A bill to protect consumers, and especially young consumers, from skyrocketing credit card debt, unfair credit card practices, and deceptive credit offers.

Summary: Credit Card Reform Act of 2008 - Amends the Fair Credit Reporting Act to permit a consumer reporting agency to furnish a consumer report in connection with any credit or insurance transaction that is not initiated by the consumer only if the report indicates that the consumer is age 21 or older. Allows 18-year olds to elect to have their name and address included in any agency list.

Amends the Truth in Lending Act to prohibit a credit card issuer from changing the terms of a credit card under an open end consumer credit plan: (1) before the scheduled contract expiration or renewal date; and (2) until the issuer has published all contract changes in any mandatory disclosures.

Establishes a cardholder right to repay all existing balances on a terminated or expired credit card account under the terms of the account in effect before the termination or expiration.

Imposes limits upon increases of interest rates and finance charges on a credit card account before its scheduled renewal date.

Permits an increase in the annual percentage rate (APR) as a penalty only for specific, material contract violations of a consumer directly related to the account that are specified in the contract as grounds for an increase.

Bans retroactive rate increases.

Prohibits a credit card issuer from imposing adverse consequences for late payment if the cardholder's payment is postmarked or initiated by electronic funds transfer on or before the required postmark date.

Requires a credit card issuer to verify, when the account is opened or the credit limit increased, that the consumer will be able to make the scheduled payments, based on a consideration of current and expected income, current obligations, and employment status.

Amends the Fair Credit Reporting Act to redefine "firm offer of credit or insurance" to require the offer to specify all material terms, including APR, fees, and the applicable amount of credit or credit limit.

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    This Act may be cited as the ``Credit Card Reform Act of 2008''.

SEC. 2. PROTECTION OF YOUNG CONSUMERS FROM PRESCREENED CREDIT OFFERS.

    (a) In General.--Section 604(c)(1)(B) of the Fair Credit Reporting 
Act (15 U.S.C. 1681b(c)(1)(B)) is amended--
            (1) in clause (ii), by striking ``and'' at the end; and
            (2) in clause (iii), by striking the period at the end and 
        inserting ``; and''; and
            (3) by adding at the end the following:
                    ``(vi) the consumer report indicates that the 
                consumer is age 21 or older, except that a consumer who 
                is at least 18 years of age may elect, in accordance 
                with subsection (e)(7), to authorize the consumer 
                reporting agency to include the name and address of the 
                consumer in any list of names provided by the agency 
                pursuant to this paragraph.''.
    (b) Opt-in for Young Consumers.--Section 604(e) of the Fair Credit 
Reporting Act (15 U.S.C. 1681b(e)) is amended--
            (1) by striking the subsection heading and inserting the 
        following:
    ``(e) Election of Consumers Regarding Lists.--''; and
            (2) by adding at the end the following:
            ``(7) Opt-in for underage consumers.--
                    ``(A) In general.--A consumer who is at least 18 
                years of age, but has not attained his or her 21st 
                birthday may elect to have the name and address of the 
                consumer included in any list provided by a consumer 
                reporting agency under subsection (c)(1)(B) in 
                connection with a credit or insurance transaction that 
                is not initiated by the consumer by notifying the 
                agency in accordance with subparagraph (B) that the 
                consumer consents to the use of a consumer report 
                relating to the consumer in connection with any credit 
                or insurance transaction that is not initiated by the 
                consumer.
                    ``(B) Manner of notification.--An election by a 
                consumer described in subparagraph (A) shall be in 
                writing, using a signed notice of election form issued 
                or made available electronically by the agency at the 
                request of the consumer for purposes of this paragraph.
                    ``(C) Effectiveness of election.--An election by a 
                consumer under subparagraph (A) to be included in a 
                list provided by a consumer reporting agency shall be 
                effective--
                            ``(i) until the earlier of--
                                    ``(I) the 21st birthday of the 
                                consumer; or
                                    ``(II) the date on which the 
                                consumer notifies the agency, through 
                                the notification system established by 
                                the agency under paragraph (5), that 
                                the election is no longer effective; 
                                and
                            ``(ii) with respect to each affiliate of 
                        the agency.
                    ``(D) Rule of construction.--An election by a 
                consumer under subparagraph (A) to be included in a 
                list provided by a consumer reporting agency may not be 
                construed to limit the applicability of this subsection 
                to any person age 21 or older, and such person may 
                elect to be excluded from any such list after the 
                attainment of his or her 21st birthday in the manner 
                otherwise provided under this subsection.''.

SEC. 3. PROHIBITION ON UNILATERAL CHANGES IN CREDIT CARD AGREEMENTS.

