Act, and some card issuers have stated expressly that the prime rate used in credit card agreements does not necessarily match the lowest interest rates they provide to their most creditworthy borrowers. Litigation has also arisen between cardholders and card issuers as to what is meant by the term and whether cardholders are being misled. A cite is Lum v. Bank of America, 361 F.3d 217 (3d Cir. 2004).

To remedy this gap in the law, the bill would require credit card disclosures under the Truth in Lending Act that reference the prime rate to use the bank prime loan rate published by the Federal Reserve Board. This published rate is widely accepted in the financial community as an accurate depiction of the lowest interest rate offered by U.S. banks to their most creditworthy borrowers, and the rate is readily available to the public on the Federal Reserve Web site. By mandating use of this published rate, the bill will ensure that consumers are not deceived by a credit card issuer using a misleading definition of the commonly used term ``prime rate.''

The second definition added by the bill to the Truth in Lending Act involves specifying the ``primary federal regulator'' of a credit card issuer. Today, many credit card issuers are federally chartered or regulated banks subject to one or more Federal bank regulators. The bill would make it clear that when a card issuer is a Federal bank, its primary Federal regulator is the same primary regulator assigned to the bank under Federal banking law. The provision would also make it clear that the primary Federal regulator is responsible for overseeing the bank's credit card operations, ensuring compliance with credit card statutes and regulations, and enforcing the prohibition against unfair or deceptive acts or practices in the Federal Trade Commission Act. Another provision in the bill would make it clear that Federal regulators are expected to conduct at least annual audits to ensure card issuer compliance with the statutes and regulations seeking to ensure fair and effective credit card operations.

The next section of the bill would improve current credit card data collection efforts. Right now, credit card issuers file periodic reports with the Federal Reserve providing information about credit card interest rates and profits. This data plays a critical role in credit card oversight efforts, as well as financial and economic analyses related to consumer spending and household debt. The bill would strengthen current data collection efforts by requiring more specific information on interest rates and fees. For example, current data reports cannot be used to determine how many credit card accounts have interest rates of 25 percent or greater, what types of fees are imposed on consumers, or how many cardholders are affected by such interest rates and fees. The new bill would ensure that regulators, credit card users, and the public have the information needed to answer those basic questions.

The bill would also require the development of credit card industrywide estimates of the approximate relative income derived from interest rates, fees imposed on cardholders, fees imposed on merchants, and any other material source of income. GAO provided this information for the first time in its 2006 report, estimating that the credit card industry now derives about 70 percent of its income from interest charges, 20 percent from interchange fees imposed on merchants, and 10 percent from fees imposed on consumers. This valuable information should continue to be collected so that regulators, credit card users, and the public gain a more informed understanding of the credit card industry.

The bill's data collection requirements are largely modeled upon and intended to replicate key interest rate, fee, and revenue data presented by GAO in its 2006 report, ``Credit Cards: Increased Complexity in Rates and Fees Heightens Need for More Effective Disclosures to Consumers.'' Credit card experts were also consulted to determine what information would be most helpful to strengthen credit card oversight.

The final provision in the bill would provide a 6-month transition period for credit card issuers to implement the bill's provisions.

Credit card issuers like to say that they are engaged in a risky business, lending unsecured debt to millions of consumers, and that's why they have to set interest rates so high and impose so many fees. But the data shows that, typically, 95 to 97 percent of U.S. cardholders pay their bills. And it is clear that credit card operations are enormously profitable. For the last decade, credit card issuers have reported year after year of solid profits, maintained their position as the most profitable sector in the consumer lending field, and reported consistently higher rates of return than commercial banks. Credit card issuers make such a hefty profit that they sent out 8 billion pieces of mail last year soliciting people to sign up.

With profits like those, credit card issuers can afford to stop treating American families unfairly. They can give up charging interest on debt that was paid on time, give up charging consumers a fee to pay their bills, give up hiking interest rates from 15 percent to 32 percent, and give up imposing repeated over-the-limit fees for a single over-the-limit purchase. As one Michigan businessman expressed it to the subcommittee, ``I don't blame the credit card issuers for putting me into debt, but I do blame them for keeping me there.''

