HR 109-31 INDEX



The CLERK. Mr. Berman, aye. Mr. Boucher?

[No response.]

The CLERK. Mr. Nadler?

Mr. NADLER. Aye.

The CLERK. Mr. Nadler, aye. Mr. Scott?

[No response.]

The CLERK. Mr. Watt?

Mr. WATT. Aye.

The CLERK. Mr. Watt, aye. Ms. Lofgren?


The CLERK. Ms. Lofgren, aye. Ms. Jackson Lee?


The CLERK. Ms. Jackson Lee, aye. Ms. Waters?

Ms. WATERS. Aye.

The CLERK. Ms. Waters, aye. Mr. Meehan?

Mr. MEEHAN. Aye.

The CLERK. Mr. Meehan, aye. Mr. Delahunt?


The CLERK. Mr. Delahunt, aye. Mr. Wexler?

[No response.]

The CLERK. Mr. Weiner?

[No response.]

The CLERK. Mr. Schiff?

Mr. SCHIFF. Aye.

The CLERK. Mr. Schiff, aye. Ms. Sanchez?


The CLERK. Ms. Sanchez, aye. Mr. Smith?


The CLERK. Mr. Smith, aye. Mr. Van Hollen?


The CLERK. Mr. Van Hollen, aye. Mr. Chairman?


The CLERK. Mr. Chairman, no.

Chairman SENSENBRENNER. Further Members who wish to cast or change their vote? The gentleman from North Carolina, Mr. Coble.

Mr. COBLE. No.

The CLERK. Mr. Coble, no.

Chairman SENSENBRENNER. The gentleman from Alabama, Mr. Bachus?


The CLERK. Mr. Bachus, no.

Chairman SENSENBRENNER. The gentleman from Florida, Mr. Keller?


The CLERK. Mr. Keller, no.

Chairman SENSENBRENNER. The gentleman from Iowa, Mr. King.

Mr. KING. No.

The CLERK. Mr. King, no.

Chairman SENSENBRENNER. The gentleman from Virginia, Mr. Forbes?


The CLERK. Mr. Forbes, no.

Chairman SENSENBRENNER. The gentleman from Virginia, Mr. Scott?










Mr. SCOTT. Aye.

The CLERK. Mr. Scott, aye.

Chairman SENSENBRENNER. Further Members who wish to cast or change their votes? If not, the clerk will report.


Chairman SENSENBRENNER. The gentleman from New York, Mr. Weiner?

The CLERK. Mr. Chairman, Mr. Weiner is not recorded.

Mr. WEINER. I vote aye.

The CLERK. Mr. Weiner, aye.

Chairman SENSENBRENNER. Further Members who wish to cast or change their vote?

[No response.]

Chairman SENSENBRENNER. The clerk will try again to report.

The CLERK. Mr. Chairman, there are 15 ayes and 20 noes.

Chairman SENSENBRENNER. And the amendment is not agreed to.

Are there further amendments?

Mr. WATT. Mr. Chairman?

Chairman SENSENBRENNER. The gentleman from North Carolina, Mr. Watt?

Mr. WATT. Mr. Chairman, I wonder if I might be recognized to strike the last word.

Chairman SENSENBRENNER. The gentleman is recognized for 5 minutes.

Mr. WATT. I have some amendments, but there are a couple of things, points that I want to make that I really can't make in the context of an amendment, and I don't want to violate the rules.

As the Ranking Member of the Subcommittee that this bill original—or some bankruptcy bill originally originated in, this one didn't make it to our Subcommittee because of the expedited consideration.

I just want to express generally the major concern that I have with this legislation, and I can't do it in the context of an amendment because it would go so basically to the structure of the bill that it would just—basically dismantle the whole bill.

The most troubling thing about this bill from my perspective—and I've said it before, and I hope people are listening to it—is that at the outset we acknowledge that there were major abuses and problems in the bankruptcy system and that those abuses needed to be addressed across the board.

Because the industry knew that it was going to be impossible to get a bill passed without cutting a deal with the consumer groups on behalf of the poorest people, basically what happened was a deal was cut to encourage the consumer groups to go away and be quiet, and that deal was that we would impose something called a means test, which basically exempts people below the means test from virtually every provision in this bill.

The result of that is very troubling in this sense: First of all, it goes absolutely contrary to everything I have heard my Republican colleagues say they stand for related to individual responsibility because basically what it says is if you fall below the means test, you are going to be exempted from worrying about the abuses that you engage in and so, therefore, we're just going to look the other way.










