December 2, 1985 EXTENSIONS OF REMARKS 33681 EXTENSIONS OF REMARKS In the meantime, I would urge American of what you could do every month with $60-or more-saved on payments!" BEWARE OF PREAPPROVED consumers across the country to beware of preapproved credit card mailings. In case Don't stop to think that at First Select's CREDIT CARDS payment schedule, you would be paying off there are some who are reluctant to heed that $2,000 loan-plus 21.9% interest-for, this warning, I want to insert an article as near as I can calculate it, the next 47 HON. MARIO BIAGGI written by Lars-Erik Nelson that recently OF NEW YORK years. The banks know a good thing when appeared in the New York Daily News. The they see it: eternal high interest rates IN THE HOUSE OF REPRESENTATIVES headline spells out the problem in a very "earned" by luring poor and trusting people Monday, December 2, 1985 concise fashion, "Endless credit, endless into an endless cycle of debt. debt." They know they can get 21.9% interest Mr. BIAGGI. Mr. Speaker, the more rates-even though the banks themselves learn about the credit card industry the [From the New York Daily News, Nov. 15, pay only 10%-by putting plastic credit more I dislike it. What's there to dislike? 1985] cards into the hands of people who really Consider, for starters, the preapproved ENDLESS CREDIT, ENDLESS DEBT can't affort them and who don't understand credit cards that we're so fortunate to re­ the intricacies of debt. People grab at that ceive in the mail. With no muss and no <By Lars-Erik Nelson> "low monthly payment" and "no credit card fuss, we are told that because of our excel­ It's not as though Ann Ficarrotta of Lyn­ fee." lent credit rating they are rewarding us brook, N.Y., was broke. But when the letter Mrs. Ficarrotta knows a widow who is with the use of their money. Sounds good, came from San Francisco offering her broke. "She makes $250 every two weeks­ $3,000, it was "too tempting not to say no." and they sent her one of these letters, right? Wrong. Once they sucker us in with Sight unseen and out of the blue, First saying 'Because of your excellent credit the promise of low monthly payments and Select VISA of San Francisco had sent her a rating you qualify for $3,000,' " she said. "I minimal annual fees, they lock the door pre-approved line of credit for $3,000. The argued with her, 'Don't take it. Once they and throw away the key. They've got us good news was "No Annual Fees" for her get you in the trap, you're stuck.' But it right where they want us, because by the VISA card and low monthly payments. looks so good." time the first monthly bill comes it's to late "One of the boys was paying off a school Mrs. Ficarrotta is a bright, jolly woman. to do anything about the outrageously high loan, so I thought, they want to give me You can see from her letter that she is interest rate that was part of the deal, but money, I'll use it to help him out," she said highly organized and keeps track of her was somehow lost in the fine print when over the phone. "Another boy needed a PA money. But when the VISA came offering system for his band. What can I do? I have $3,000 for just $60 a month, she took it. Be­ we got our plastic money. all these talented children and no money." cause the monthly payments were lower, Oh, sure, there are some credit card issu­ First Select VISA promised to save her she borrowed money at 21.9% to help her ers that charge a reasonable rate of inter­ $85 a month in payments on her $3,000. She son pay off a tuition loan-not thinking est. But, we won't ever get a credit card would only have to pay 2% of her outstand­ that the interest rate on his loan was 7%. from them in the mail, preapproved, be­ ing balance-$60 a month. In seven months, she has paid $584 to cause they recognize that preapproved "I'm a very bad person," Mrs. Ficarrotta VISA and reduced her debt by only $157.19. credit card mailings result in significant laughed. "When anybody offers me money, "I called up to complain, and the girl said 'If fraud and abuse costs-costs associated I never refuse it." you don't like it, I would suggest you pay it with a poor business practice that has been Last April, she made her first payment of in full.' .. $60. Her loan balance went from $3,014.39 Which Mrs. Ficarrotta intends