I
111th CONGRESS
1st Session
H. R. 627
IN THE HOUSE OF REPRESENTATIVES
January 22, 2009
Mrs. Maloney (for herself, Mr. Frank of Massachusetts, Mr. Jones, Mr. Kanjorski, Ms. Waters, Mr. Gutierrez, Mr. Ackerman, Mr. Capuano, Mr. Ellison, Mr. Davis of Tennessee, Mr. Cleaver, Mr. George Miller of California, Mr. Obey, Mr. DeFazio, Mr. Hinojosa, Mr. McGovern, Mr. Yarmuth, Mr. Olver, Ms. Edwards of Maryland, Mr. Courtney, Ms. DeLauro, Mr. Kennedy, Mrs. Lowey, Mr. Brady of Pennsylvania, Mr. Chandler, Mr. Loebsack, Mr. Pascrell, Mr. Bishop of New York, Mr. Filner, Mr. Carnahan, Mr. Weiner, Mr. Markey of Massachusetts, Mr. Grijalva, Mr. Cummings, Ms. Schakowsky, Mr. Gene Green of Texas, Mr. Moran of Virginia, Ms. Sutton, Mr. Hinchey, Ms. Bordallo, Ms. Lee of California, Mr. Welch, and Mr. Higgins) introduced the following bill; which was referred to the Committee on Financial Services
A BILL
To amend the Truth in Lending Act to establish fair and transparent practices relating to the extension of credit under an open end consumer credit plan, and for other purposes.
Short title
This Act may be cited as the
Credit Cardholders’ Bill of Rights Act
of 2009
.
Credit cards on terms consumers can repay
Retroactive rate increases and universal default limited
Chapter 2 of the Truth in Lending Act (15 U.S.C. 1631 et seq.) is amended by inserting after section 127A the following new section:
Additional requirements for credit card accounts under an open end consumer credit plan
Retroactive rate increases and universal default limited
In general
Except as provided in subsection (b), no creditor may increase any annual percentage rate of interest applicable to the existing balance on a credit card account of the consumer under an open end consumer credit plan.
Existing balance defined
For purposes of this
subsection and subsections (b) and (c), the term existing
balance
means the amount owed on a consumer credit card account as of
the end of the 14th day after the creditor provides notice of an increase in
the annual percentage rate in accordance with subsection (c).
Treatment of existing balances following rate increase
If a creditor increases any annual percentage rate of interest applicable to the credit card account of a consumer under an open end consumer credit plan and there is an existing balance in the account to which such increase may not apply, the creditor shall allow the consumer to repay the existing balance using a method provided by the creditor which is at least as beneficial to the consumer as 1 of the following methods:
An amortization period for the existing balance of at least 5 years starting from the date on which the increased annual percentage rate went into effect.
The percentage of the existing balance that was included in the required minimum periodic payment before the rate increase cannot be more than doubled.
Limitation on certain fees
If—
a creditor increases any annual percentage rate of interest applicable on a credit card account of the consumer under an open end consumer credit plan; and
the creditor is prohibited by this section from applying the increased rate to an existing balance,
.
Exceptions to the amendment made by subsection (a)
Section 127B of the Truth in Lending Act is amended by inserting after subsection (a) (as added by subsection (a)) the following new subsection:
Exceptions
In general
A creditor may increase any annual percentage rate of interest applicable to the existing balance on a credit card account of the consumer under an open end consumer credit plan only under the following circumstances:
Change in index
The increase is due solely to the operation of an index that is not under the creditor's control and is available to the general public.
Expiration or loss of promotional rate
The increase is due solely to—
the expiration of a promotional rate; or
the loss of a promotional rate for a reason specified in the account agreement (e.g., late payment).
Payment not received during 30-day grace period after due date
The increase is due solely to the fact that the consumer's minimum payment has not been received within 30 days after the due date for such minimum payment.
