Jeb Hensarling

Mr. HENSARLING

Mr. HENSARLING. I thank the gentleman for yielding. Madam Chair, I rise in opposition to this legislation. It offers a new $1 billion benefit to Federal workers. I have no doubt that the Federal workers deserve this benefit, but to non-Federal workers, they don't deserve having their paychecks docked $1 billion to pay for it. That's what we're talking about. That's if the non-Federal Government workers are fortunate enough to still have their jobs in this troubled economy. Again, it's a great benefit. I wish every new parent could have that. I want to create a more prosperous economy in America so that every American could enjoy it, but this is absolutely nothing more than a wealth transfer of $1 billion from non-Federal Government workers to Federal workers. It is just patently unfair. Why would you want to dock the pay of everybody else in this troubled economy to pay for this? Already, if you look at the benefits that Federal Government employees receive--and listen, there are great Federal employees, and I want to keep them, and many of them are incredibly dedicated public servants. Yet look at the annual leave of the Federal Government versus the annual leave, on average, in the private sector. Federal workers are already receiving a better deal. Look at the annual sick leave of the Federal Government compared to the average sick leave in the private sector. The Federal Government worker is already receiving a better deal. Look at the family medical leave. You can see that Federal Government workers already receive, on average, a better deal than those in the private sector. So, again, on average, when they're enjoying greater benefits and when they're enjoying greater job security, what a slap in the face to every worker in America who doesn't receive a government paycheck to see that, all of a sudden, they're going to have to pay for a new benefit for Federal workers. This is on top of the fact that, today, the Federal Government is already having to borrow, Madam Chair, as you well know, 46 cents on the dollar. We are awash in red ink. Already, this body, under Democratic control, passed a budget that will triple the national debt in 10 years, costing taxpayers $148,926 per household. It will triple the national debt in the next 10 years. We are about to see more debt placed on this Nation, more debt in the next 10 years than in the previous 220. You know, Madam Chair, there was a time in America's history where you worked hard today so that your children could have a better life tomorrow. Instead, a bill like this is saying: You know what? Let's go ahead and let the government work easy today so that our children have to work even harder tomorrow. Again, it's just unfair to everybody who doesn't receive that Federal Government paycheck. At some point, Madam Chair, you have to ask: When does the debt and the spending stop? We will never run out of good ideas. We will never run out of opportunities to take money away from one group of citizens and give it to another group of citizens. Those opportunities are there each and every day. Again, if you care about all of the children in America, you will quit placing an unconscionable burden of debt upon them. So this bill must be rejected out of fairness and out of fiscal responsibility.

Mr. HENSARLING

Mr. HENSARLING. Madam Speaker, I rise today to honor Chief Ron Shields of the Brownsboro Police Department and recognize his exceptional service and contributions to his country, the State of Texas and his community. His exemplary career in law enforcement has touched communities throughout Texas. As an instructor with the East Texas Police Academy at Kilgore College, Chief Shields has helped train more than 500 peace officers. Chief Shields represents public service in the highest regard. Before his career in law enforcement, Chief Shields served his country honorably as a member of the Army National Guard. As the Congressman for the Fifth District of Texas, I am honored to recognize Chief Ron Shields for his many years of public service and innumerable contributions to his country, state and community. Chief, on behalf of all the constituents of the Fifth District, I would like to extend our most sincere thanks.

Mr. HENSARLING

Mr. HENSARLING. Mr. Speaker, may I inquire how much time is remaining on both sides.

