[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 2755 Introduced in Senate (IS)]
108th CONGRESS
2d Session
S. 2755
To amend the Consumer Credit Protection Act to ban abusive credit
practices, enhance consumer disclosures, protect underage consumers,
and for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
July 22, 2004
Mr. Dodd introduced the following bill; which was read twice and
referred to the Committee on Banking, Housing, and Urban Affairs
_______________________________________________________________________
A BILL
To amend the Consumer Credit Protection Act to ban abusive credit
practices, enhance consumer disclosures, protect underage consumers,
and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
This Act may be cited as the ``Credit Card Accountability
Responsibility and Disclosure Act of 2004'' or the ``Credit CARD Act of
2004''.
SEC. 2. REGULATORY AUTHORITY.
The Board of Governors of the Federal Reserve System may issue such
rules or publish such model forms as it considers necessary to carry
out this Act and the amendments made by this Act.
TITLE I--ABUSIVE PRACTICES
Subtitle A--Use of Default Clauses
SEC. 111. PRIOR NOTICE OF RATE INCREASES REQUIRED.
Section 127 of the Truth in Lending Act (15 U.S.C. 1637) is amended
by adding at the end the following:
``(h) Advance Notice of Increase in Interest Rate Required.--
``(1) In general.--In the case of any credit card account
under an open end consumer credit plan, no increase in any
annual percentage rate of interest (other than an increase due
to the expiration of any introductory percentage rate of
interest, or due solely to a change in another rate of interest
to which such rate is indexed)--
``(A) may take effect before the beginning of the
billing cycle which begins not less than 15 days after
the obligor receives notice of such increase; or
``(B) may apply to any outstanding balance of
credit under such plan as of the date of the notice of
the increase required under paragraph (1).
``(2) Notice of right to cancel.--The notice referred to in
paragraph (1) with respect to an increase in any annual
percentage rate of interest shall be made in a clear and
conspicuous manner and shall contain a brief statement of the
right of the obligor to cancel the account before the effective
date of the increase.''.
SEC. 112. FREEZE ON INTEREST RATE TERMS AND FEES ON CANCELED CARDS.
Section 127 of the Truth in Lending Act (15 U.S.C. 1637), as
amended by this Act, is amended by adding at the end the following:
``(i) Freeze on Interest Rate Terms and Fees on Canceled Cards.--If
an obligor referred to in subsection (h) closes or cancels a credit
card account before the beginning of the billing cycle referred to in
subsection (h)(1)--
``(1) an annual percentage rate of interest applicable
after the cancellation with respect to the outstanding balance
on the account as of the date of cancellation may not exceed
any annual percentage rate of interest applicable with respect
to such balance under the terms and conditions in effect before
the date of the notice of any increase referred to in
subsection (h)(1); and
``(2) the repayment of the outstanding balance after the
cancellation shall be subject to all other terms and conditions
applicable with respect to such account before the date of the
notice of the increase referred to in subsection (h).''.
SEC. 113. LIMITS ON FINANCE AND INTEREST CHARGES FOR ON-TIME PAYMENTS.
Section 127 of the Truth in Lending Act (15 U.S.C. 1637), as
amended by this Act, is amended by adding at the end the following:
``(j) Prohibition on Penalties for On-Time Payments.--
``(1) Prohibition on finance charges for on-time
payments.--In the case of any credit card account under an open
end credit plan, where no other balance is owing on the
account, no finance or interest charge may be imposed with
regard to any amount of a new extension of credit that was paid
on or before the date on which it was due.
``(2) Prohibition on cancellation or additional fees for
on-time payments or payment in full.--In the case of any credit
card account under an open end consumer credit plan, no fee or
other penalty may be imposed on the consumer in connection with
the payment in full of an existing account balance, or payment
of more than the minimum required payment of an existing
account balance.''.
SEC. 114. PROHIBITION ON OVER-THE-LIMIT FEES FOR CREDITOR-APPROVED
TRANSACTIONS.
Section 127 of the Truth in Lending Act (15 U.S.C. 1637), as
amended by this Act, is amended by adding at the end the following:
``(k) Limitation on Imposition of Over-the-Limit Fees.--In the case
of any credit card account under an open end consumer credit plan, a
creditor may not impose any fees on the obligor for any extension of
credit in excess of the amount of credit authorized to be extended with
respect to such account, if the extension of credit is made in
connection with a credit transaction which the creditor approves in
advance or at the time of the transaction.''.
