[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[S. 235 Introduced in Senate (IS)]
111th CONGRESS
1st Session
S. 235
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.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
January 14, 2009
Mr. Schumer (for himself and Mr. Udall of Colorado) introduced the
following bill; which was read twice and referred to the Committee on
Banking, Housing, and Urban Affairs
_______________________________________________________________________
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.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Credit Cardholders' Bill of Rights
Act of 2009''.
SEC. 2. CREDIT CARDS ON TERMS CONSUMERS CAN REPAY.
(a) 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:
``Sec. 127B. Additional requirements for credit card accounts under an
open end credit plan
``(a) Retroactive Rate Increases and Universal Default Limited.--
``(1) 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 credit plan.
``(2) 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).
``(3) 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 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 one of the following methods:
``(A) 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.
``(B) The percentage of the existing balance that
was included in the required minimum periodic payment
before the rate increase cannot be more than doubled.
``(4) Limitation on certain fees.--If--
``(A) a creditor increases any annual percentage
rate of interest applicable on a credit card account of
the consumer under an open end credit plan; and
``(B) the creditor is prohibited by this section
from applying the increased rate to an existing
balance,
the creditor may not assess any fee or charge based solely on
the existing balance.''.
(b) 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:
``(b) Exceptions.--
``(1) 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
credit plan only under the following circumstances:
``(A) 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.
``(B) Expiration or loss of promotional rate.--The
increase is due solely to--
``(i) the expiration of a promotional rate;
or
``(ii) the loss of a promotional rate for a
reason specified in the account agreement
(e.g., late payment).
``(C) 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.
``(2) 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.''.
(c) 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:
``(c) Advance Notice of Rate Increases.--In the case of any credit
card account under an open end 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.''.
(d) 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 credit plan.''.
SEC. 3. ADDITIONAL PROVISIONS REGARDING ACCOUNT FEATURES, TERMS, AND
PRICING.
(a) 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:
``(d) Double Cycle Billing.--
``(1) 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 credit plan that is based on balances for
days in billing cycles preceding the most recent billing cycle.
``(2) Exceptions.--Paragraph (1) shall not apply so as to
prohibit a creditor from--
``(A) charging a consumer for deferred interest
even though that interest may have accrued over
multiple billing cycles; or
``(B) adjusting finance charges following
resolution of a billing error dispute.''.
(b) 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:
``(e) Limitations Relating to Account Balances Attributable Only to
Accrued Interest.--
``(1) In general.--If the outstanding balance on a credit
card account under an open end 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--
``(A) no fee may be imposed or collected in
connection with such balance attributable only to
interest before such end of the billing period; and
``(B) 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.
Such balance remains a legally binding debt obligation.
``(2) Rule of construction.--Paragraph (1) shall not be
construed as affecting--
``(A) the consumer's obligation to pay any accrued
interest on a credit card account under an open end
credit plan; or
``(B) the accrual of interest on the outstanding
balance on any such account in accordance with the
terms of the account and this title.''.
(c) 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:
``(f) Payoff Balance Information.--Each periodic statement provided
by a creditor to a consumer with respect to a credit card account under
an open end credit plan shall contain the telephone number, Internet
address, and worldwide website at which the consumer may request the
payoff balance on the account.''.
(d) 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:
``(g) Consumer Right To Reject Card Before Notice of New Account Is
Provided to Consumer Reporting Agency.--
``(1) 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 credit plan until the
credit card has been used or activated by the consumer.
``(2) 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 credit plan or any inquiry about any such account to a
consumer reporting agency (as so defined).''.
(e) 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:
``(h) Use of Terms.--The following requirements shall apply with
respect to the terms of any credit card account under any open end
credit plan:
``(1) `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.
``(2) 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).
``(3) Due date.--
``(A) 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.
``(B) 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.
``(C) 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.''.
(f) 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:
``(i) Pro Rata Payment Allocations.--
``(1) In general.--Except as permitted under paragraph (2),
if the outstanding balance on a credit card account under an
open end credit plan accrues interest at two 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.
``(2) 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.
``(3) Special rules for accounts with promotional rate
balances or deferred interest balances.--
``(A) In general.--Notwithstanding paragraph (1) or
(2), in the case of a credit card account under an open
end 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.
``(B) 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.