Mr. HENSARLING. Mr. Speaker, I yield myself 5 minutes. Mr. Speaker, I think, for the moment, I do wish to return to the credit card debate. Again, Mr. Speaker, I fear that the legislation before us is going to be riddled with unintended consequences. Again, there are portions of the bill to which I think almost every Member of this body would agree. Consumers have been taken advantage of by misleading claims, by deceptive disclosures, and we must have effective disclosure written in legalese not voluminous disclosure. Rather, we need effective disclosure written in English, as opposed to voluminous disclosure written in legalese. But we don't need to take away consumer's credit opportunities at a time when the market is already contracting from the economic recession. I mean, these credit cards are needed. And again, Mr. Speaker, I fear that this legislation will take us back to a bygone era, an era that most of us, frankly, don't want to revisit. Now, in my earlier remarks I alluded to this New York Times piece, again, not exactly known as a bastion of conservative thought, but it is certainly a third-party validation to what many of us have been saying in this debate. But I allude to this New York Times article of May 19. And it talks about this bygone era, and in part of this article it says: ``Banks used to give credit cards only to the best customers and charge them a flat interest rate of about 20 percent, and an annual fee.'' Well, once certain usury laws have been relaxed, once there were technological innovations allowing this thing called risk-based pricing, something happened, Mr. Speaker, and that was, people who previously had no access to credit finally got access to credit. Something else happened, Mr. Speaker. That is that those debtors who paid their bills on time, who were less risky, managed to pay a lower interest rate and managed to get rid of the dreaded annual fees. This is a piece of legislation that will take us back to a bygone era that most of us want to leave bygone. It is a step into the past. The article in the New York Times goes on to say, ``The industry says that the proposals will force banks to issue fewer credit cards at greater cost to the current cardholders.'' Now, some may view that to be a good thing. Well, it's not necessarily the struggling families of the Fifth Congressional District of Texas. They want their credit cards. They want choices to be had. They want there to be honest disclosure that they understand, but they want choices in the marketplace. Now, I may view this legislation differently, Mr. Speaker, if I thought there weren't competition in the marketplace, but we've heard testimony throughout this debate that there are over 10,000 different issuers of credit cards--10,000. We've seen contraction in the market due to the economic recession, and all this legislation is going to do is exacerbate that phenomenon. So, again, this is a bailout bill. It's asking those who pay their bills on time and in full to bail out those who don't. So, again, we'll hear all of the rhetoric that we're slapping around the big credit card companies. Frankly, there are a number of their practices that deserve slapping around, but somebody else is going to get slapped around, and that is the borrower who pays his bill in full and on time. He is going to be punished. He is going to get slapped around by this legislation at a time when they can ill, ill afford it. We've seen this before. We've heard testimony from, for example, community banks that tell us, if this legislation is passed--and I've heard this from banks in my own district--that ultimately the credit card portfolios of the smaller institutions are going to be ended or that they're going to be sold to the larger institutions. Less competition. Less opportunities. We've heard from academics in this debate, like Professor Todd Zywicki from George Mason University. The increased use of credit cards has been a substitution for other types of consumer credit. If these individuals are unable to get access to credit cards, experience and empirical evidence indicates that they will turn elsewhere for credit.

Mr. HENSARLING. Mr. Speaker, I yield myself the balance of our time. First, Mr. Speaker, I don't spend all of my time observing the processes and procedures and ways of the other body so I don't know how these two particular issues managed to get commingled. Having said that, I can't think of any bad time to stand up for the Second Amendment rights of our citizenry. Again, it appears to me that one lone, perhaps rogue Federal judge has tried to put a dent into the Second Amendment rights of our citizens. I was happy in the last Congress to introduce H.R. 5434, the Protecting Americans from Violent Crime Act, that would have taken care of this issue. Again, this is a bedrock principle embedded in our Constitution. The citizens need to have their right to keep and bear arms protected, even on this Federal property, particularly when incidences of violence at Federal parks has shown increases, upticks. But regardless, we cannot allow the Constitution of the United States to be amended in such an unconstitutional fashion. So I'm happy to raise my voice in support of that. Back to the credit card issue at hand--and I will try not to use the entire 4\1/2\ minutes. We have had testimony from the Congressional Research Service, we have had testimony from academics, we have had testimony from community bankers. We have seen the history. We have seen the history of what has happened in Great Britain. There are huge unintended consequences associated with this legislation. The people who pay their credit card bills in full, on time, are about to be punished. They will be forced to bail out those who don't. They will end up paying annual fees. They will end up paying higher interest rates. They will see such things as member rewards programs contract. I believe this to be patently unfair, Mr. Speaker, and it will be caused by this legislation. Again, I think the intentions are pure. I think the intentions are noble. But such will be the consequences of this legislation. In the middle of a huge credit crisis we will take credit cards away from people who desperately need them. We will end up taking them away from families like the Blanks family of Fruitdale in the Fifth District of Texas, who wrote to me, ``Congressman, my new business would not have been started if not for my credit and credit cards. My existing job will be gone, and it is forcing me to do what I really want to do anyway.'' He goes on to say, ``I couldn't have achieved the American Dream without credit cards.'' I fear under this legislation that families like the Blanks family of Fruitdale will lose their credit cards. I heard from the Vehon family in Rowlett, also in the Fifth District of Texas. ``In the fall of 2004, my wife and I were laid off from our jobs at the same time. Needless to say, the layoff was quite a shock, and without access to our credit cards at the time, frankly, I don't know what we would have done. ``Due to the flexibility that credit cards can supply to responsible people in challenging times like I have described, we were able to stay pretty current on our bills.'' I heard from the Juarez family in Mesquite, Texas, that I have the honor of representing in Congress. ``I oppose this legislation, as I have utilized my credit cards to pay for some costly oral surgeries. I do not want to get penalized by this legislation for making my payments on time.'' Again, Mr. Speaker, this legislation is not fair to the Juarez family, it is not fair to the Vehon family, it is not fair to the Blanks family, it is not fair to millions of other families across our land who desperately need their credit cards. And I urge that we reject this conference report. I yield back the balance of my time.