TITLE II--ENHANCED CONSUMER DISCLOSURES
SEC. 211. DISCLOSURES RELATED TO ``TEASER RATES''.
Section 127(c) of the Truth in Lending Act (15 U.S.C. 1637(c)) is
amended--
(1) by redesignating paragraph (5) as paragraph (7); and
(2) by inserting after paragraph (4) the following:
``(5) Additional notice concerning `teaser rates'.--
``(A) In general.--An application or solicitation
for a credit card for which a disclosure is required
under this subsection shall contain the disclosures
referred to in subparagraph (B) or (C), as applicable,
if the application or solicitation offers, for an
introductory period of less than 1 year, an annual
percentage rate of interest that--
``(i) is less than the annual percentage
rate of interest which will apply after the end
of the introductory period; or
``(ii) in the case of an annual percentage
rate which varies in accordance with an index,
is less than the current annual percentage rate
under the index which will apply after the end
of the introductory period.
``(B) Fixed annual percentage rate.--If the annual
percentage rate which will apply after the end of the
introductory period will be a fixed rate, the
application or solicitation shall include the following
disclosure: `The annual percentage rate of interest
applicable during the introductory period is not the
annual percentage rate which will apply after the end
of the introductory period. The non-introductory annual
percentage rate will apply after [insert applicable
date] and will be [insert applicable percentage
rate].'.
``(C) Variable annual percentage rate.--If the
annual percentage rate which will apply after the end
of the introductory period will vary in accordance with
an index, the application or solicitation shall include
the following disclosure: `The annual percentage rate
of interest applicable during the introductory period
is not the annual percentage rate which will apply
after the end of the introductory period. The permanent
annual percentage rate will be determined by an index
and will apply after [insert applicable date]. If the
index which will apply after such date were applied to
your account today, the annual percentage rate would be
[insert applicable percentage rate].'.
``(D) Conditions for introductory rates.--If the
annual percentage rate of interest which will apply
during the introductory period described in
subparagraph (A) is revocable or otherwise conditioned
upon any action by the obligor, including any failure
by the obligor to pay the minimum payment amount or
finance charge or to make any payment by the stated
monthly payment due date, the application or
solicitation shall include a disclosure of--
``(i) the conditions that the obligor must
meet in order to retain the annual percentage
rate of interest during the introductory
period; and
``(ii) the annual percentage rate of
interest that will apply as a result of the
failure of the obligor to meet such conditions.
``(E) Form of disclosures.--The disclosures
required under this paragraph shall be made in a clear
and conspicuous manner, in a format that is at least as
prominent as the disclosure of the annual percentage
rate of interest which will apply during the
introductory period.''.
SEC. 212. PAYOFF TIMING DISCLOSURES.
(a) In General.--Section 127(b) of the Truth in Lending Act (15
U.S.C. 1637(b)) is amended by adding at the end the following:
``(11)(A) Repayment information that would apply to the
outstanding balance of the consumer under the credit plan,
including--
``(i) the required minimum monthly payment on that
balance, represented as both a dollar figure and as a
percentage of that balance;
``(ii) the number of months (rounded to the nearest
month) that it would take to pay the entire amount of
that balance, if the consumer pays only the required
minimum monthly payments and if no further advances are
made;
``(iii) the total cost to the consumer, including
interest and principal payments, of paying that balance
in full, if the consumer pays only the required minimum
monthly payments and if no further advances are made;
and
``(iv) the monthly payments amount that would be
required for the consumer to eliminate the outstanding
balance in 36 months if no further advances are made.
``(B)(i) Subject to clause (ii), in making the disclosures
under subparagraph (A) the creditor shall apply the interest
rate in effect on the date on which the disclosure is made
until the date on which the balance would be paid in full.
``(ii) If the interest rate in effect on the date on which
the disclosure is made is a temporary rate that will change
under a contractual provision applying an index or formula for
subsequent interest rate adjustment, the creditor shall apply
the interest rate in effect on the date on which the disclosure
is made for as long as that interest rate will apply under that
contractual provision, and then apply an interest rate based on
the index or formula in effect on the applicable billing date.