Some argue that Congress doesn't need to ban unfair credit card practices; they contend that improved disclosure alone will empower consumers to seek out better deals. Sunlight can be a powerful disinfectant, which is why I have strongly urged the Federal Reserve Board to expedite its regulatory effort to strengthen credit card disclosure and help consumers understand and compare how various credit cards work. But credit cards have become such complex financial products that even improved disclosure will frequently not be enough to curb the abuses--first because some practices are so complex that consumers can't easily understand them, and second because better disclosure does not always lead to greater market competition, especially when virtually an entire industry is using and benefiting from practices that disadvantage consumers.

So when we find credit card practices that are inherently unfair, consumers are often best served, not by greater disclosure, but by stopping the unfair practices that take advantage of them. Among those practices identified in this bill are unfair interest charges that squeeze consumers who pay their credit card debt on time; unilateral and retroactive interest rate hikes that deepen and prolong credit card debt; unreasonable fees; and payment allocation practices that prevent consumers from paying off the credit card debts bearing the highest interest rates first.

Congress needs to enact proconsumer legislation that puts an end to unfair credit card practices. I am afraid that these practices are too entrenched, too profitable to the credit card companies, and too immune to consumer pressure for the companies to change them on their own. Our bill offers measures that would combat a host of unfair practices that plague consumers and unfairly deepen and prolong their debt. I look forward to working with my colleagues to address these problems.

Mr. President, I ask unanimous consent that the text of the bill be printed in the Record.

Mr. President, Senators from both parties are working very hard these days to put together an immigration bill. The majority leader is working hard to create an environment in which that can happen, and I appreciate his doing that. It is not easy to do. But it is absolutely essential that we have a comprehensive immigration bill.

This is not something Members of the Congress can blame on anybody else. It is not the Governors' job, it is not the mayors' job, it is not the county commissioners' job, it is not the Sheriff's job, it is our job to decide what our immigration policy should be. It is our job to secure the border. It is our job to make certain that those who come here are legally here. It is also our job to make sure that those who come here legally have an opportunity to become Americans, a chance to become part of our country.

We have a motto above our wall that says, ``One from many.'' It doesn't say ``Many from one.'' We are very proud of our magnificent diversity in this country. People come here from virtually every country in the world. Anyone who has gone to the naturalization ceremonies can attest, where last year 650,000 new citizens stood in courthouses all across America, raised their right hands and swore their allegiance to this country--nothing is more moving than that. But as much as we prize that diversity, what we prize even more is our ability to turn all that diversity into one country.

Unity is harder than diversity. There are a lot of diverse countries in the world, and they are ripped apart by their differences. We have been fortunate. As other countries struggle with the idea of becoming French, becoming German, becoming Japanese--it is hard to do. But in this country, if you become a citizen, you have to become an American.

How do you do that? You don't do it by your race. In fact, our Constitution says that race cannot be used.

You don't do it by any other form of ancestry. It doesn't matter where your grandparents came from. What does matter is that you subscribe to a few principles and that you learn a common language. Those are the most basic elements of the unity, this fragile and important unity that makes us the United States of America instead of just another United Nations.

In anticipation of the immigration debate next week, I introduce today, along with Senators Cochran and Cornyn, what we call the Strengthening American Citizenship Act. It is an essential part of any immigration bill because it addresses what happens after one lawfully becomes a resident of this country and begins to think about lawfully becoming a citizen.

This legislation will help legal immigrants who are prospective American citizens learn our common language and learn about our ways of government. I introduced this legislation last year, in the 109th Congress, when we considered an immigration bill. It had several cosponsors and it passed this body 91 to 1. It was an amendment to the Senate immigration bill, in April of 2006.

I hope the Senate will agree again to make it a part of the bill. It might not make the most headlines, but it will make as much lasting difference in immigration legislation as possible.

Here, in brief, is what the legislation would do. First, it would help prospective citizens learn English and it would do that in two ways. It would provide education grants of up to $500 for English courses for immigrants who declare their intent to become American citizens. They might use these grants of $500, for example, to go to any accredited agency such as ``Fuentes,'' in Los Angeles, a place I happen to know about, which can do, for that amount of money, an excellent job of helping, in that case mostly Spanish-speaking citizens, learn also to speak English. So it is a $500 voucher, in effect, to help any lawful person learn English.