Mr. HENSARLING. Will the gentleman yield?

Mr. HENSARLING. Mr. Speaker, at this time I would like to yield 3 minutes to the gentleman from Utah (Mr. Bishop).

Mr. HENSARLING. I yield myself 1 additional minute. Why, Mr. Speaker, do we want to punish those people on behalf of those who don't do it right? Now, some don't do it right because of circumstances beyond their control, but the way to address that is not to take away the rights and opportunities of others. That can be addressed through social safety net legislation. But others don't pay their bills simply because they're irresponsible. Why do the responsible have to bail out the irresponsible? And we already see that we are in the midst of a huge credit contraction, Mr. Speaker. At a time when Americans are struggling to pay their mortgages, to pay for their groceries, to pay their health care costs, why, why would we want to make credit more expensive and less available? It is the completely wrong policy. Now, again, I want to agree with the disclosure provisions. I also want to agree with the provisions in the bill that say that consumers ought to have a reasonable amount of time to close out their accounts under their old provisions and old interest rates, but otherwise, we need to reject this legislation. I reserve my time.

Mr. HENSARLING. Mr. Speaker, I yield myself an additional minute. They will turn elsewhere for credit, such as to pawnshops, to payday lenders, to rent-to-own or even to loan sharks. In some respects, maybe we ought to call this the Payday Lenders and Pawnshop Relief Act, because that will be the consequence. Now, I'm not trying to cast aspersions on their business models. Many consumers turn to them. That's not the point. The point is this legislation is going to constrict consumer choice. We've seen similar legislation in the United Kingdom. They passed a law that capped default fees. What happened? Well, two of the three largest issuers promptly imposed annual fees on their cardholders. Nineteen of the largest raised interest rates, and by one independent study, 60 percent of new applicants were rejected. That's what happened in the U.K. These are the unintended consequences of this legislation, and that is why I believe this conference report should be rejected at this time. There is a better way of doing this, Mr. Speaker, and it is with disclosure and with effective enforcement of any fraud laws.

Mr. HENSARLING. Mr. Speaker, at this time I would like to yield 3 minutes to the gentleman from Washington (Mr. Hastings).

Mr. HENSARLING. Was that not already embedded in the legislation, in that one of the four opportunities for credit card companies to raise interest rates retroactively is when people don't meet their workout plans. Would that not be one of the reasons?