And so abuses that are taking place in the system now for people who fall below the means test can continue unabated.

At the same time, people above the means test get a bunch of rules applied to them regardless of whether they are abusing the bankruptcy system or not. So the whole purpose that we set out to achieve to do bankruptcy reform was missed because of this means test thing.

But a more troubling thing is a public policy concern that I think is just—is devastating because the effect of this means test is that you're going to end up with two bankruptcy courts, in effect. You're going to end up with a pauper's bankruptcy court and a higher-income bankruptcy court, and it's going to give judges and courts the authority to treat people so differently even though their problems in bankruptcy theoretically should be viewed as the same.

It is so contrary to our whole system of principles that it is just troubling as a matter of public policy.

Mr. CANNON. Would the gentleman yield?

Mr. WATT. No, let me just——

Mr. CANNON. Because I agree with you.

Mr. WATT. And I just—I couldn't——

Chairman SENSENBRENNER. The time of the gentleman——

Mr. WATT. I ask unanimous consent for 30 seconds to take back the time that——

Chairman SENSENBRENNER. Without objection.

Mr. WATT. I couldn't—I couldn't structure an amendment to deal with this, but I think the public needs to know how terrible a public policy we are creating in this bill. It has nothing to do with the content of the bill that you can amend and correct. But the structure of this bill is so contrary to everything that our legal system stands for and everything that our bankruptcy system has historically stood for that it is absolutely incredible.

Chairman SENSENBRENNER. The time of——

Mr. CANNON. Mr. Chairman, I ask unanimous consent that the gentleman be granted another 30 seconds.

Mr. WATT. And I'll yield it to my gentleman friend——

Chairman SENSENBRENNER. Reluctantly, without objection.

Mr. WATT. I yield it to my——

Mr. CANNON. I appreciate the yielding and also the Chairman's willingness to go on. Let me just say that what Mr. Watt has said is profound, and it's true, and it's very important. We disagree only on the point of creating two courts. I think as a practical matter that may happen. I hope that our bankruptcy judges are not—don't fall into that trap. But the issue truly for me is twofold here: personal responsibility—and a means test does exactly what Mr. Watt has suggested, and I think that's a problem, but it's a problem we have to deal with in a practical way.

And so in the first place, a means test—or the individual responsibility is important. Secondly, availability of credit is important. That's fundamentally important in this process——

Chairman SENSENBRENNER. The time of the gentleman has once again expired.

Mr. WATT. I ask unanimous consent for 30 additional seconds and yield it to the gentleman from Utah.

Chairman SENSENBRENNER. Without objection.










Mr. CANNON. And I will only finish by saying that the availability of credit to all people—you know, people start out poor in life. I started out very poor. Many people do. But the availability of credit is a way for people to get out of that trap, and in part, this bill is about reducing that cost.

Thank you, Mr. Chairman. Thank you, Mr. Watt.

Chairman SENSENBRENNER. The time of all of the gentlemen have really expired.

By my calculation, we have approximately an hour's worth of votes and a debate on a motion to recommit on the supplemental appropriation bill. And, thus, I think it is time to recess the Committee until either 12:30 or 30 minutes after the end of the last vote, whichever comes later.

The Committee stands recessed.

Mr. WATT. Did you say whichever comes later, Mr. Chairman?

Chairman SENSENBRENNER. Yes, sir.



[12:47 p.m.]

Chairman SENSENBRENNER. The Committee will be in order. A working quorum is present.

When the Committee recessed for the lunch hour and the votes, pending was a motion to report the bill Senate 256 favorably to the House. Are there further amendments? The gentleman from North Carolina.





Mr. WATT. Thank you, Mr. Chairman. I have an amendment at the desk.

Chairman SENSENBRENNER. The clerk will report the amendment.

Mr. WATT. Amendment 01a.

Chairman SENSENBRENNER. The clerk will report the amendment.

Mr. WATT. 01a.

Chairman SENSENBRENNER. That's "A" as in apple?

Mr. WATT. Yes.

The CLERK. Amendment to S. 256, offered by Mr. Watt and Mr. Delahunt——

Mr. WATT. Mr. Chairman, I ask unanimous consent——

Chairman SENSENBRENNER. Without objection, the amendment is considered as read.

[The amendment follows:]






Chairman SENSENBRENNER. The gentleman from North Carolina is recognized for 5 minutes.

Mr. WATT. Thank you, Mr. Chairman. And this actually follows very closely on with the Conyers amendment that was considered before we broke for the votes.