``(C) Form of disclosure.--
``(i) In general.--All of the information described
in subparagraph (A) shall--
``(I) be disclosed in the form and manner
which the Board shall prescribe by regulations;
and
``(II) be placed in a conspicuous and
prominent location on the billing statement in
typeface that is at least as large as the
largest type on the statement, but in no
instance less than 12-point in size.
``(D) Tabular format.--
``(i) Form of table to be prescribed.--In the
regulations prescribed under subparagraph (C), the
Board shall require that the disclosure of such
information shall be in the form of a table that--
``(I) contains clear and concise headings
for each item of such information; and
``(II) provides a clear and concise form
stating each item of information required to be
disclosed under each such heading.
``(E) Requirements regarding location and order of table.--
In prescribing the form of the table under subparagraph (D),
the Board shall require that--
``(i) all of the information in the table, and not
just a reference to the table, be placed on the billing
statement, as required by this subparagraph; and
``(ii) the items required to be included in the
table shall be listed in the order in which such items
are set forth in subparagraph (A).
``(F) Board discretion in prescribing order and wording of
table.--In prescribing the form of the table under subparagraph
(C), the Board shall--
``(i) employ terminology which is different than
the terminology which is employed in subparagraph (A),
if such terminology is easily understood and conveys
substantially the same meaning.''.
(b) Civil Liability.--Section 130(a) of the Truth in Lending Act
(15 U.S.C. 1640(a)) is amended, in the undesignated paragraph following
paragraph (4), by striking the second sentence and inserting the
following: ``In connection with the disclosures referred to in
subsections (a) and (b) of section 127, a creditor shall have a
liability determined under paragraph (2) only for failing to comply
with the requirements of section 125, 127(a), or paragraph (4), (5),
(6), (7), (8), (9), (10), or (11) of section 127(b), or for failing to
comply with disclosure requirements under State law for any term or
item that the Board has determined to be substantially the same in
meaning under section 111(a)(2) as any of the terms or items referred
to in section 127(a), or paragraph (4), (5), (6), (7), (8), (9), (10),
or (11) of section 127(b).
SEC. 213. REQUIREMENTS RELATING TO LATE PAYMENT DEADLINES AND
PENALTIES.
Section 127 of the Truth in Lending Act (15 U.S.C. 1637), as
amended by this Act, is amended by adding at the end the following:
``(l) Requirements Relating to Late Payment Deadlines and
Penalties.--
``(1) Late payment deadline and postmark date required to
be disclosed.--In the case of a credit card account under an
open end consumer credit plan under which a late fee or charge
may be imposed due to the failure of the obligor to make
payment on or before the due date for such payment, the
periodic statement required under subsection (b) with respect
to the account shall include, in a conspicuous location on the
billing statement--
``(A) the date on which the payment is due or, if
different, the date on which a late payment fee will be
charged, together with the amount of the fee or charge
to be imposed if payment is made after that date;
``(B) the date by which the payment must be
postmarked, if paid by mail, in order to avoid the
imposition of a late payment fee with respect to the
payment; and
``(C) a statement that no late fee may be imposed
in connection with a payment made by mail which was
postmarked on or before the postmark date.
``(2) Disclosure of increase in interest rates for late
payments.--If 1 or more late payments under an open end
consumer credit plan may result in an increase in the annual
percentage rate the account, the statement required under
subsection (b) with respect to the account shall include
conspicuous notice of such fact, together with the applicable
penalty annual percentage rate, in close proximity to the
disclosure required in paragraph (1) of the date on which
payment is due under the terms of the account.
``(3) Requirements relating to postmark date.--
``(A) In general.--The date included in a periodic
statement pursuant to paragraph (1)(B) with regard to
the postmark on a payment shall allow, in accordance
with regulations prescribed by the Board under
subparagraph (B), a reasonable time for the consumer to make the
payment and a reasonable time for the delivery of the payment by the
due date.
``(B) Board regulations.--The Board shall prescribe
guidelines for determining a reasonable period of time
for making a payment and delivery of a payment for
purposes of subparagraph (A), after consultation with
the Postmaster General and representatives of consumer
and trade organizations.