Mr. HENSARLING. Mr. Speaker, I yield myself 5 minutes. First, I observe this may be the seventh or eighth time we've had an opportunity to essentially debate the same bill. So I first want to congratulate the chairman of the full committee for a very open and deliberative process. I also want to congratulate the gentlelady from New York. Although I very much disagree with the ultimate consequences of the legislation, certainly she has brought passion and tenacity to an issue and has seen it through the process. And to the extent that I can count votes in the minority where you have the luxury of being right about 99 percent of the time when you count votes, I'm sure her side is on the verge of victory. But, Mr. Speaker, I just would say before my friends on the other side of the aisle high-five each other, they may want to do a high one or high two, but I'm not sure it's a high five. I agree with the gentlelady from New York that there have been deceptive trade practices and misleading advertising by a number of credit card companies. This has to stop. There are a number of disclosure provisions that the Federal Reserve has presented after 3 years of a very careful study, a number of those provisions are mirrored in this particular legislation. I think the whole House agrees with those. Clearly, there needs to be consequences for companies that engage in this kind of behavior. And in addition, we need to ensure that the laws that we have on the books, Mr. Speaker, are enforced: the Deceptive Trade Practices Act, the Truth in Lending Act, and other laws that we have on the books. But, Mr. Speaker, just like when you hear in a tax debate that Congress is getting ready to tax the rich, somehow the middle income have to hold on to their wallet; when you hear there's a piece of legislation that is aimed at reining in the credit card companies, well, John Q. Citizen had better watch out as well. I'm afraid my friends on the other side of the aisle have been very effective through bailout legislation, stimulus legislation, omnibus legislation, a budget that creates more debt in the next 10 years than in the previous 220, they've been very adept at taking the cash out of Americans' wallets, and now with this legislation, many will have their credit cards removed by the Congress as well. People know that Congress excels at one thing, and that is unintended consequences, and I fear, Mr. Speaker, there will be a number of unintended consequences through this particular legislation. This legislation ultimately restricts economic opportunities. It has a version of price controls for late fees. It restricts the ability of credit card companies to engage in facets of what is called risk-based pricing, and ultimately what that means is, this legislation, notwithstanding the good portions of the bill which will create better and effective disclosure for consumers, but what it will ultimately do is a couple of things. Number one, Mr. Speaker, this will force the good customers to yet, again, bail out the not-so-good customers. And it's interesting, Mr. Speaker, having debated this a number of times, there was an article that came out I believe in yesterday's New York Times, and this is isn't National Review or The Weekly Standard or Rush Limbaugh. It's the New York Times. I'd like to quote from portions of that article. ``Credit cards have been a very good deal for people who pay their bills on time and in full. Now Congress is moving to limit the penalties on riskier borrowers who have become a prime source of billions of dollars in fee revenue for the industry, and to make up for the lost income, the card companies are going after those people with sterling credit.'' Again, the observation of the New York Times. Banks are expected to look at reviving annual fees, curtailing cash back and other rewards programs, and charging interest immediately on a purchase instead of allowing a grace period of weeks, according to bank officials and trade groups. From the head of the American Bankers Association, those that manage their credit well will in some degree subsidize those that have credit problems. Again, Mr. Speaker, I respectfully submit to you this is yet another piece of bailout legislation. Over 50 percent of Americans who have credit cards pay their bills in full and on time. There's another huge percentage who at least make the minimum payment on time. Why, why are we going to punish those----

Mr. HENSARLING. Mr. Speaker, at this time, I would like to yield to the distinguished ranking member of the Financial Services Committee for as much time as he may consume, the gentleman from Alabama (Mr. Bachus).

Mr. HENSARLING

Mr. HENSARLING. Mr. Chairman, I have an amendment at the desk.

Mr. HENSARLING. I yield myself such time as I may consume. To my friend from North Carolina, there are many reasons not to support the bill. I didn't say I wasn't supporting it for these reasons. I said it was hard to take a mortgage reform bill seriously that didn't treat this. At the end of the day, Mr. Chairman, again, what is going to happen is that we are functionally outlawing certain types of loans here, and we know particularly subprime, with these amorphous legal standards, applying them to securitizers, applying them to investors, functionally, you are outlawing this. Well, that hurts people. It hurts the Taylor family of Forney, Texas, that wrote to me, ``If it hadn't been for subprime lending, I wouldn't have my house now. My credit was destroyed because of a divorce. I worked hard for 5 years to clean up bad credit.'' These people still ought to have an opportunity to realize their American Dream, and we ought to quit protecting them out of their homes. I urge adoption of the amendment.