I have the honor of serving both on this Judiciary Committee and on the Financial Services Committee, and Representative Miller from North Carolina and myself, also from North Carolina, have been trying to structure, in consultation with Republicans and Democrats, a bipartisan predatory lending bill in the Financial Services Committee so that we could create a national predatory lending standard. Some States have different standards, and we're trying to craft something that will be either a national floor or a national standard. Depending on who you talk to, there's some disagreement about whether it ought to be preemptive or not.

But be that as it may, the gist of this amendment would be to exempt the predatory loans that have interest rates in excess of 50 percent. The gentleman from California had some concerns about fees. This interest is solely about interest rates. It doesn't involve fees.

I take it?






And so I think this is a problem that needs to be addressed, and we need to not make people have to pay or acknowledge in bankruptcy these predatory loans that there is a growing agreement within the industry and outside the industry are just getting out of control and out of hand.

Now, I heard very clearly that the Chairman is not desirous of having any amendments to this bill, so I am patently aware that all of this is perhaps a charade. But if there's ever anything we're going to do to the bill, I certainly hope that we will send this message that interest rates of over 50 percent per year just are unacceptable, and I would ask your support for this amendment in that regard.

I yield back the balance of my time.

Chairman SENSENBRENNER. The gentleman from Utah.

Mr. CANNON. Thank you, Mr. Chairman.

Chairman SENSENBRENNER. Recognized for 5 minutes.

Mr. CANNON. Thank you. May I just direct a question to the Chair and the Ranking Member? In the prior amendment, I think we heard virtually all of the general arguments. I understand there are some technical arguments that may relate to some of the future amendments. But we've heard most of the arguments that were made last cycle.

Has the Chair and the Ranking Member, have you come to any kind of a conclusion about how many amendments we might expect today?

Chairman SENSENBRENNER. Well, if the gentleman will yield, from the Chair's standpoint I know of no amendments on the Republican side of the aisle.

Mr. CANNON. We're amazed at the discipline that you have created on this side. Do we have any——

Mr. WATT. If the gentleman would yield, I will tell him how many I have.

Mr. CANNON. Please.

Mr. WATT. That's all I can speak for. I think I have six. And actually, a lot of them relate to things that have occurred in the interim since we started considering this bill 8 years ago. I mean, you all's argument has been that there's no need to make any—to have any hearings, but there are substantial changed conditions that have taken place over the—over the period of time that we've been debating this bill. And this bill has been kind of marching in place, same construct, same problems, same concerns, but times have changed. And some of those times involve industry practices such as increased predatory lending that hopefully all of us agree are just unacceptable. And if we had gone to a hearing and a markup in our Subcommittee, or—well, I understand you all started this bill on the other side so that you wouldn't make any amendments over here. But if somebody had had some hearings on it, maybe some of these things could have been done.

Mr. CANNON. Well, reclaiming my time, if I might, Mr. Watt, just ask a question. When you talk about preemption, that refers to the—if there's a State interest limit law that is higher than 50 percent, then you would preempt that with this bill? I doubt that there are any State laws with a 50 percent rate, but when you mention preemption, that is, preempting State law, that is what you're referring to, I take it?










Mr. WATT. No, that's—I was actually giving you all background about other things that are going on. This deals with outstanding loans that have interest rates of 50 percent or above.

Mr. CANNON. Okay.

Mr. WATT. It's not about preemption or non-preemption. We're going to deal with that issue when we do the general predatory lending bill in the Financial Services Committee. This is about bankruptcy and——

Mr. CANNON. But it would——

Mr. WATT—whether you discharge loans that have interest rates above 50 percent or don't do that.

Mr. CANNON. Let me just urge my colleagues to vote against the amendment. In the first place, on the Senate this was debated and a similar amendment with a 30-percent usury cap was voted down 24 to 74. I guess——

Mr. WATT. That's why we raised it.

Mr. CANNON. Pardon me. I guess part of the problem is what Mr. Issa talked about earlier, which is how do you calculate the interest rate when you've got costs involved and if you——

Mr. WATT. Would the gentleman yield?

Mr. CANNON. In just a moment. I think Mr. Issa pointed out that if you take a $2 fee on a $200 loan for a week because it's a paycheck loan, that is a 100%—or, no, it's a very high interest rate. And so—it's 52. I've got to do the numbers here. I'm not as quick as you, Darrell.

So I am concerned about that. I don't think the amendment does what the gentleman would like it to do, which is, I think we have a general agreement that personal responsibility is significant, and people need to be responsible for what kind of loans they are. In our market what we—what I'm trying to do here is create a market for loans where people get much, much lower-cost capital because they are responsible for themselves. And I have a few seconds left. I'd be happy to yield.