Limitation on increases due to loss of promotional rate
Notwithstanding paragraph (1)(B)(ii), the annual percentage rate in effect after the increase permitted under such subsection due to the loss of a promotional rate may not exceed the annual percentage rate that would have applied under the terms of the agreement after the expiration of the promotional rate.
.
Advance notice of rate increases
Section 127B of the Truth in Lending Act is amended by inserting after subsection (b) (as added by subsection (b)) the following new subsection:
Advance notice of rate increases
In the case of any credit card account under an open end consumer credit plan, no increase in any annual percentage rate of interest may take effect unless the creditor provides a written notice to the consumer at least 45 days before the increase takes effect which fully describes the changes in the annual percentage rate, in a complete and conspicuous manner, and the extent to which such increase would apply to an existing balance.
.
Clerical amendment
The table of sections for chapter 2 of the Truth in Lending Act (15 U.S.C. 1631 et seq.) is amended by inserting after the item relating to section 127A the following new item:
127B. Additional requirements for credit card accounts under an open end consumer credit plan.
.
Additional provisions regarding account features, terms, and pricing
Double cycle billing prohibited
Section 127B of the Truth in Lending Act is amended by inserting after subsection (c) (as added by section 2(c)) the following new subsection:
Double cycle billing
In general
No finance charge may be imposed by a creditor with respect to any balance on a credit card account under an open end consumer credit plan that is based on balances for days in billing cycles preceding the most recent billing cycle.
Exceptions
Paragraph (1) shall not apply so as to prohibit a creditor from—
charging a consumer for deferred interest even though that interest may have accrued over multiple billing cycles; or
adjusting finance charges following resolution of a billing error dispute.
.
Limitations relating to account balances attributable only to accrued interest
Section 127B is amended by inserting after subsection (d) (as added by subsection (a)) the following new subsection:
Limitations relating to account balances attributable only to accrued interest
In general
If the outstanding balance on a credit card account under an open end consumer credit plan at the end of a billing period represents an amount attributable only to interest accrued during the preceding billing period on an outstanding balance that was fully repaid during the preceding billing period—
no fee may be imposed or collected in connection with such balance attributable only to interest before such end of the billing period; and
any failure to make timely repayments of the balance attributable only to interest before such end of the billing period shall not constitute a default on the account.
Rule of construction
Paragraph (1) shall not be construed as affecting—
the consumer’s obligation to pay any accrued interest on a credit card account under an open end consumer credit plan; or
the accrual of interest on the outstanding balance on any such account in accordance with the terms of the account and this title.
.
Access to payoff balance information
Section 127B of the Truth in Lending Act is amended by inserting after subsection (e) (as added by subsection (b)) the following new subsection:
Payoff balance information
Each periodic statement provided by a creditor to a consumer with respect to a credit card account under an open end consumer credit plan shall contain the telephone number, Internet address, and website at which the consumer may request the payoff balance on the account.
.
Consumer right To reject card before notice is provided of open account
Section 127B of the Truth in Lending Act is amended by inserting after subsection (g) (as added by subsection (c)) the following new subsection:
Consumer right To reject card before notice of new account is provided to consumer reporting agency
In general
A creditor may not furnish any information to a consumer reporting agency (as defined in section 603) concerning the establishment of a newly opened credit card account under an open end consumer credit plan until the credit card has been used or activated by the consumer.
Rule of construction
Paragraph (1) shall not be construed as prohibiting a creditor from furnishing information about any application for a credit card account under an open end consumer credit plan or any inquiry about any such account to a consumer reporting agency (as so defined).
.
Use of terms clarified
Section 127B of the Truth in Lending Act is amended by inserting after subsection (g) (as added by subsection (d)) the following new subsection:
Use of terms
The following requirements shall apply with respect to the terms of any credit card account under any open end consumer credit plan:
Fixed
rate
The term
fixed
, when appearing in conjunction with a reference to the
annual percentage rate or interest rate applicable with respect to such
account, may only be used to refer to an annual percentage rate or interest
rate that will not change or vary for any reason over the period clearly and
conspicuously specified in the terms of the account.