Mr. HENSARLING. Mr. Chairman, the subject of mortgage reform is a very serious subject. And although there are certain laudable aspects of the underlying legislation, I fear that although it is a serious subject, it is difficult to take the legislation seriously. How can you have mortgage reform when you leave out the single biggest root cause of the economic debacle we find ourselves in, and that is reform of Fannie and Freddie? How can you seriously deal with mortgage reform and be absolutely silent to at least half of the fraud equation, and that is those who lied about their income, lied about their occupancy, lied about their net worth? The underlying legislation, Mr. Chairman, unfortunately, is going to ensure that consumers lose their choices. It will make interest more expensive. It will protect--``protect,'' a term we hear from our friends on the side of the aisle--protect people out of their homes and effectively take away the American Dream from millions and millions of Americans. Now, we need effective disclosure. We need effective policing of fraud and misrepresentation. We also need some personal responsibility, and we need to quit bailing out failed institutions, and we shouldn't force people who are struggling to pay their own mortgages to pay their neighbors' as well. Now, Mr. Chairman, one particularly bad and onerous aspect of this legislation is something called assignee liability. What this means is that once the mortgage is entered into, that those who securitize the mortgage, those who may invest in the mortgage, that all of a sudden new legal liability will attach to them as well. The bill introduces legal liability for the originator. It doesn't introduce any new legal liability on behalf of the borrower, but introduces new legal liability saying that, with respect to refinancing, that there must be a ``net tangible benefit''; and, if the lender fails this standard, he has legal liability. On all financing, there must be a ``reasonable ability to pay.'' Well, what do these standards mean? Net tangible benefit. So if somebody decides to refinance, take equity out of their home and start a small business, is that a net tangible benefit? Or does it depend on how successful the small business is? How about if an individual refinances their home, they take out equity, and they decide to put a swimming pool in the backyard? Well, maybe that is not a net tangible benefit. Maybe it is, maybe it isn't. I don't know. Maybe they refinance, because in their particular situation they need a lower monthly payment but yet they are willing to pay a larger sum. Is that a net tangible benefit? I would be happy to yield to anybody on the other side of the aisle who could tell me if those examples constitute net tangible benefits. Hearing nobody on the other side of the aisle take me up on it, it kind of proves my point: We don't know what these terms mean, nor do we know about reasonable ability to pay. So all of a sudden, if a lender figures out that there is a tragic divorce going on in a family, does he have a legal obligation now to deny homeownership opportunity because maybe there is no longer a reasonable ability to pay? How about if somebody has the tragic discovery that they have breast cancer? All of a sudden, is there a legal obligation that maybe this person can no longer have a reasonable ability to pay? We don't know what these legal standards are, Mr. Chairman. And so now they are getting passed on to the assignees, these fuzzy, muddy, cloudy, amorphous terms. It is a plaintiff's lawyer's dream, and so we will have an explosion of liability exposure. Why would people want to invest? Why would people want to securitize? You know, when people invested in the stock of Enron, they were the victims. They weren't the victimizers. And now, all of a sudden, we are turning this on their head, and at the end of the day there is going to be less mortgage money available to anybody who wants to have their American Dream realized. I reserve the balance of my time.

Mr. HENSARLING. Mr. Chairman, I demand a recorded vote.

