I

104TH CONGRESS

1ST SESSION H. R. 1105

To amend the Truth in Lending Act to require additional disclosures with

respect to credit card accounts, to require a study of the competitiveness

of the credit card industry, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

MARCH 1, 1995

Mr. SCHUMER introduced the following bill; which was referred to the

Committee on Banking and Financial Services

A BILL

To amend the Truth in Lending Act to require additional

disclosures with respect to credit card accounts, to require a study of the competitiveness of the credit card

industry, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Credit and Charge

5 Card Disclosure and Interest Rate Amendments Act of

6 1995’’.

7 SEC. 2. FINDINGS.

8 The Congress finds that—
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1 (1) the annual percentage rates applicable to

2 credit balances on credit card accounts have not

3 been responsive to the steady decline in creditors’

4 costs of funds during the 3 years preceding the date

5 of the enactment of this Act, as would be expected

6 if the credit card market were truly competitive;

7 (2) such annual percentage rates should be re8 duced; and

9 (3) more public disclosure of such annual rates

10 should make the market in credit cards more com11 petitive.

12 SEC. 3. DISCLOSURE REQUIREMENTS RELATING TO CRED13 IT CARD ACCOUNTS.

14 (a) STATEMENTS TO INCLUDE BETTER INFORMA15 TION REGARDING INTEREST BURDEN.—Section 127(b) of

16 the Truth in Lending Act (15 U.S.C. 1637(b)) is amended

17 by adding at the end the following:

18 ‘‘(11) In the case of any credit card account

19 under an open end consumer credit plan—

20 ‘‘(A) the total of all amounts paid by the

21 obligor with respect to the account during the

22 current year;

23 ‘‘(B) the total amount of finance charges

24 paid by the obligor with respect to the account
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1 during the current year, stated next to the in2 formation required by subparagraph (A); and

3 ‘‘(C) the date by which the obligor will

4 complete paying the current outstanding bal5 ance of the account (including all finance

6 charges that will be added to the account with

7 respect to that balance in the future) if the obli8 gor pays each month only the minimum amount

9 required to be paid under the plan.’’.

10 (b) STATEMENTS TO INCLUDE INFORMATION RE11 GARDING CHANGES IN TERMS.—Section 127 of the Truth

12 in Lending Act (15 U.S.C. 1637) is amended by adding

13 at the end the following new subsection:

14 ‘‘(h) STATEMENTS REQUIRED TO INCLUDE REVISED

15 TABLE OF TERMS BEFORE CHANGE IN TERMS IS EFFEC16 TIVE.—In the case of any credit card account under an

17 open end consumer credit plan, no change in any term

18 applicable to such plan which is described in paragraph

19 (1)(A), (1)(B), or (4)(A) of subsection (c) may take effect

20 unless, before the effective date of the change, 1 or more

21 of the statements which are transmitted pursuant to sub22 section (b) contain the information described in such para23 graphs (1)(A), (1)(B), and (4)(A) which is applicable to

24 the plan (as in effect after such change) in the tabular

25 format required under section 122(c).’’.
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1 (c) ENVELOPES TO INCLUDE TABLES.—Section 127

2 of the Truth in Lending Act (15 U.S.C. 1637) is amended

3 by adding after subsection (h) (as added by subsection (b)

4 of this section) the following new subsection:

5 ‘‘(i) ENVELOPES TO CONTAIN INFORMATION IN TAB6 ULAR FORMAT.—The envelope containing any application

7 or solicitation referred to in subsection (c)(1)(A) shall con8 tain the information required to be included in such appli9 cation, solicitation, or statement under any such sub10 section in the tabular format required under section

11 122(c).’’.

12 (d) ADVERTISING TO INCLUDE TABLES.—Section

13 143 of the Truth in Lending Act (15 U.S.C. 1663) is

14 amended—

15 (1) by striking ‘‘No advertisement’’ and insert16 ing ‘‘(a) IN GENERAL.—Subject to subsection (b),

17 no advertisement’’; and

18 (2) by adding at the end the following new sub19 section:

20 ‘‘(b) CREDIT CARD ACCOUNTS.—

21 ‘‘(1) IN GENERAL.—Subject to paragraphs (2)

22 and (3), any advertisement to aid or assist directly

23 or indirectly the extension of consumer credit

24 through a credit card account under an open end
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1 consumer credit plan shall include, in a clear and

2 conspicuous disclosure—

3 ‘‘(A) the information described in para4 graphs (1) and (2) of subsection (a);

5 ‘‘(B) the information described in para6 graphs (1)(A) and (1)(B)(i) of section 127(c)

7 disclosed in the tabular format required under

8 section 122(c); and

9 ‘‘(C) any other information the Board may

10 require in the form prescribed by the Board.