Second, it will change the citizenship rules to allow those who learn to speak English fluently to reduce from 5 to 4 years the amount of time they have to wait to become a citizen. These are two ways we are trying to help people learn English and by doing that value our common language.

There are other ways to do that. Senator Kennedy and I have talked about the fact that there are lines of people in Boston, his State, and Nashville, in my State, of adults who want to learn English, but there is no room for them in the adult education programs we fund. Perhaps when we pass the Workforce Investment Act, or other appropriations bills, we can find other ways to help people who want to learn English, learn English. But this legislation focuses specifically on prospective citizens who want to learn English by giving them a grant to help them do it and by giving them an incentive to learn the language fluently. They can become a citizen then in 4 years instead of 5.

Also, it helps prospective citizens learn more about the American way of life. Albert Shanker, the late President of the American Federation of Teachers, said the common school was created in America, the public school, to help largely immigrant children learn reading and writing and arithmetic and what it means to be an American, with the hope they would go home and teach their parents.

The last time we had such a large percentage of foreign-born people in our country was in about 1900, the turn of that century. Organizations all over America got busy helping new arrivals learn about our country, learn about our Declaration of Independence, learn about our Constitution and the ideas that were part of it because they knew that, since you do not become a citizen based upon your race or your ancestry and you do it upon the idea of America, that someone needed to help these people learn about the idea of America. Many were very eager to do that.

The legislation I introduced today would establish a foundation to support the activities of the Office of Citizenship within the Department of Homeland Security so that organizations that want to support and cooperate in efforts to reach out to prospective citizens can do so.

It would provide grants to organizations to provide classes in American history and civics. We are talking about a lot of prospective citizens--650,000 or so last year. After this immigration bill it may be more, because if you become a citizen, you are going to have to be legally here. So we want to make sure we have plenty of help for these who want to do that.

Third, codify the oath of allegiance. One of the most remarkable oaths, I suppose, in the American language, is the oath of allegiance that the 650,000 new citizens take when they become Americans. It is an oath that goes all the way back to George Washington's time and Valley Forge. It was essentially the oath that Washington and his officers took at the beginning of the American revolution. It says that I, George Washington, or I, the new citizen, declare that we owe no allegiance or obedience--in that case, to King George;

. . . and that we renounce, refuse and abjure any allegiance

or obedience to him and do swear that I will, to the utmost

of my power, support, maintain and defend the said United

States.

Essentially, that same oath of allegiance is the oath new citizens take. This elevates that oath of allegiance from a bureaucratic rule to a part of the law and gives it the same dignity that the Pledge of Allegiance has and the national anthem has. Finally, this legislation would celebrate new citizens by focusing on these hundreds of ceremonies that we have, in which people from all over the world wear their best clothes, prove that they have good character, that they have waited 5 years, that they have learned English, that they have passed a test about citizenship, and they are ready to say: As proud as I am of where I came from, I now pledge my allegiance to the United States of America.

We want to celebrate those events. This instructs the Secretary of Homeland Security to develop and implement a strategy to make those naturalization ceremonies more important in the fabric of our everyday life, and establish an award for citizens who have been naturalized in the last 10 years who have made an outstanding contribution to the American Nation. We all know in our own experiences that new Americans are sometimes the best Americans. They make the largest contribution. They have the best understanding of our country. We want to celebrate what they have done.

This is legislation the Senate adopted before. Senator Cochran, Senator Cornyn, and I are introducing it to make sure we adopt it again when immigration comes up.

I also wish to mention that I intend on looking at a comprehensive effort toward the same goal, which I like to call the American citizenship agenda; learning English and what it means to becoming an American. I have identified several areas, and I may introduce amendments in many of these areas to the immigration bill.

These were not introduced the last time, but they would include clarifying the mission of the Office of Citizenship within the U.S. Citizenship and Immigration Service, establishing State citizenship advisory boards in a number of States, coordinating efforts toward helping immigrants learning English, American history, and civics. It would create an employer tax credit for businesses that help their employees learn English. As I mentioned earlier, at the beginning of the 20th century, there were a great many businesses hiring new Americans who spent their money, their time, and their effort to make sure those new employees understood what it meant to become Americans.