Mr. HENSARLING

Mr. HENSARLING. Mr. Chairman, I thank the gentleman for yielding. Mr. Chairman, this is a very, very serious topic. Unfortunately, it is being addressed with a very, very disappointing bill. I heard several of my colleagues on the other side of the aisle say this is all about protecting consumers. It is a piece of legislation, Mr. Chairman, which will protect them right out of their homes. I don't think that is the type of protection that the consumers or America are looking for. What this bill will do, if this Chamber passes this and ultimately if it is signed into law, it means the Federal Government will functionally be taking away homeownership opportunities from the American people. It will cause an increase in interest rates for people as they seek to either buy a home or keep the homes they have. It changes the rules to where once again those who follow the rules will end up having to bail out those who do not. Now, in the previous debate on the rule I heard the distinguished chairman of the full committee and others give us a history lesson about the cause, and it is important to learn the lessons of history. They were a whole lot less focused upon how this bill will impact the future. But if we actually look at our history lesson, there is no cause that looms larger--looms larger--in the mortgage crisis meltdown than the abuses of the government-sponsored enterprises, Fannie and Freddie, where government gave them a functional monopoly to go out, make profits that could not be achieved in a competitive market, and told them to finance loans to people who could not afford them. The demand for the subprime mortgage skyrocketed when Fannie and Freddie, the government-sponsored enterprises, demanded them. Many on the other side of the aisle wanted to roll the dice. Yes, the dice were rolled, and the American people lost. This is called the Mortgage Reform and Anti-Predatory Lending Act. There can be no mortgage reform, Mr. Chairman, without reforming Fannie and Freddie. And for those who claim that this has already been accomplished, well, now that they have been effectively nationalized, when their market share of new mortgages has gone from 50 percent to almost 90 percent, when the taxpayers are on the hook for hundreds and hundreds and hundreds of billions of dollars, which makes the bailout of AIG look cheap, I don't think this is reform, Mr. Chairman. With respect to the title of ``anti-predatory lending,'' the bill is almost completely silent on predatory borrowing. How can we take this as a serious piece of legislation, when we know that FinCEN, the Financial Crimes Enforcement Network, has said that over half of the mortgage fraud took place with borrowers, those who lied about their income, they lied about their wealth, they lied about their occupancy; yet, the bill is almost completely silent. It only says, oh, by the way, if you are caught defrauding your lender, we are not going to allow you to sue him. Otherwise, there is a complete explosion of liability exposure on the lender side. And we know what happens in lawsuit abuse, Mr. Chairman. It gets poked into the price of every single mortgage. People will pay higher mortgages. Right now, the plaintiffs' trial attorneys, I have no doubt, are licking their chops over this legislation. We have such nebulous terms as ``net tangible benefit,'' ``reasonable ability to repay.'' Well, what is the net tangible benefit? If somebody wants to refinance their home and update their kitchen, is that a net tangible benefit? Maybe it is. How about if they want to refinance their home to put in a swimming pool? Is that not a net tangible benefit? If there is somebody on the other side of the aisle who would answer those questions, I would be happy to yield time. Well, seeing none, I think that buttresses my point, Mr. Chairman, that nobody knows how to define these terms. So, ultimately what we are going to have are fewer mortgages being made. This is Uncle Sam telling you, with a couple of exceptions, if you can't qualify for a 30-year fixed mortgage, then we are going to deny you the homeownership opportunity in America, because we are smarter than you. We know better than you. We have to protect you from yourself. If we want true protection, we need effective disclosure. Mortgage fraud needs to be treated equally on the borrower's side and the lender's side. And at a time of a national credit crisis, we need to be finding ways to help the American families with more credit for their needs, not less. This bill needs to be rejected.

Mr. HENSARLING

Mr. HENSARLING. Mr. Chairman, I yield back the balance of my time.

Mr. HENSARLING. Madam Chairman, the part of this amendment that I, perhaps, do not support is one more mandate; but on balance, I wanted to compliment the ranking member, and I wanted to compliment the gentlelady from New York because the approach of this amendment is to provide consumers with tools that they can use to better understand the provisions of their credit card agreements. To me, that's at the crux of the argument. What we should do is not take consumer choice away. We shouldn't take credit opportunities away, particularly in a national credit crunch, but we have got to end misleading, deceptive and confusing disclosures where consumers do not have the opportunity or the ability to understand the options that are before them. So as I look down here, being able to notify customers as to how a credit application can adversely affect their credit rating, this is a good thing. Increasing font sizes, in certain instances where needed, is a good thing. Requiring signage in stores that offer credit cards in order to help consumers to know their terms, this is a good thing. I have said before--and I don't know if the gentlelady from New York was on the floor--that I applaud her for that portion of her bill that helps empower consumers with greater disclosure. I think that is a huge step forward. As she well knows, I think her bill takes several steps backwards. I think it ends up eroding risk-based pricing. I believe there are some price controls within the bill. We've had a debate on that, and I assume we will continue to have a debate. Overall, this amendment is a very good amendment, and it will help empower consumers. I am concerned about some of the pay-to-pay fees. I don't quite understand what's being accomplished there; but otherwise, it's a good amendment, and I applaud the authors for it.