    (a) In General.--Chapter 4 of the Truth in Lending Act (15 U.S.C. 
1666 et seq.) is amended--
            (1) by redesignating section 171 as section 172; and
            (2) by inserting after section 170 the following:
``Sec. 171. Prohibition on unilateral changes in credit card agreements
    ``(a) In General.--Except as permitted under section 163(b), a 
credit card issuer may not amend or change the terms of a credit card 
contract or agreement under an open end consumer credit plan--
            ``(1) prior to the scheduled--
                    ``(A) expiration of such contract or agreement; or
                    ``(B) renewal date of such contract or agreement; 
                and
            ``(2) until such time as the issuer has disclosed all the 
        amendments and changes to the terms of such contract or 
        agreement to the cardholder in any disclosure or statement 
        required under section 127(d).
    ``(b) Authority to Payoff Balances.--A cardholder shall have the 
right to repay all existing balances on a credit card account that is 
terminated or expires under the terms of such account in effect prior 
to such termination or expiration.
    ``(c) Construction.--Termination of an account due refusal to renew 
the account or to failure to agree to a change in terms shall not 
constitute a default under an existing credit card contract or 
agreement under an open end consumer credit plan, and shall not trigger 
an obligation of the cardholder to immediately repay the obligation in 
full.''.
    (b) Conforming Change in Disclosures Prior to Renewal.--Section 
127(d) of the Truth in Lending Act (15 U.S.C. 1637(d)) is amended--
            (1) in paragraph (1)--
                    (A) by inserting ``, or that has made any change in 
                the terms of the consumer's credit or charge card 
                contract or agreement since the previous scheduled 
                renewal date,'' after ``or (c)(4)(A)(i)'';
                    (B) in subparagraph (B), by striking ``; and'' and 
                inserting a semicolon;
                    (C) in subparagraph (C), by striking the period and 
                inserting ``; and''; and
                    (D) by adding at the end the following:
                    ``(D) any changes or amendments in the terms of the 
                consumer's credit or charge card contract or agreement 
                since the previous scheduled renewal date.''; and
            (2) in paragraph (2)(A), by striking ``The disclosures 
        required'' and inserting ``If no changes have been made to the 
        contract or agreement since the previously scheduled renewal 
        date, the disclosures required''.
    (c) Clerical Amendment.--The table of sections for chapter 4 of the 
Truth in Lending Act (15 U.S.C. 1666 et seq.) is amended by inserting 
after the item relating to section 170 the following new item:

``171. Prohibition on unilateral changes in credit card agreements.''.

SEC. 4. STOPPING UNFAIR INTEREST RATES AND FEES.

    Section 163 of the Truth in Lending Act (15 U.S.C. 1666b) is 
amended--
            (1) by striking the section title and all that follows 
        through ``If an open'' and inserting the following:
``Sec. 163. Billing period and finance charges
    ``(a) Billing Period.--
            ``(1) Fourteen-day minimum.--If an open'';
            (2) by striking ``(b) Excusable Cause.--Subsection (a)'' 
        and inserting the following:
            ``(2) Excusable cause.--Subsection (a)''; and
            (3) by adding at the end the following:
    ``(b) Limits on Interest Rate Increases.--
            ``(1) In general.--With respect to a credit card account 
        under an open end consumer credit plan, the creditor shall not 
        increase any annual percentage rate, fee, or finance charge 
        prior to the scheduled renewal date of the plan, unless--
                    ``(A) such increase is pursuant to the expiration 
                of an introductory rate, fee, or finance charge which 
                was disclosed under section 127(c)(6);
                    ``(B) such increase is pursuant to the application 
                of a variable rate which was disclosed under section 
                127(c)(1)(A)(i)(II); or
                    ``(C) such increase is pursuant to the application 
                of a penalty rate which was disclosed under subsections 
                (a)(4) and (c)(1)(A)(i) of section 127.
            ``(2) Reasons for penalty interest rate increase.--A 
        creditor may impose an increase in the annual percentage rate 
        as a penalty only for specific, material actions or omissions 
        of a consumer in violation of the credit card account contract 
        or agreement that are directly related to such account and that 
        are specified in the contract or agreement as grounds for an 
        increase. Information not directly related to the credit card 
        account of the consumer, including adverse information 
        concerning the consumer, information in any consumer report (as 
        that term is defined in section 603 of the Fair Credit 
        Reporting Act), or changes in the credit score of the consumer 
        do not for purposes of this paragraph constitute a specific, 
        material reason.
            ``(3) Limit on penalty interest rate.--A creditor may not 
        apply as a penalty, in accordance with the provisions of 
        paragraph (2), an increase in the annual percentage rate in 
        excess of 7 percentage points above the interest rate that was 
        in effect with respect to a consumer's credit card account on 
        the date immediately preceding the first such penalty increase 
        for such account.
    ``(c) Ban on Retroactive Rate Increases.--With respect to a credit 
card account under an open end consumer credit plan, if the creditor 
increases the periodic interest rate applicable to an extension of 
credit under the account, other than the expiration of an introductory 
rate or an increase in a variable rate, such increased rate shall apply 
only to extensions of credit made on and after the date of such 
increase under the account, and any extension of credit under such 
account made before the date of such increase shall continue to incur 
interest at the rate that was in effect on the date prior to the date 
of the increase.''.

SEC. 5. CAP ON FEES CHARGED BY CREDITORS.