Prime rate
The term prime
rate
, when appearing in any agreement or contract for any such account,
may only be used to refer to the bank prime rate published in the Federal
Reserve Statistical Release on selected interest rates (daily or weekly), and
commonly referred to as the H.15 release (or any successor publication).
Due date
In general
Each periodic statement for any such account shall contain a date by which the next periodic payment on the account must be made to avoid a late fee or be considered a late payment, and any payment received by 5 p.m., local time at the location specified by the creditor for the receipt of payment, on such date shall be treated as a timely payment for all purposes.
Certain electronic fund transfers
Any payment with respect to any such account made by a consumer online to the website of the credit card issuer or by telephone directly to the credit card issuer before 5 p.m., local time at the location specified by the creditor for the receipt of payment, on any business day shall be credited to the consumer’s account that business day.
Presumption of timely payment
Any evidence provided by a consumer in the form of a receipt from the United States Postal Service or other common carrier indicating that a payment on a credit card account was sent to the issuer not less than 7 days before the due date contained in the periodic statement under subparagraph (A) for such payment shall create a presumption that such payment was made by the due date, which may be rebutted by the creditor for fraud or dishonesty on the part of the consumer with respect to the mailing date.
.
Pro rata payment allocations
Section 127B of the Truth in Lending Act is amended by inserting after subsection (h) (as added by subsection (e)) the following new subsection:
Pro rata payment allocations
In general
Except as permitted under paragraph (2), if the outstanding balance on a credit card account under an open end consumer credit plan accrues interest at 2 or more different annual percentage rates, the total amount of each periodic payment made on such account shall be allocated by the creditor between or among the outstanding balances at each such annual percentage rate in the same proportion as each such balance bears to the total outstanding balance on the account.
Allocation to higher rate
Notwithstanding paragraph (1), a creditor may elect, in any case described in such paragraph, to allocate more than a pro rata share of any payment to a portion of the outstanding balance that bears a higher annual percentage rate than another portion of such outstanding balance.
Special rules for accounts with promotional rate balances or deferred interest balances
In general
Notwithstanding paragraph (1) or (2), in the case of a credit card account under an open end consumer credit plan the current terms of which allow the consumer to receive the benefit of a promotional rate or deferred interest plan, amounts paid in excess of the required minimum payment shall be allocated to the promotional rate balance or the deferred interest balance only if other balances have been fully paid.
Exception for deferred interest balances
Notwithstanding subparagraph (A), a creditor may allocate the entire amount paid by the consumer in excess of the required minimum periodic payment to a balance on which interest is deferred during the 2 billing cycles immediately preceding the expiration of the period during which interest is deferred.
Prohibition on restricted grace periods under certain circumstances
If, with respect to any credit card account under an open end consumer credit, a creditor offers a time period in which to repay credit extended without incurring finance charges to cardholders who pay the balance in full, the creditor may not deny a consumer who takes advantage of a promotional rate balance or deferred interest rate balance offer with respect to such an account any such time period for repaying credit without incurring finance charges.
.
Timely provision of periodic statements
Section 127B of the Truth in Lending Act is amended by inserting after subsection (i) (as added by subsection (f)) the following new subsection:
Timely provision of periodic statements
Each
periodic statement with respect to a credit card account under an open end
consumer credit plan shall be sent by the creditor to the consumer not less
than 25 calendar days before the due date identified in such statement for the
next payment on the outstanding balance on such account, and section 163(a)
shall be applied with respect to any such account by substituting
25
for
fourteen
.
.