Mr. HENSARLING. I thank the gentleman for yielding. Madam Chair, I want to rise in support of the Frank amendment. I appreciate the distinguished chairman of the Financial Services Committee working with me on this. I do believe that it is an important study to have, and again, I don't know what the results of the study will be. I'll take the chairman up on his challenge. I'll be prepared to take the pop quiz once the study comes out. The only thing that is a little bit disappointing to me, if I recall right, is I offered a second-degree amendment to the Waters amendment in markup, which I believe was a 6-month study after implementation. This is a 2-year. I wish we didn't have to wait quite that long for the results. Madam Chairman, one of the big debates that we're having within this body today is ultimately what will the impact be of this legislation. There are those on the other side of the aisle who have maintained that this will have no adverse impact on credit availability or that there will be no bailout effect with those who have good credit ratings and good practices who ultimately end up bailing out others. Now, some on the other side admitted they just believe there are more benefits to be derived from the legislation than the cost. I do not feel that way. Number one, the Congressional Research Service, in response to a question regarding this legislation, said: ``Credit card issuers could respond in a variety of ways. They may increase loan rates across the board on all borrowers, making it more expensive for both good and delinquent borrowers to use revolving credit. Issuers may also increase minimum monthly payments, reduce credit limits or reduce the number of credit cards issued to people with impaired credit.'' That was the opinion of the Congressional Research Service. Again, it may prove to be true. It may not prove to be true. I believe it will prove to be true, and I believe that the Federal Reserve study could at least be helpful in determining this. I've heard from community bankers within my district. They believe, if this legislation is passed, that ultimately smaller banks will be driven out of the market and that only the larger banks will be left offering these cards. If so, that, again, is fewer choices for consumers and reduced credit options. We've heard from academics on the subject, like Professor Todd Zywicki of George Mason University, who said, ``The increased use of credit cards has been a substitution from other types of consumer credit. If individuals are unable to get access to credit cards, experience and empirical evidence indicates they will turn elsewhere for credit--such as to pawn shops, payday lenders, rent-to-own or even loan sharks.'' Again, I think that, given the expertise of the Federal Reserve--and certainly, I don't agree with everything they come out with, but they are a relevant party. They do have expertise, and I think it is an important portion of the chairman's amendment that they study the phenomena. We know about the experience of the U.K. When a couple of years ago they passed legislation, they ordered that the credit card default fees had to be cut or legal action would be taken. What happened is that two of the three biggest issuers imposed annual fees on their cardholders. Nineteen of the largest raised interest rates. Sixty percent fewer applicants were being able to receive credit. So we have, number one, historical experience. We have academic testimony. We have testimony from the Congressional Research Service. So I hope there is an acknowledgment that there is at least a chance that those of us who argue the adverse consequences of the legislation may be proven right. I don't think the Federal Reserve are the only people who should study this phenomenon. I'm happy to invite a GAO study and other independent studies. Again, I think it's a very important point, and although I think the gentlelady from New York's legislation takes a huge step forward with respect to disclosure, with respect to fighting misleading and really deceptive practices, I also fear that those who need credit the most in a credit crunch will be denied those opportunities. I fear that those who pay their bills on time or at least pay the minimum on time, which is over half of America, will end up having to bail out the other half, and we will have more bailout legislation. So I appreciate the chairman in working with me and at least studying the phenomenon to see if it has any validity. I'm sorry we have to wait 2 years, but it's certainly better than nothing. Again, I appreciate the chairman of the full committee working with me on this.

Mr. HENSARLING. Mr. Chairman, I certainly appreciate the intent behind the legislation, but I am fearful of what its adverse impact could be. Like many people across this Nation, probably many people in this institution, I worked my way through undergraduate school. I worked a couple of different jobs in Texas A&M University back in the mid- seventies to get through college. To get to those jobs, I somehow had to keep an old 1965 Mustang running, and it didn't want to run. For some reason, a credit card company sent me a solicitation, and I got a credit card. And whether I had a transmission problem that I couldn't pay for, I had a water pump go out, that credit card tided me over, made sure I had transportation to get to my job to pay for my undergraduate studies. And I hate to think about all of the college students in America who may be denied that opportunity. I used it the way it was supposed to be used. I used it for emergency purposes. I used it to tide me over until that next paycheck came in. We're talking about folks over 18 who can vote, who can go to war, in most States can marry, own real property. We shouldn't be paternalistic towards them. We shouldn't deny them what could be an incredibly valuable tool to get them through college in the first place. So I urge the rejection of this amendment.