11 ‘‘(2) RADIO ADVERTISING.—Any advertisement

12 described in paragraph (1) which is made by means

13 of any radio broadcast or other audio broadcast or

14 transmission to the public shall include a verbal dis15 closure of—

16 ‘‘(A) the information described in para17 graphs (1) and (2) of subsection (a);

18 ‘‘(B) any fee described in paragraph

19 (1)(A)(ii) or (1)(B)(i) of section 127(c) which is

20 applicable with respect to such account or any

21 transaction under such account; and

22 ‘‘(C) if section 127(c)(1)(A)(iii) is applica23 ble with respect to such account, that fact and

24 the information described in subclause (II) of

25 such section.
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1 ‘‘(3) TELEVISION ADVERTISING.—Any adver2 tisement described in paragraph (1) which is made

3 by means of any television broadcast or other video

4 broadcast or transmission to the public shall include

5 the information described in paragraphs (1)(A) and

6 (1)(B)(i) of section 127(c) disclosed clearly and con7 spicuously in the tabular format required under sec8 tion 122(c).

9 ‘‘(4) EXCEPTION FOR PROMOTIONAL ADVERTIS10 ING.—The provisions of this subsection shall not

11 apply to any advertising which is solely promotional

12 and does not involve any solicitation of business by

13 any creditor.’’.

14 (e) SEPARATE DISCLOSURE IN THE ‘‘SCHUMER BOX’’

15 OF RATE FOR CASH ADVANCES IF SUCH RATE DIFFERS

16 FROM OTHER RATES.—Section 122(c)(2) of the Truth in

17 Lending Act (15 U.S.C. 1631(c)(2)) is amended by adding

18 at the end the following new subparagraph:

19 ‘‘(D) RATES APPLICABLE TO CASH AD20 VANCES.—If a different annual percentage rate

21 described in section 127(c)(1)(A) is applicable

22 to extensions of credit in the form of cash than

23 is applicable to other extensions of credit to

24 which such section applies, the table prescribed

25 by the Board under this subsection shall list
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1 such rate separately from other rates and under

2 a separate heading.’’.

3 (f) BETTER DISCLOSURE OF GRACE PERIOD.—Sec4 tion 127(c)(1)(A)(iii) of the Truth in Lending Act (15

5 U.S.C. 1637(c)(1)(A)(iii)) is amended by adding at the

6 end the following:

7 ‘‘(III) The terms and conditions

8 under which such ‘grace period’ is for9 feited, stated clearly and in conspicu10 ous bold print.’’.

11 (g) TOLL-FREE NUMBER FOR INFORMATION ON LOW

12 RATE CREDIT CARDS.—The Board of Governors of the

13 Federal Reserve System shall establish, maintain, and

14 publicize a toll-free telephone line for consumers to call

15 for free information on the availability of low-rate credit

16 cards.

17 (h) TECHNICAL AND CONFORMING AMENDMENTS.—

18 (1) Section 122(c) of the Truth in Lending Act

19 (15 U.S.C. 1631(c)) is amended by inserting ‘‘and

20 in sections 127(h) and 143(b)’’ after ‘‘of section

21 127(c)’’.

22 (2) The heading for section 122(c) of the Truth

23 in Lending Act (15 U.S.C. 1631(c)) is amended by

24 striking ‘‘SECTION 127(c)’’ and inserting ‘‘SECTIONS

25 127(c), 127(h), and 143(b)’’.
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1 SEC. 4. NOTICE AND ELECTION REQUIRED IN CASE OF IN2 CREASE IN RATES UNDER CREDIT CARD AC3 COUNTS.

4 (a) IN GENERAL.—Section 127 of the Truth in Lend5 ing Act (15 U.S.C. 1637) is amended by adding after sub6 section (i) (as added by section 3(c) of this Act) the follow7 ing new subsection:

8 ‘‘(j) NOTICE AND CONSUMER ELECTION IN CASE OF

9 INCREASE IN RATES OR FEES UNDER CREDIT CARD AC10 COUNTS.—

11 ‘‘(1) NOTICE REQUIRED.—

12 ‘‘(A) IN GENERAL.—No increase in any

13 annual percentage rate applicable to the balance

14 (or any portion of any such balance) outstand15 ing on any credit extended in connection with

16 any credit card account under any open end

17 consumer credit plan, and no change in any

18 term described in paragraph (1)(A) or (1)(B) of

19 subsection (c) which adversely affects the

20 consumer, may take effect before the end of the

21 30-day period beginning on the date the card22 holder receives notice and a description of such

23 increase or change and the procedures for mak24 ing an election under paragraph (2).