to do. used by many banks to justify their high to $3,004.56. That is, she still owed $3,000. How? Simple. "Somebody offered me an­ interest charges. I just received a Visa card She made another payment of $60. When other $3,000 and I took it, she said "You from the Simmons First National Bank of the next VISA statement came, she still know the old saying about borrowing from Pine Bluff, AR, that charges only 12.5 per­ owed $3,000. Peter to pay Paul? That's me. Maybe some­ cent interest, compared to a national aver­ So, she made a payment of $100. Now she where out there you can save someone else age of 18.6 percent. But, I had to apply for owed $2,956. She made a payment of $75. from this pitfall.'' it, and anyone else can do the same. That reduced her loan by Just $21. In February, I authored a bill, H.R. 1197, If Mrs. Ficarrotta continues to pay First ADMINISTRATION OPPOSES to cap credit card interest rates at 5 per­ Select VISA at the rate they said she would owe them each month, she will owe them centage points above the Federal Reserve's SENATE VERSION OF TEXTILE $3,000 forever. "Please tell my how First BILL discount rate, which is how much it costs VISA Select could be allowed to do this and the banks to borrow money from the Fed­ how they differ from illegal money loans," eral Reserve. Under present conditions that she asks. HON. BILL FRENZEL means a 12.5-percent cap. I modeled this "Let's make a bet," Jeffrey McCarthy of OF MINNESOTA legislation after the policy adopted by the First Deposit Savings Bank had written IN THE HOUSE OF REPRESENTATIVES State of Arkansas and I am convinced that Mrs. Ficarrotta. "If I ask you right now how if all banks nationwide would simply do much you're paying in a.nnual credit card Monday, December 2, 1985 away with preapproved credit card mail­ fees, I bet you couldn't tell me. If you can't, Mr. FRENZEL. Mr. Speaker, printed you're not alone. Most people have been below is a letter from our U.S. Trade Rep­ ings, they could make a very healthy profit paying a.nnual credit card fees for so long, with a 12.5-percent interest charge. After that they don't have any idea how much all resentative, Clayton Yeutter, which indi­ all, if it works in Arkansas, it should work those a.nnual fees are costing them." cates that the administration strongly op­ elsewhere. What McCarthy's letter omits is informa­ poses the Senate version of H.R. 1562, as There is growing support for this propos­ tion that is much more costly than credit well as the earlier House version. Ambassa­ al and the House Banking Subcommittee card fees. It is the interest rate that First dor Yeutter reiterates the same points of on Consumer Affairs and Coinage, chaired Select VISA charges. That is found in fine opposition that apply to the House bill­ by my good friend and distinguished col­ print in another document. It is 21.9%. that the textile bill will harm the U.S. econ­ McCarthy prefers not to speak of it. He omy overall more than it will help one par­ league from Illinois, FRANK ANNUNZIO; re­ spends his time on other things. "On a cently held hearings on this legislation. $2,000 balance, many banks would require a ticular sector, that it will be harmful to our However, despite this favorable progress, monthly payment of at least $100," he foreign policy interests and that it will the future of a Federal cap on card interest wrote. "But with First Select VISA, your greatly increase costs to U.S. consumers. rates remains uncertain. monthly payment would be only $40! Think The letter is as follows: e This "bullet" symbol identifies statements or insertions which are not spoken by the Member of the Senate on the floor. Boldface type indicates words inserted or appended, rather than spoken, by a Member of the House on the floor. 33682 EXTENSIONS OF REMARKS December 2, 1985 U.S. 'TRADE REPRESENTATIVE, We believe there are far better ways to was first elected to the board in April of Washington, December 2, 1985. assist the textile and apparel industries. 1973 and took office the 1st of July that Hon. BILL FRENZEL, This Administration is committed to negoti­ year. He has been elected twice, once in House of Representatives, ating a strong, new Multifiber Arrangement Washington, DC. that will respond to the concerns which pre­ 1977 and 1981.