One way to meet this need of a large percentage of foreign-born people in our country is to provide tax incentives to businesses that help their employees learn English. Another proposal is to require a demonstration of English language proficiency when an individual renews his or her green card; establishing a Presidential award for companies that go above and beyond in bringing their employees together as Americans; finally, asking for a Government Accountability Office study to identify the need of lawful permanent residents not speaking English and the associated costs; in other words, how many people living in our country do not speak English and what would be the cost and the most effective programs of helping them learn English.

That is my purpose today, to introduce the Strengthening American Citizenship Act, legislation that passed when we considered the immigration bill in 2006, and which Senators Cochran and Cornyn and I hope will be a part of this legislation; then to discuss what I call the Strengthening American Citizenship Agenda, which will be looking for a variety of other ways to help make sure we not only celebrate our diversity but we find ways to celebrate our unity.

We can look across the ocean at Europe and see the struggle in Turkey right now for that nation's identity. We can see the difficulty France and Germany are having as Muslim workers have a hard time integrating into their country. We do not want the United States of America to become a country where we have enclaves of people who have no loyalty to the idea of this Nation. We want to create an environment where everyone has an opportunity to think about loyalty to this country, where almost all have a chance to think about becoming a citizen one day, and where every single person who lives here has an opportunity to learn to speak our common language, not just for their benefit but so we do not become a tower of Babel or a United Nations, that we become a United States of America, as our Founders envisioned.

Mr. President, I rise to speak about the Student Information Means a Positive Loan Experience Act, the SIMPLE Act, which I, along with Senators Alexander, Allard, Burr and Isakson, am introducing today. With the increasing debt level of many students, it is important to make sure borrowers have good options for managing their debt and good information on the available options so they make wise, informed decisions.

We are calling this the SIMPLE Act for a reason. We have heard testimony from experts and comments from borrowers and other stakeholders about the information borrowers receive currently. On the one hand, borrowers receive so much information that they have ``information overload,'' which leads to confusion. On the other hand, many borrowers do not receive good information about the full range of tools available to help them repay their loans. What has come through loud and clear is that we need to simplify the information and spell out the impact of selecting various options. Borrowers need better, clearer information to help them make better decisions, not more repayment plans and confusing choices.

There are already four repayment plans in the Federal Family Education Loan program and four in Direct Loans. From the data we have obtained, it is clear that the vast majority of borrowers with Stafford loans have a standard repayment plan. Many borrowers are not taking advantage of the graduated, extended or income sensitive/income contingent repayment plans currently available.

Rather than adding another repayment plan, this bill makes the existing repayment plans more flexible, by providing borrowers with the option to pay only the interest on their loans for the first 2 years they are in repayment, regardless of their repayment plan. The bill also expands access to the extended repayment plan to borrowers with $20,000 of student loan debt, instead of the $30,000 currently needed to qualify for extended repayment plans.

The bill also revises the definition of economic hardship, raising the eligibility cut-off point to 150 percent of the poverty line and taking family size into account when making the determination of eligibility.

To make sure borrowers understand the availability of the various options, and the impact different repayment plans would have on their payments, the bill expands and clarifies the information to be provided to borrowers during their exit interview. Information on repayment plans available will include a discussion of the different features of each plan, average anticipated monthly payment amounts, and the ability of the borrower to prepay their loans or to change repayment plans.

The bill requires borrowers to be provided with clear information on the availability of deferment and forbearance. These are two excellent debt management tools, but borrowers must understand the potential impact on their loan principal and total interest paid on their loans when they choose these options.

During exit counseling, borrowers must also be provided with information on the effect of consolidating student loans on the borrower's underlying loan benefits, including grace periods, loan forgiveness and cancellation. Borrowers must be informed that different lenders offering consolidation loans may offer different borrower benefits.

Last, but not least, borrowers must be given notice that information on their student loans is housed in the National Student Loan Database and they must be told how to access their information. It will help them keep track of the status of their loans and the outstanding principal.

All of this is designed to help borrowers ask questions first, then make decisions that are right for them. The concept is simple, and requires a few, but essential changes to the Higher Education Act to put them into effect.

Mr. President, I ask unanimous consent that the text of the bill be printed in the Record.

Mr. President, I rise to speak about the Student Financial Aid Data Privacy Protection Act, which I, along with Senators Alexander, Allard, Burr, Isakson and Roberts, am

introducing today. In a climate where our personal financial information is at risk, it is now more important than ever to ensure that the Department of Education is providing appropriate safeguards around one of the world's largest databases, National Student Loan Data System.