25 ‘‘(B) FORM OF NOTICE.—Notice to a

26 consumer under subparagraph (A) shall be in
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1 the form of the following sentence appearing in

2 conspicuous bold print on the outside of an en3 velope containing a statement transmitted to

4 the consumer pursuant to subsection (b): ‘Fed5 eral law requires the following notification: The

6 terms of your credit card contract have been

7 changed. Look inside this envelope for impor8 tant details.’.

9 ‘‘(C) FORM OF DESCRIPTION.—The de10 scription required by subparagraph (A) shall

11 be—

12 ‘‘(i) included in an envelope contain13 ing a statement transmitted to the

14 consumer pursuant to subsection (b) and

15 on which appears a notice in accordance

16 with subparagraph (B);

17 ‘‘(ii) on a document that is separate

18 from the statement transmitted pursuant

19 to subsection (b); and

20 ‘‘(iii) in the tabular format required

21 under section 122(c).

22 ‘‘(2) ELECTION TO RESCIND FURTHER USE OF

23 ACCOUNT.—Any cardholder who receives notice

24 under paragraph (1) with respect to any credit card

25 account under any open end consumer credit plan
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1 may notify the creditor that such cardholder is re2 scinding any use of the account to obtain any addi3 tional extensions of credit under the plan effective

4 upon such notice.

5 ‘‘(3) OUTSTANDING BALANCE SUBJECT TO EX6 ISTING RATES UPON ELECTION.—If any cardholder

7 with respect to any credit card account under any

8 open end consumer credit plan notifies the creditor

9 of the cardholder’s election, pursuant to paragraph

10 (2), to rescind the use of the account, any balance

11 outstanding with respect to such account shall be

12 subject to any repayment rate, and any other terms,

13 in effect with respect to such balance on the date the

14 cardholder receives the notice under paragraph (1).

15 ‘‘(4) ANY SUBSEQUENT EXTENSION OF CREDIT

16 NEGATES ELECTION.—

17 ‘‘(A) IN GENERAL.—If any person—

18 ‘‘(i) makes an election under para19 graph (2) to rescind the use of any credit

20 card account to obtain any extension of

21 credit under any open end consumer credit

22 plan after the date of notice pursuant to

23 such election; and

24 ‘‘(ii) after the date of notice of such

25 election, engages in any transaction with
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1 respect to such account, other than any

2 transaction in connection with the repay3 ment of any balance outstanding under the

4 account,

5 paragraph (3) shall cease to apply with respect

6 to such balance.

7 ‘‘(B) LIABILITY FOR FORGONE INTEREST

8 AND FINANCE CHARGES.—Any person referred

9 to in subparagraph (A) shall be liable for any

10 difference between—

11 ‘‘(i) the amount of interest and fi12 nance charges paid by that person on any

13 balance outstanding under the credit plan

14 referred to in such subparagraph in ac15 cordance with paragraph (3) since the date

16 of the notice under paragraph (2); and

17 ‘‘(ii) the amount of such charges the

18 person would have been required to pay

19 under the plan but for paragraph (3).’’.

20 SEC. 5. FINANCE CHARGE NOT TO BE IMPOSED BEFORE

21 DATE CHARGE IS POSTED TO CREDIT CARD

22 ACCOUNT.

23 (a) IN GENERAL.—The Truth in Lending Act (15

24 U.S.C. 1601 et seq.) is amended by inserting after section

25 127A the following:
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1 ‘‘§ 127B. Limitation on imposing finance charges on

2 certain consumer accounts

3 ‘‘No finance charge may be imposed on an extension

4 of credit with respect to a credit card account under an

5 open end consumer credit plan before the date the exten6 sion of credit is posted to the account.’’.

7 (b) CLERICAL AMENDMENT.—The table of sections

8 at the beginning of chapter 2 of the Truth in Lending

9 Act (15 U.S.C. 121 et seq.) is amended by inserting after

10 the item relating to section 127A the following:

‘‘127B. Limitation on imposing finance charges on certain consumer accounts.’’.