Consumer choice with respect to over-the-limit transactions
Section 127B of the Truth in Lending Act is amended by inserting after subsection (j) (as added by section 3(g)) the following new subsections:
Opt-out of creditor authorization of over-the-limit transactions if fees are imposed
In general
In the case of any credit card account under an open end consumer credit plan under which an over-the-limit-fee may be imposed by the creditor for any extension of credit in excess of the amount of credit authorized to be extended under such account, the consumer may elect to prohibit the creditor, with respect to such account, from completing any transaction involving the extension of credit, with respect to such account, in excess of the amount of credit authorized by notifying the creditor of such election in accordance with paragraph (2).
Notification by consumer
A consumer shall notify a creditor under paragraph (1)—
through the notification system maintained by the creditor under paragraph (4); or
by submitting to the creditor a signed notice of election, by mail or electronic communication, on a form issued by the creditor for purposes of this subparagraph.
Effectiveness of election
An election by a consumer under paragraph (1) shall be effective beginning 3 business days after the creditor receives notice from the consumer in accordance with paragraph (2) and shall remain effective until the consumer revokes the election.
Notification system
Each creditor that maintains credit card accounts under an open end consumer credit plan shall establish and maintain a notification system, including a toll-free telephone number, Internet address, and website, which permits any consumer whose credit card account is maintained by the creditor to notify the creditor of an election under this subsection in accordance with paragraph (2).
Annual notice to consumers of availability of election
In the case of any credit card account under an open end consumer credit plan, the creditor shall include a notice, in clear and conspicuous language, of the availability of an election by the consumer under this paragraph as a means of avoiding over-the limit fees and a higher amount of indebtedness, and the method for providing such notice—
in the periodic statement required under subsection (b) with respect to such account at least once each calendar year; and
in any such periodic statement which includes a notice of the imposition of an over-the-limit fee during the period covered by the statement.
No fees if consumer has made an election
If a consumer has made an election under paragraph (1), no over-the-limit fee may be imposed on the account for any reason that has caused the outstanding balance in the account to exceed the credit limit.
Regulations
in general
The Board shall issue regulations allowing for the completion of over-the-limit transactions that for operational reasons exceed the credit limit by a de minimis amount, even where the cardholder has made an election under paragraph (1).
Subject to no fee limitation
The regulations prescribed under subparagraph (A) shall not allow for the imposition of any fee or any rate increase based on the permitted over-the-limit transactions.
Over-the-limit fee restrictions
With respect to a credit card account under an open end consumer credit plan, an over-the-limit fee may be imposed only once during a billing cycle if, on the last day of such billing cycle, the credit limit on the account is exceeded, and an over-the-limit fee, with respect to such excess credit, may be imposed only once in each of the 2 subsequent billing cycles, unless the consumer has obtained an additional extension of credit in excess of such credit limit during any such subsequent cycle or the consumer reduces the outstanding balance below the credit limit as of the end of such billing cycle.
Over-the-limit fees prohibited in conjunction with certain credit holds
Notwithstanding subsection (l), an over-the-limit fee may not be imposed if the credit limit was exceeded due to a hold unless the actual amount of the transaction for which the hold was placed would have resulted in the consumer exceeding the credit limit.
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Strengthen credit card information collection
Section 136(b) of the Truth in Lending Act (15 U.S.C. 1646(b)) is amended—
in paragraph (1)—
by striking
Collection
required.—The Board shall
and
inserting
Collection required.—
In general
The Board shall
.
by adding at the end the following new subparagraph:
Information to be included
The information under subparagraph (A) shall include, for the relevant semiannual period, the following information with respect each creditor in connection with any consumer credit card account:
A list of each type of transaction or event during the semiannual period for which 1 or more creditors has imposed a separate interest rate upon a consumer credit card accountholder, including purchases, cash advances, and balance transfers.
For each type of transaction or event identified under clause (i)—
each distinct interest rate charged by the card issuer to a consumer credit card accountholder during the semiannual period; and
the number of cardholders to whom each such interest rate was applied during the last calendar month of the semiannual period, and the total amount of interest charged to such accountholders at each such rate during such month.