The Department of Education has not inspired confidence in its ability to protect its data systems from those bad actors who would misuse the financial information of students and parents. Indeed in 2006 the House Committee on Oversight and Government Reform gave the Department of Education a failing grade for its efforts to improve the security of its data systems in compliance with the Federal Information Security Management Act.

More recently, on April 17 of this year the Department of Education suspended the access of lenders, services and guaranty agencies to the National Student Loan Data System. While I am pleased to see that the Department of Education is monitoring this database, it is clear from the information provided by the Department of Education that this unprecedented restriction of access was done without having in place clear standard operating procedures for limiting and restoring access to the database.

The National Student Loan Data System is a vital tool for lenders, universities and students. It is a system that is absolutely essential to the efficient functioning of our country's higher education loan and grant programs. When the operation of this system suffers, students suffer.

Students and parents depend on this system to consolidate their loans. Lenders and guaranty agencies depend on this system to verify whether students should be entering their repayment period. And our institutions of higher education depend on this system to determine whether students are exceeding caps on how much they should be borrowing to attend college.

This bill sets out operating principles for the National Student Loan Data System, to ensure that the Department of Education continues to manage this database in manner that advances the best interests of students. The bill requires the Department of Education establish protocols for limiting access to the database when there are suspicions that the system is being used inappropriately, and the steps to be taken in order to restore access.

This bill also requires the Department of Education, lenders and guaranty agencies to assist students and parents in better understanding how their sensitive, financial information is entered into the National Student Loan Data System and then accessed by thousands of lenders, consolidators and guaranty agencies across the country.

Finally, the bill prohibits nongovernmental researchers and policy analysts from accessing sensitive borrower-specific information, and directs the Secretary of Education to explore ways to empower students and parents to control which lenders are accessing their sensitive, financial information.

We must help the 14.3 million students and their families who trust the Department of Education to protect their personal financial information. Action is needed to restore confidence in the ability of the Department of Education to manage the National Student Loan Data System. I want to thank Senators Alexander, Allard, Burr, Isakson and Roberts for joining me in this effort, and look forward to this bill being included in our efforts to reauthorize the Higher Education Act.

I ask unanimous consent that the text of the bill be printed in the Record.

Mr. President, I rise to speak concerning the Mortgage Cancellation Relief Act, S. 1394. In previous Congresses, I have introduced this legislation to provide immediate tax relief to homeowners adversely impacted by the recent downturn in the Nation's housing markets.

However, this Congress, I am pleased to join my friend and colleague from Michigan, Senator Debbie Stabenow, as a cosponsor of S. 1394. She was on the floor earlier this morning, and she had the opportunity to address this bill. I want to thank her for her continued interest in this issue.

I agree with her that it is well past time for Congress to act on this legislation.

There are a number of positive things I can say about S. 1394. It is a bipartisan bill. It is sound tax policy. It is good economic policy. And it treats those who have been impacted by housing declines fairly in their time of need.

As I mentioned, Senator Stabenow introduced this bill in May.

The President recommended a similar proposal in August.

However, the one not-so-positive thing I can say is that it is not law.

We are now into November. And despite all of the positive aspects of S. 1394, it has still not been reported by the Finance Committee or debated on the Senate floor.

The problem addressed by this legislation has its roots in the housing market.

In September, overall home sales slid 8 percent from the month before. Single-family sales slowed to the lowest pace in nearly 10 years.

Inventory is going up. At the end of August, there was a 9.6-month supply of homes. At the end of September, there was a 10.5-month supply of homes on the market.

So supply is up, and demand is down.

A high school senior, barely paying attention in his economics class, could tell you the result.

The result is a buyer's market. The median home price is down 4.2 percent from the year before.

With the dip in the housing market has come a corollary decrease in new home construction.

According to one recent estimate, construction spending on all new homes fell by 22 percent in 2007. The decline was even greater for single family homes--25 percent.

With another 4 percent dip in 2008, residential construction spending will be down to $254 billion in 2008 from $384 billion in 2005.

While this is not good news for the Nation's builders, at least it tells us that the U.S. housing market is functioning rationally. As the supply of housing tightens, demand and prices will once again go up. This leads many economists to believe that housing markets will turn the corner sooner rather than later.