11 SEC. 6. LIMITATION ON USE OF CREDIT INFORMATION BY

12 ISSUERS OF CREDIT CARDS.

13 (a) LIMITATION.—The Truth in Lending Act (15

14 U.S.C. 1601 et seq.) is amended by inserting after section

15 127B (as added by section 5) the following:

16 ‘‘§ 127C. Limitation on use of information by credit

17 card issuers

18 ‘‘(a) LIMITATION.—A card issuer shall not use, sell,

19 or otherwise disclose for direct marketing purposes, infor20 mation regarding the use of a consumer credit card issued

21 by the card issuer (including any list of cardholders

22 derived from such information) if—

23 ‘‘(1) the card issuer has not notified the card24 holder in accordance with subsection (b) that the in25 formation will be used for those purposes; or
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1 ‘‘(2) the cardholder has notified the card issuer

2 in accordance with subsection (c) that the cardholder

3 does not consent to the use of that information for

4 those purposes.

5 ‘‘(b) NOTIFICATION BY CARD ISSUER.—

6 ‘‘(1) TIME.—A card issuer shall notify a card7 holder for purposes of subsection (a)(1) in writing—

8 ‘‘(A) before the first transaction is made

9 under the credit card; and

10 ‘‘(B) in at least one billing cycle of each

11 calendar year in which the card issuer is re12 quired to send a billing statement to the card13 holder under applicable Federal law.

14 ‘‘(2) CONTENT.—Each notification under para15 graph (1) shall include—

16 ‘‘(A) a clear and conspicuous statement

17 that information regarding the use of the credit

18 card can be disclosed for direct marketing pur19 poses unless the cardholder notifies the card is20 suer, in writing or, if applicable, by calling any

21 toll free telephone number established by the

22 card issuer for that purpose, that the card23 holder does not consent to the use of that infor24 mation for those purposes;
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1 ‘‘(B) an address that the cardholder may

2 write to for purposes of subsection (a)(2); and

3 ‘‘(C) either—

4 ‘‘(i) a postage paid, self-addressed

5 form which the cardholder may sign and

6 mail to the card issuer to notify the card

7 issuer for purposes of subsection (a)(2); or

8 ‘‘(ii) in a clear and conspicuous man9 ner, a toll free telephone number that the

10 card issuer establishes for notifying the

11 card issuer for purposes of subsection

12 (a)(2).

13 ‘‘(3) FORM.—Each notification under para14 graph (1) shall be made on a document that is sepa15 rate and distinct from any other information with

16 which it is provided to the cardholder.

17 ‘‘(c) NOTIFICATION BY CARDHOLDER.—A cardholder

18 may notify a card issuer for purposes of subsection

19 (a)(2)—

20 ‘‘(1) by calling any toll free telephone number

21 that is established by the card issuer for that pur22 pose;

23 ‘‘(2) by signing and mailing to the card issuer

24 any form provided by the card issuer in accordance

25 with subsection (b); or
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1 ‘‘(3) otherwise in writing to the address pro2 vided under subsection (b)(2)(B).

3 ‘‘(d) LIMITED REQUIREMENTS.—Nothing in this sec4 tion shall be construed or interpreted as a general require5 ment for credit card issuers to notify cardholders. The re6 quirements of subsection (b) are established solely to en7 able credit card issuers to satisfy the conditions of sub8 section (a) for purposes of using cardholder information

9 for direct marketing purposes.

10 ‘‘(e) DIRECT MARKETING DEFINED.—For purposes

11 of this section, the term ‘direct marketing’ means selling

12 or offering for sale, directly to a consumer or a specific

13 group of consumers, a good or service.’’.

14 (b) CLERICAL AMENDMENT.—The table of sections

15 at the beginning of chapter 2 of the Truth in Lending

16 Act (15 U.S.C. 1601 et seq.), as amended by this Act,

17 is further amended by inserting after the item relating to

18 section 127B (as added by section 5) the following:

‘‘127C. Limitation on use of information by credit card issuers.’’.

19 SEC. 7. STUDY OF COMPETITIVENESS OF CREDIT CARD

20 MARKET.

21 (a) STUDY REQUIRED.—The Comptroller General of

22 the United States, in consultation with the Board of Gov23 ernors of the Federal Reserve System, shall conduct a

24 study of the market in credit cards to determine whether

25 such market is competitive.
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1 (b) SPECIFIC ISSUES REQUIRED TO BE STUDIED.—

2 The study conducted pursuant to subsection (a) shall in3 clude the following:

4 (1) The annual percentage rates of interest on

5 credit extended through credit cards (as defined in

6 section 103(k) of the Truth in Lending Act) during

7 the 66-month period beginning 5 years before the

8 date of the enactment of this Act.

9 (2) The cost of funds to creditors (as defined

10 in section 103(f) of the Truth in Lending Act) for

11 the extension of such credit during such period.