``(4) Prohibition on restricted grace periods under certain
circumstances.--If, with respect to any credit card account
under an open end 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.''.
(g) 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:
``(j) Timely Provision of Periodic Statements.--Each periodic
statement with respect to a credit card account under an open end
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'.''.
SEC. 4. 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:
``(k) Opt-Out of Creditor Authorization of Over-the-Limit
Transactions if Fees Are Imposed.--
``(1) In general.--In the case of any credit card account
under an open end 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).
``(2) Notification by consumer.--A consumer shall notify a
creditor under paragraph (1)--
``(A) through the notification system maintained by
the creditor under paragraph (4); or
``(B) 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.
``(3) 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.
``(4) Notification system.--Each creditor that maintains
credit card accounts under an open end credit plan shall
establish and maintain a notification system, including a toll-
free telephone number, Internet address, and worldwide 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).
``(5) Annual notice to consumers of availability of
election.--In the case of any credit card account under an open
end 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--
``(A) in the periodic statement required under
subsection (b) with respect to such account at least
once each calendar year; and
``(B) 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.
``(6) 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.
``(7) Regulations.--
``(A) 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).
``(B) 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.
``(l) Over-the-Limit Fee Restrictions.--With respect to a credit
card account under an open end 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.
``(m) 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.''.
SEC. 5. STRENGTHEN CREDIT CARD INFORMATION COLLECTION.
Section 136(b) of the Truth in Lending Act (15 U.S.C. 1646(b)) is
amended--
(1) in paragraph (1)--
(A) by striking ``Collection required.--The Board
shall'' and inserting ``Collection required.--
``(A) In general.--The Board shall''.
(B) by adding at the end the following new
subparagraph:
``(B) 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:
``(i) A list of each type of transaction or
event during the semiannual period for which
one or more creditors has imposed a separate
interest rate upon a consumer credit card
account holder, including purchases, cash
advances, and balance transfers.
``(ii) For each type of transaction or
event identified under clause (i)--
``(I) each distinct interest rate
charged by the card issuer to a
consumer credit card account holder
during the semiannual period; and
``(II) 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
account holders at each such rate
during such month.
``(iii) A list of each type of fee that one
or more of the creditors has imposed upon a
consumer credit card account holder 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.
``(iv) For each type of fee identified
under clause (iii), the number of account
holders 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.
``(v) The total number of consumer credit
card account holders that incurred any finance
charge or any other fee during the semiannual
period.
``(vi) The total number of consumer credit
card accounts maintained by each creditor as of
the end of the semiannual period.
``(vii) The total number and value of cash
advances made during the semiannual period
under a consumer credit card account.
``(viii) The total number and value of
purchases involving or constituting consumer
credit card transactions during the semiannual
period.
``(ix) The total number and amount of
repayments on outstanding balances on consumer
credit card accounts in each month of the
semiannual period.
``(x) The percentage of all consumer credit
card account holders (with respect to any
creditor) who--
``(I) 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
``(II) incurred any such finance
charge at any time during the
semiannual period.
``(xi) The total number and amount of
balances accruing finance charges during the
semiannual period.
``(xii) The total number and amount of the
outstanding balances on consumer credit card
accounts as of the end of such semiannual
period.
``(xiii) 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.
``(xiv) Any other information related to
interest rates, fees, or other charges that the
Board deems of interest.''; and
(2) by adding at the end the following new paragraph:
``(5) 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--
``(A) the imposition of interest rates on
cardholders, including separate estimates for--
``(i) interest with an annual percentage
rate of less than 25 percent; and
``(ii) interest with an annual percentage
rate equal to or greater than 25 percent;
``(B) the imposition of fees on cardholders;
``(C) the imposition of fees on merchants; and
``(D) any other material source of income, while
specifying the nature of that income.''.
SEC. 6. 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:
``(n) Standards Applicable to Initial Issuance of Subprime or `Fee
Harvester' Cards.--
``(1) In general.--In the case of any credit card account
under an open end 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.
``(2) 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.''.
SEC. 7. 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:
``(8) Extensions of credit to underage consumers.--
``(A) 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.
``(B) 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.''.
SEC. 8. EFFECTIVE DATE.
(a) In General.--The amendments made by this Act shall apply to all
credit card accounts under open end credit plans as of the end of the
3-month period beginning on the date of the enactment of this Act.
(b) 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).
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