A list of each type of fee that 1 or more of the creditors has imposed upon a consumer credit card accountholder during the semiannual period, including any fee imposed for obtaining a cash advance, making a late payment, exceeding the credit limit on an account, making a balance transfer, or exchanging United States dollars for foreign currency.
For each type of fee identified under clause (iii), the number of accountholders upon whom the fee was imposed during each calendar month of the semiannual period, and the total amount of fees imposed upon cardholders during such month.
The total number of consumer credit card accountholders that incurred any finance charge or any other fee during the semiannual period.
The total number of consumer credit card accounts maintained by each creditor as of the end of the semiannual period.
The total number and value of cash advances made during the semiannual period under a consumer credit card account.
The total number and value of purchases involving or constituting consumer credit card transactions during the semiannual period.
The total number and amount of repayments on outstanding balances on consumer credit card accounts in each month of the semiannual period.
The percentage of all consumer credit card accountholders (with respect to any creditor) who—
incurred a finance charge in each month of the semiannual period on any portion of an outstanding balance on which a finance charge had not previously been incurred; and
incurred any such finance charge at any time during the semiannual period.
The total number and amount of balances accruing finance charges during the semiannual period.
The total number and amount of the outstanding balances on consumer credit card accounts as of the end of such semiannual period.
Total credit limits in effect on consumer credit card accounts as of the end of such semiannual period and the amount by which such credit limits exceed the credit limits in effect as of the beginning of such period.
Any other information related to interest rates, fees, or other charges that the Board deems of interest.
; and
by adding at the end the following new paragraph:
Report to Congress
The Board shall, on an annual basis, transmit to Congress and make public a report containing estimates by the Board of the approximate, relative percentage of income derived by the credit card operations of depository institutions from—
the imposition of interest rates on cardholders, including separate estimates for—
interest with an annual percentage rate of less than 25 percent; and
interest with an annual percentage rate equal to or greater than 25 percent;
the imposition of fees on cardholders;
the imposition of fees on merchants; and
any other material source of income, while specifying the nature of that income.
.
Standards
applicable to initial issuance of subprime or fee harvester
cards
Section 127B of the Truth in Lending Act is amended by inserting after subsection (m) (as added by section 4) the following new subsection:
Standards
applicable to initial issuance of subprime or fee harvester
cards
In general
In the case of any credit card account under an open end consumer credit plan the terms of which require the payment of fees (other than late fees or over-the-limit fees) by the consumer in the first year the account is opened in an amount in excess of 25 percent of the total amount of credit authorized under the account, no payment of any fees (other than late fees or over-the-limit fees) may be made from the credit made available by the card.
Rule of construction
No provision of this subsection may be construed as authorizing any imposition or payment of advance fees otherwise prohibited by any provision of law.
.
Extensions of credit to underage consumers
Section 127(c) of the Truth in Lending Act (15 U.S.C. 1637(c)) is amended by adding at the end the following new paragraph:
Extensions of credit to underage consumers
In general
No credit card may be knowingly issued to, or open end credit plan established on behalf of, a consumer who has not attained the age of 18, unless the consumer is emancipated under applicable State law.
Rule of construction
For the purposes of determining the age of an applicant, the submission of a signed application by a consumer stating that the consumer is over 18 shall be considered sufficient proof of age.
.
Effective date
In general
The amendments made by this Act shall apply to all credit card accounts under open end consumer credit plans as of the end of the 3-month period beginning on the date of the enactment of this Act.
Regulations
The Board of Governors of the Federal Reserve System, in consultation with the Comptroller of the Currency, the Director of the Office of Thrift Supervision, the Federal Deposit Insurance Corporation, the National Credit Union Administration Board, and the Federal Trade Commission, shall prescribe regulations, in final form, implementing the amendments made by this Act before the end of the 3-month period referred to in subsection (a).