Mr. WATT. I thank the gentleman for yielding. I would just point out to him that this says nothing about fees. This is all about interest rates. And if the credit card companies and the lenders don't know how to calculate interest, we're in real, real trouble. We know what interest is. And if the construct of the bill really dealt with personal responsibility for everybody, I mean, we had that discussion before we——

Mr. CANNON. Could I reclaim my time just briefly on this point? Because what will happen then is that short-term lenders will raise their costs, their fees, and so you'll have a lower interest rate. I mean, how do we deal with that for the record here today? Since what will happen is you'll get a higher fee——

Chairman SENSENBRENNER. The gentleman——

Mr. WATT. Would the gentleman yield? I ask unanimous consent for 30 additional seconds.

Chairman SENSENBRENNER. Without objection.

Mr. WATT. So I can answer to the—answer the question that was asked. Does the gentleman yield?

Mr. CANNON. Certainly.

Mr. WATT. I would just say to you that we are dealing with an existing problem, not what happens in the future. These are outstanding loans, not prospective loans, right?










Mr. CANNON. But people will make loans this week and next week and the week after that, and as soon as we pass this law, I think——

Mr. WATT. I mean, you——

Mr. CANNON. I would urge the Members of the Committee to reject this amendment. Thank you. I yield back.

Chairman SENSENBRENNER. The gentleman——

Mr. DELAHUNT. Mr. Chairman?

Chairman SENSENBRENNER. The gentleman's time has expired.

The gentleman from Massachusetts, Mr. Delahunt.

Mr. DELAHUNT. I mean, as I sit here listening to the debate, I think Mr. Watt has been very clear that this does not involve fees. It doesn't involve penalties. It simply involves interest. I mean, we're talking about 50 percent interest. And we should remind ourselves that, you know, 3-month Treasury bills are now about 2.75 percent, a 30-year mortgage is 5.6 percent. How can we really in good conscience reject this? I mean, 50 percent interest, I mean, that's—that's Mafia figures. I mean, this should be the—let's crack down on the Mafia amendment offered by the gentleman from North Carolina. I mean, this isn't interest. Maybe you're right. This isn't interest. This is the vig.

Mr. CANNON. Would the gentleman yield just for a question?

Mr. DELAHUNT. Of course.

Mr. CANNON. I don't have to go cash my check—in fact, I think ours is—mine is done electronically. But many, many people in America are doing that. Are you familiar with that system and what's going on there? I mean, I don't understand how this quite general language helps poor people who are in a State where they need to get a check cashed or have some other very short-term, high-cost credit?

Mr. DELAHUNT. Reclaiming my time, because the gentleman has been very clear, I think, in indicating that those costs, as you just described them now, are not part of the calculation that goes into interest. Now, we talked a lot about personal responsibility, and I concur. But I think why we have a division in terms of whether this bill is good sound policy is that there has been no discussion about corporate responsibility.

Mr. WATT. Would the gentleman yield for a second?

Mr. DELAHUNT. I yield.

Mr. WATT. I just want to make clear, you make it sound like I'm trying to do something to help poor people. If somebody poor is abusing the bankruptcy system—I made this point before we left for lunch—I think that's a real problem with this bill. There's really no way to deal with that because you've exempted them under the means test.

This is about personal responsibility or corporate responsibility of lenders that are charging 50 percent per year, and so it's not about personal responsibility of individuals. I don't think it is reasonable for lenders to be charging 50 percent a year. And so to turn the question to one as if it's about personal responsibility of individuals is to just acknowledge that personal responsibility or corporate responsibility of lenders is somehow sacrosanct and off limits; whereas, personal responsibility of individuals is the highest priority.










I just don't understand that. That doesn't fit in my value system. Now, if it fits in yours, then I think you ought to vote against this amendment.

Mr. DELAHUNT. Reclaiming my time, I think what we're saying to those lenders that have no scruples, have no parameters, just go to it, by rejecting this amendment. And again, we're talking about 50-percent interest. We're saying the door is open, do whatever you want. And it sends a message to the American people that large credit companies do not have to be concerned because Congress is with them and supports them, and yet somebody who has an income of $25,000 a year and is trying to pay off a credit card bill of $10,000, given the kind of interest rates that we all know are assessed, as well as the fees and the penalties, they can't do it.

Chairman SENSENBRENNER. Does the gentleman yield back?