Mr. HENSARLING. I thank the gentleman for yielding. I fear that what we have here is another form of price controls being applied to credit card availability. You know, what is going to happen here, as we attempt to protect the consumer, I think we are about to protect him right out of having any opportunity to have an introductory rate. I mean, what is going to end up happening here is, instead of, say, enjoying a 10 percent rate for 3 months and then a 15 percent rate kicks in for the next 9 months, you are going to end up with 15 percent for the whole year. Again, the answer here is to allow the consumer to have choice. People can understand this if we will write the disclosure in the right way. Yes, there are deceptive practices, but don't hurt the consumer as you clean up deceptive practices, but let the consumer choose. Let the consumer choose. And particularly for those who pay their bill on time at the end of each month, they are going to be hurt every time you take away just a little bit and chip away at the ability for people to have their risk priced because those who are good risk are going to end up subsidizing those who aren't. I fear, again, that this will be an amendment that has untold, unintended consequences that are going to ultimately hurt the consumer. I mean, there are a lot of different things that I would love for Congress to do. You know, I don't like to pay extra for the cheese on a cheeseburger; maybe we can somehow pass a law that they can't charge me extra for that. But you know what's going to happen? Either, one, they are going to quit offering me the cheeseburger, or number two, everybody who doesn't offer it is going to have to pay more. If you poke in on one end of the balloon, it pokes out somewhere else. I know the intention is good, but we are going to protect consumers out of having any opportunity to have introductory rates if they wish them. So we need to reject this amendment.

Mr. HENSARLING. I yield myself such time as I may consume. Mr. Chairman, I'm not completely certain that I actually oppose the amendment. I do have a couple of concerns. One, I want to congratulate the gentleman for the thrust of his amendment, and indeed, we want to ensure that our consumers are empowered and that our consumers have proper disclosure. There are a number of reasons why consumers do not understand the disclosure forms that they have today, one of which is there are misleading and deceptive practices by credit card companies. We all agree on that. Another reason, though, is that, day after day and with the noblest of intentions, we mandate more disclosures. I'm just somewhat fearful-- and not that this is not necessarily good information--that the combined impact will turn what otherwise might be a 2- to 3-page disclosure that a consumer might actually take the time to read into a 30- to 45-page behemoth that no one will take the time to read. Again, I congratulate the gentleman for his intent and for his thrust. I'm not going to oppose the amendment, but I do want to articulate the concern again that we really want to emphasize that the most important aspects of a consumer's relationship with his credit card company are disclosed so that we can get focused there. In the average mortgage disclosure, there is so much disclosure, that people see a dizzying array of documents and pay attention to none of them. I have always been an advocate for the succinct, effective disclosure written in plain English, not necessarily voluminous disclosure written in legalese. I would also say that particularly for my friends on the other side of the aisle that have been extolling the virtues of the Federal Reserve throughout this debate, that through their rule-making, I believe that they have already addressed this issue. They did spend more time studying it than we did. I personally don't know. I didn't see the evidence of how much demand there is for consumers for this information. I don't know the answer to that. One other aspect I would bring up besides the fact that we need to ensure that we're having effective disclosure. I am not indifferent as to the increased regulatory burden on our small community banks. Two Congresses ago, I had the opportunity to be the lead sponsor and write regulatory relief legislation for our small community banks. We have about half of what we had, I believe, 20 years ago. And so I am always a little concerned, too, in making sure that the benefits of an amendment or legislation are worth the cost. I don't want to continue to see more community banks get out of the credit card business because it's an extra cost here, it's an extra cost there. They don't have the personnel, and I just always want to be sensitive to the fact that I do not want to reduce competition down. I don't see the distinguished chairman of the full committee on the floor today at this moment, but I know that he often jokes about that one day we may change our name to the ``bank committee'' because there will only be one bank left in America. So, again, I just want to show sensitivity, and I don't know if there is any kind of program for our smaller banks. I know on a number of pieces of legislation there are exclusions for small businesses. I don't see that in the language here. And again, I am not going to oppose this particular amendment, but I did want to articulate concerns that I hope will be taken to heart by the majority, things that they could consider as this goes into conference. At this moment, I will reserve the balance of my time.

Mr. HENSARLING. Mr. Chairman, I have an amendment at the desk.