    (a) In General.--Section 164 of the Truth in Lending Act (15 U.S.C. 
1666c) is amended--
            (1) by striking ``Payments received'' and inserting ``(a) 
        In General.--Payments received''; and
            (2) by adding at the end the following:
    ``(b) Limitations on Late Payment Fees and Other Adverse 
Consequences.--
            ``(1) In general.--If a late payment fee is to be imposed 
        with respect to a credit card account under an open end 
        consumer credit plan due to the failure of the consumer to make 
        payment on or before a required payment due date, the credit 
        card issuer shall state clearly and conspicuously on the 
        billing statement--
                    ``(A) the date on which the payment must be 
                postmarked, if paid by mail, or the date on which a 
                consumer must initiate a payment using an electronic 
                fund transfer (as defined under section 903 of the 
                Electronic Fund Transfers Act), in order to avoid the 
                imposition of a late fee with respect to the payment; 
                and
                    ``(B) the amount of the late payment fee to be 
                imposed if payment is late.
            ``(2) Limitation.--No card issuer may, with respect to a 
        credit card account under an open end consumer credit plan, 
        impose a late payment fee, raise the annual percentage rate on 
        the credit card account for late payment, or impose other 
        adverse consequences for late payment if the cardholder's 
        payment is postmarked, received, or initiated electronically, 
        on or before the required date stated in accordance with 
        paragraph (1)(A).
            ``(3) Cap on fees.--
                    ``(A) In general.--The amount of any fee or charge 
                that a credit card issuer may impose in connection with 
                any default, omission, or violation of the cardholder 
                agreement, including any late payment fee, over the 
                limit fee, increase in the applicable annual percentage 
                rate, or any similar fee or charge, may not exceed an 
                amount that is reasonably related to the cost to the 
                card issuer of such default, omission, violation, or 
                similar event.
                    ``(B) Rulemaking.--The Board shall promulgate 
                regulations to carry out the limitation described in 
                subparagraph (A).''.
    (b) Conforming Amendment.--Section 127(b) of the Truth in Lending 
Act (15 U.S.C. 1637(b)) is amended by striking paragraph (12).

SEC. 6. VERIFICATION OF ABILITY TO PAY CREDIT OBLIGATIONS.

    Section 127 of the Truth in Lending Act (15 U.S.C. 1637) is amended 
by adding at the end the following:
    ``(i) Verification of Ability To Pay.--
            ``(1) In general.--A credit card issuer may not open any 
        credit card account for any person under an open end consumer 
        credit plan, or increase any credit limit applicable to such an 
        account, unless the credit card issuer has determined, at the 
        time at which the account is opened or the credit limit 
        increased, that the consumer will be able to make the scheduled 
        payments under the terms of the transaction, based on a 
        consideration of their current and expected income, current 
        obligations, and employment status.
            ``(2) Regulations.--The Board shall prescribe, by 
        regulation, the appropriate formula for determining the ability 
        of a consumer to pay and the criteria to be considered in 
        making any such determination for purposes of this subsection.
            ``(3) Prohibitions.--The Board, by regulation or order, 
        shall prohibit acts or practices in connection with any credit 
        card account under an open end consumer credit plan--
                    ``(A) that the Board finds to be unfair, deceptive, 
                or designed to evade the provisions of this title; and
                    ``(B) that the Board finds to be associated with 
                abusive lending practices, or that are otherwise not in 
                the interest of the consumer.''.

SEC. 7. CURBING DECEPTIVE CREDIT CARD OFFERS.

    Section 603(l) of the Fair Credit Reporting Act (15 U.S.C. 
1681a(l)) is amended to read as follows:
    ``(l) Firm Offer of Credit or Insurance.--
            ``(1) In general.--The term `firm offer of credit or 
        insurance' means any offer of credit or insurance to a consumer 
        that specifies all material terms and will be honored if the 
        consumer is determined, based on information in a consumer 
        report on the consumer, to meet the specific criteria used to 
        select the consumer for the offer.
            ``(2) Required disclosures in offers of credit.--In the 
        case of a firm offer of credit, the offer shall set forth the 
        specific annual percentage rate, fees, and amount of credit or 
        credit limit applicable to the offer.
            ``(3) Acceptable conditions.--A firm offer of credit or 
        insurance to a consumer may be further conditioned on 1 or more 
        of the following:
                    ``(A) Verification that the consumer continues to 
                meet the specific criteria used to select the consumer 
                for the offer, by using information in a consumer 
                report on the consumer, information in the consumer's 
                application for the credit or insurance, or other 
                information bearing on the credit worthiness or 
                insurability of the consumer.
                    ``(B) The consumer furnishing any collateral that 
                is a requirement for the extension of the credit or 
                insurance that was--
                            ``(i) established before selection of the 
                        consumer for the offer of credit or insurance; 
                        and
                            ``(ii) disclosed to the consumer in the 
                        offer of credit or insurance.''.

SEC. 8. EFFECTIVE DATES.

    The amendments made by sections 3, 4, 5, 6, and 7 of this Act shall 
take effect 6 months after the date of enactment of this Act, except 
that the Board of Governors for the Federal Reserve System shall begin 
to propose such regulations as may be appropriate to implement such 
amendments on or after the date of enactment of this Act.