``(4) Payment at local branches.--If the creditor, in the
case of a credit card account referred to in paragraph (1), is
a financial institution which maintains branches or offices at
which payments on any such account are accepted from the
obliger in person, the date on which the obliger makes a
payment on the account at such branch or office shall be
considered as the date on which the payment is made for
purposes of determining whether a late fee or charge may be
imposed due to the failure of the obligor to make payment on or
before the due date for such payment, to the extent that such
payment is made before the close of business of the branch or
office on the business day immediately preceding the due date
for such payment.''.
TITLE III--RESPONSIBILITIES IN BANKRUPTCY
SEC. 311. AMENDMENTS TO THE BANKRUPTCY CODE.
Section 523(a)(2)(C) of title 11, United States Code, is amended by
adding at the end the following: ``However, this subparagraph shall not
apply for any portion of debt incurred under an open end credit plan,
as defined in section 103 of the Truth in Lending Act, if the annual
rate of interest charged with respect to the account was more than 20
percentage points above the Federal prime lending rate on the last day
of month during which the interest was charged.''.
TITLE IV--PROTECTION OF YOUNG CONSUMERS
SEC. 411. EXTENSIONS OF CREDIT TO UNDERAGE CONSUMERS.
Section 127(c) of the Truth in Lending Act (15 U.S.C. 1637(c)) is
amended by inserting after paragraph (5), as added by this Act, the
following:
``(6) Applications from underage consumers.--
``(A) Prohibition on issuance.--No credit card may
be issued to, or open end credit plan established on
behalf of, a consumer who has not attained the age of
21, unless the consumer has submitted a written
application to the card issuer that meets the
requirements of subparagraph (B).
``(B) Application requirements.--An application to
open a credit card account by an individual who has not
attained the age of 21 as of the date of submission of
the application shall require--
``(i) the signature of the parent, legal
guardian, or spouse of the consumer, or any
other individual having a means to repay debts
incurred by the consumer in connection with the
account, indicating joint liability for debts
incurred by the consumer in connection with the
account before the consumer has attained the
age of 21;
``(ii) submission by the consumer of
financial information indicating an independent
means of repaying any obligation arising from
the proposed extension of credit in connection
with the account; or
``(iii) proof by the consumer that the
consumer has completed a credit counseling
course of instruction by a nonprofit budget and
credit counseling agency approved by the Board
for such purpose.
``(C) Minimum requirements for counseling
agencies.--To be approved by the Board under
subparagraph (B)(iii), a credit counseling agency
shall, at a minimum--
``(i) be a nonprofit budget and credit
counseling agency, the majority of the board of
directors of which--
``(I) is not employed by the
agency; and
``(II) will not directly or
indirectly benefit financially from the
outcome of a credit counseling session;
``(ii) if a fee is charged for counseling
services, charge a reasonable fee, and provide
services without regard to ability to pay the
fee; and
``(iii) provide trained counselors who
receive no commissions or bonuses based on
referrals, and demonstrate adequate experience
and background in providing credit
counseling.''.
SEC. 412. ENHANCED PENALTIES.
Section 130(a)(2)(A) of the Truth in Lending Act (15 U.S.C. 1640
(a)(2)(A)(iii)) is amended by striking ``or (iii) in the'' and
inserting the following:
``(iii) in the case of an individual action relating to an
open end credit plan that is not secured by real property or a
dwelling, twice the amount of any finance charge in connection
with the transaction, with a minimum of $500 and a maximum of
$5,000 or such higher amount as may be appropriate in the case
of an established pattern or practice of such failures; or
``(iv) in the''.
SEC. 413. RESTRICTIONS ON CERTAIN AFFINITY CARDS.
Section 127 of the Truth in Lending Act (15 U.S.C. 1637), as
amended by this Act, is amended by adding at the end the following:
``(m) Restrictions on Issuance of Affinity Cards to Students.--No
credit card account under an open end credit plan may be established by
an individual who has not attained the age of 21 as of the date of
submission of the application pursuant to any agreement relating to
affinity cards, as defined by the Board, between the creditor and an
institution of higher education, as defined in section 101(a) of the
Higher Education Act of 1965 (20 U.S.C. 1001(a)), unless the
requirements of section 127(c)(6) are met with respect to the
obliger.''.
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