In the meantime, however, we have a deadly economic mix of declining housing prices, interest rate volatility, and adjustable rate mortgages that are beginning to reset. When this convergence of events takes place and is followed by a certain unnecessarily punitive and totally unfair provision in our Tax Code, life becomes even more burdensome for some of our most vulnerable families and communities.

Let me explain why.

Adjustable rate mortgages are a product that provides an opportunity for millions of families to achieve home ownership. Because they pose less risk to lenders, these mortgages can be a more affordable product that allows families to purchase homes while assuming the risk that interest rates will increase.

Yet because of the easy availability of adjustable rate mortgages, some people took out very high mortgages and according to the Wall Street Journal, there are 17 percent adjustable rate mortgage holders who cannot make their payments on time.

We are currently witnessing how well private industry will be able to handle this problem on its own. The Nation's largest mortgage lender, Countrywide Financial, announced that it is modifying the terms of $16 billion in adjustable rate mortgages. Thirty thousand have already restructured their loans, and Countrywide intends to contact 52,000 borrowers to see if they would like to restructure their loans as well.

Still, the declines in the Nation's housing markets have left two groups particularly vulnerable.

First, there are those who sell their homes for less than the outstanding amount of the mortgage.

Second, there are those who are unable to make their mortgage payments and suffer foreclosure.

As I mentioned earlier, the Tax Code effectively kicks these folks while they are down.

The Internal Revenue Code defines income very broadly.

And when lenders forgive mortgage debt in a short-sale or a foreclosure, the borrower has technically received taxable income. Yet this is phantom income, and it makes little sense to have these financially vulnerable families getting a form 1099 and an increased tax liability for income they never received.

This makes little sense as public policy. And it is inequitable as tax policy.

Section 121 of the Internal Revenue Code allows the exclusion of up to $250,000--or $500,000 on a joint return--of gain on the sale of a home. Few people realize gains in excess of this statutory exclusion. And for those who do, those gains are taxed at lower capital gains rates.

Yet if a family is in such a dire financial situation that it is losing its home or selling it at a loss, the phantom gain on these transactions is taxed at ordinary income rates.

With adjustable rate mortgages being reset, growing housing inventory, and declining housing prices, too many people will be getting a 1099 form in the mail telling them that they owe income taxes on this debt forgiveness.

This is not the way it ought to be.

Our legislation would remedy this problem by excluding this debt forgiveness from gross income.

There is precedent for this. Congress provided similar relief in the wake of Hurricane Katrina.

Given the ramifications of housing market declines, we should extend this needed relief to all Americans who find themselves receiving this kind of phantom income.

Yes, we would forgo some tax revenue by making this simple, fair, and commonsense change to our tax laws, but the House has found a reasonable offset that is supported by the housing industry so the net effect to the Federal budget should be zero.

As I stated earlier, it is time to act. I am not sure what the delay is.

The drop in the housing market and the problems with adjustable rate mortgages are no longer breaking news. It has been nearly 6 months since this bipartisan legislation was introduced. It has been over 2 months since the President indicated he supported this legislation and wanted to get it signed into law.

This Congress seems to have ground to a halt.

You can hear crickets chirping on the Senate floor lately. To say we are too busy to address this important legislation is simply false.

The lack of quick action on this legislation is no longer acceptable.

I urge my colleagues to support S. 1394 and for the Senate to pass this legislation as soon as possible. Families in need and vulnerable communities demand that we act.

Mr. President, this is an important issue, one I have raised many times over the years. I have testified before the Banking Committee, and introduced numerous bills.

It is not a new issue. There have been at least four high-profile times in the last 12 years where proposed foreign acquisitions in the U.S. have threatened our security.

In 1998, President Clinton tried to turn over management of a 144- acre terminal at the former U.S. Naval Station in Long Beach to the Chinese Ocean Shipping Company, COSCO--a subsidiary of the People's Liberation Army.

I am going to quote from an LA Times article from that time:

The embattled COSCO deal came to an end Thursday night,

when congressional conferees submitted to Congress the 1998-

99 Defense Authorization Bill . . . Leading the effort to

block COSCO from the facility were Sen. James Inhofe (R-OK)

and Rep. Duncan Hunter [of the] San Diego area.

That was one battle that we won.