Mr. DELAHUNT. I yield back.

Ms. JACKSON LEE. Mr. Chairman?

Chairman SENSENBRENNER. The gentlewoman from Texas.

Ms. JACKSON LEE. Mr. Chairman, let me rise to support the gentleman from North Carolina's and Mr. Delahunt's amendment on predatory lending and utilize the terminology that I used earlier today, which is the unfortunateness of this legislation being a poster child for class warfare.

The middle class happened to be known as the backbone of America. These predatory lending incidences or opportunities really do confront the working and middle class, particularly in African American communities and other communities that happen to be minority or urban-centered. And it would seem, if this is going to be a bill that talks about responsibility, that we should take responsibility for the abusive, usurious rates that plague communities who are attempting to secure, whether it be loans to pay off other bills or whether it be to take advantage of a credit system that allows them to buy furniture or to secure a property, we should be responsible for allowing the recklessness of this system to burden individuals who are simply trying to participate in the American dream. And then they wind up waking up one morning with a family of four or six or seven or eight, and the property that they bought or the washing machine that they thought they would get, making payments on a weekly basis or a monthly basis because of the way they have to do it, maybe their income, maybe they are the working poor, maybe they are lower middle class, and then to come up against this usurious rate, some catastrophic incident has occurred, a medical need, a divorce, and they wind up with this debt. And the bulk of the debt is interest.

If we are trying to put forward legislation that is thoughtful and really does answer the concerns of those who are coming to the debtors court, if we want to take away all of the jurisdiction of the judges which might look at this burdensome process, then this is an appropriate amendment.

So I'd ask my colleagues in the course of their deliberation—and, again, the fix is in, but we're going to process ourselves through the process. I think the gentlemen's—plural—Mr. Watt and Mr. Delahunt's amendment is completely appropriate because it does provide some balance to this legislation for those who would be severely burdened by usurious rates not of their causing, because they attempted simply to participate in this credit system and to










pay off debts by getting another loan or to buy furniture or to buy property.

With that, I yield back my time.

Mr. CANNON. Would the gentlelady yield? Would the gentlelady yield?

Ms. JACKSON LEE. I'd be happy to yield for an inquiry.

Mr. CANNON. I'd actually just like to make a couple comments. You have a little bit of time left, and that would save an extra 5 minutes, I think, of time, if——

Ms. JACKSON LEE. I'm yielding to the gentleman.

Mr. CANNON. Thank you. I appreciate that.

You know, we have a really interesting discussion here, and I expressed my appreciation earlier for what Mr. Watt said, which I thought was very, very thoughtful. To add to that, people are poor for many reasons. The biggest reason for being poor is because people are young, because they're getting their education, they're getting started, they're maybe having a family early. Many, many people started out life poor. There are other reasons—people who have mental incapacity or who have lack of education. A lot of things affect poverty.

In the environment of personal responsibility, what I want to see and what I think this bill does to a very large degree is create a market that is unfettered, and in that market people have choices, and they have a choice to prepare themselves for good credit and lower-cost credit over time. You expect as a young person to pay more for your credit than you do when you're older and you have more opportunities because you've been careful with your credit.

It seems to me that that's the core of the kind of debate that we ought to be dealing with here.

Ms. JACKSON LEE. Would the gentleman—I'd like to reclaim my time.

Mr. CANNON. Could I make just one other comment?

Ms. JACKSON LEE. If you'd make it quickly. I want to reclaim my time.

Mr. CANNON. You're almost out. Thank you. I——

Ms. JACKSON LEE. I have to respond to the gentleman on that point. I didn't not hear Mr. Watt's earlier point. But let me just say this: Your focus on responsibility is somewhat distorted. People are vulnerable in coming to the bankruptcy courts because they've been taken advantage by the bombardment of credit cards, with no criteria, usurious rates, and a system of capitalism that encourages people to purchase. I don't know how you can—I believe in personal responsibility as well. But when you issue out credit cards like candy, when you don't allow people to pay for a rent-a-car with cash, and every system of government or every process of purchase people are asking for a credit card, then you are building us on a house of cards of credit. And, therefore, I think it is wrong to suggest that people are irresponsible or should be responsible when they are being victimized by this onslaught of credit card poisoning.

And so I would simply say this bill is unbalanced, Mr. Chairman, and it needs to be balanced toward those who are victimized by those who use them as simply puppets to their system.

Thank you for the credit cards that do good things, but let them realize that this bill does not regulate them. It just allows them to burden and to up the usurious rates and—











HR 109-31 INDEX