Since working in 1995 to prevent Los Angeles ports from being controlled by Chinese interests, I have continued my pressure on the issue. For example, I expressed my concern with the CFIUS process over 2 years ago in the spring of 2005 when I delivered four speeches on China. While examining this issue I came across a disturbing example of China buying the U.S. company, Magnequench Inc., and moving it piecemeal back to mainland China.

Let me read from the floor speech I gave on April 4, 2005:

I believe that CFIUS does not have a broad enough

conception of U.S. security. One example of CFIUS falling

short is with Magnequench International Incorporated. In 1995

Chinese corporations bought GM's Magnequench, a supplier of

rare earth metals used in the guidance systems of smart-

bombs. Over twelve years, the company has been moved

piecemeal to mainland China, leaving the U.S. with no

domestic supplier of a critical component of rare-earth

magnets. CFIUS approved this transfer.

The United States now has no domestic supplier of rare earth metals, which are essential for precision-guided munitions.

That was one we lost.

Following this series of four speeches that spring, on July 20, 2005, I introduced Senate amendment No. 1311 as an amendment to the annual National Defense Authorization Act for Fiscal Year 2006. My amendment prompted the very beginning of the legislative pursuit of this issue in recent years. For example, my amendment prompted another, later, second-degree amendment, Senate amendment No. 1335, by Senator Shelby, then the chairman of the Senate Banking Committee.

I also testified before the U.S.-China Commission on July 21, 2005. The U.S.-China Economic and Security Review Commission is a bipartisan committee created in 2000 to monitor, investigate, and submit to Congress an annual report on the national security implications of the bilateral trade and economic relationship between the United States and the People's Republic of China.

The Commission is composed of 12 members, 3 of whom are selected by each of the majority and minority leaders of the Senate, and the Speaker and the minority leader of the House. The Commissioners serve 2-year terms.

Their recommendations are consistent with the amendment I introduced to the Defense authorization bill that would have made some of the necessary changes to CFIUS.

On September 28, 2005, the Government Accountability Office issued a report on CFIUS that is right in line with the recommendations of the US-China Commission. So this has not just been me saying that CFIUS is in need of

critical change--it's the U.S.-China Commission and the GAO as well.

When my amendment stalled over a committee jurisdictional point, on September 29, 2005, I chose to introduce the changes as a stand-alone bill, the Foreign Investment Security Act of 2005, S. 1797, which was referred to the Banking Committee. That bill was the first bill introduced in recent years on this topic.

Later the Banking Committee held a hearing on the GAO report, and I testified before them on October 20, 2005, at that hearing.

In all of these ways I have just mentioned, the Banking Committee was prompted by me to pursue this topic.

In the past couple of years, several high profile business deals have been approved by CFIUS that would allow foreign-owned companies, in particular companies that are owned or controlled by foreign governments, to acquire other companies doing business in the United States.

More recently I was concerned with China's state-owned CNOOC attempted to buyout Unocal, a US oil company. We won this one because of Congressional pressure, and CNOOC withdrew its bid. Over the past 2 years, I have been pointing out that the CFIUS process has ignored some major issues which threaten our national security.

The most publicized deal was the state owned Dubai Ports World, DPW, purchase of Peninsular and Oriental Steam Navigation, P&O, that would have allowed DPW to take over the operations at various east coast ports in the United States. The public outcry against this deal lead DPW to abandon its plans to operate the U.S. ports and that portion of the takeover was sold to U.S. based companies. However since the DPW- P&O deal was canceled, other transactions have been approved by CFIUS that are just as questionable.

CFIUS has received over 1,600 notifications and investigated under 40. Of those, only one acquisition has been stopped by the President.

This is a critical issue at a critical time. CFIUS seems to only get scrutiny when some major deal is in the papers. I have been paying attention to it all along. It needs reform, and I hope we can make some progress.

I am glad that Congress is now taking a closer look at CIFIUS reform. Rest assured that I continue to push for this badly needed reform and as Congress addresses this issue, I will keep your thoughts in mind.

Note too that I will ensure in particular that the national security aspects of this work are appropriately attended to. I will not stand idly by and allow a bill that is weak on national defense to pass.

Let us all work together to ensure that the legislative process performs appropriately to defend our Nation, and let this bill I am introducing today be a new start.