12 (3) An analysis of the change in the spread be13 tween the cost of such funds to creditors and the an14 nual percentage rates of interest on credit extended

15 through credit cards during such period.

16 (4) Whether such factors indicate that competi17 tion exists among creditors for new credit card ac18 counts and the degree to which such competition ex19 ists among the 10 credit card issuers who have is20 sued the largest number of cards.

21 (5) Whether the degree of competition among

22 the 10 credit card issuers who have issued the larg23 est number of cards differs from the degree of com24 petition in—

25 (A) the credit card industry generally; and
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1 (B) other consumer loan markets, includ2 ing housing loans and auto loans.

3 (6) If there is a difference in the degree of com4 petition identified in the markets referred to in para5 graph (5), the reason for the disparity.

6 (7) The competitive barriers to entry into—

7 (A) the credit card market; and

8 (B) the group of 10 credit card issuers

9 having the largest number of credit card ac10 counts.

11 (c) REPORT REQUIRED BY END OF 9-MONTH PE12 RIOD.—Before the end of the 9-month period beginning

13 on the date of the enactment of this Act, the Comptroller

14 General shall submit a report to the Congress contain15 ing—

16 (1) the findings and conclusions of the Comp17 troller General with respect to the study conducted

18 pursuant to subsection (a); and

19 (2) such recommendations for legislative or ad20 ministrative action as the Comptroller General deter21 mines to be appropriate.
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1 SEC. 8. REQUIREMENT TO PROVIDE ANNUAL STATEMENTS

2 OF PAYMENTS MADE ON CREDIT CARD AC3 COUNTS.

4 (a) IN GENERAL.—Section 127 of the Truth in Lend5 ing Act (15 U.S.C. 1637) is amended by adding after sub6 section (j) (as added by section 4(a) of this Act) the

7 following new subsection:

8 ‘‘(k) STATEMENTS OF COSTS OF CREDIT CARDS.—

9 ‘‘(1) DISCLOSURE REQUIREMENT.—A card is10 suer under an open end credit plan shall include

11 with the first 3 statements provided in a year under

12 subsection (b) with respect to the plan a separate

13 statement of the total amounts the obligor paid to

14 the card issuer in the preceding year for credit cards

15 issued under the plan—

16 ‘‘(A) as fees or charges described in sub17 sections (c)(4) (A) and (B); and

18 ‘‘(B) as finance charges (other than those

19 referred to in subparagraph (B)).

20 ‘‘(2) TABULAR FORMAT.—

21 ‘‘(A) IN GENERAL.—The statement re22 quired under paragraph (1) shall disclose the

23 fees and charges described in paragraph (1) in

24 the form and manner which the Board shall

25 prescribe by regulations.
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1 ‘‘(B) FORM OF TABLE.—In the regulations

2 required under subparagraph (A), the Board—

3 ‘‘(i) shall require that the disclosure

4 of fees and charges shall, to the extent the

5 Board determines to be practicable and ap6 propriate, be in the form of a table

7 which—

8 ‘‘(I) contains clear and concise

9 headings for each item of information

10 disclosed in the table; and

11 ‘‘(II) provides a clear and concise

12 form for stating each item of informa13 tion disclosed in the table;

14 ‘‘(ii) may list the items of information

15 required to be included in the table in a

16 different order than the order in which the

17 items are set forth in subsections (c)(4)

18 (A) and (B); and

19 ‘‘(iii) may use terminology which is

20 different than the terminology employed in

21 subsections (c)(4) (A) and (B) if the termi22 nology used conveys substantially the same

23 meaning.’’.
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1 (b) EFFECTIVE DATE.—The amendment made by

2 subsection (a) shall be effective on the date of publication

3 of final regulations under subsection (c).

4 (c) DATE FOR ISSUANCE OF REGULATIONS.—The

5 Board of Governors of the Federal Reserve System shall

6 issue regulations which implement the amendment made

7 by subsection (a) by not later than 9 months after the

8 date of the enactment of this Act.

9 SEC. 9. REQUIREMENT TO PROVIDE COPY OF AGREEMENT

10 ESTABLISHING TERMS OF CREDIT CARD AC11 COUNT.

12 Section 127 of the Truth in Lending Act (15 U.S.C.

13 1637) is amended by adding after subsection (l) (as added

14 by section 8(a) of this Act) the following new subsection:

15 ‘‘(i) PROVISION OF COPY OF AGREEMENT ON RE16 QUEST.—A card issuer under an open end credit plan shall

17 upon request provide a copy of the agreement that estab18 lishes the conditions, requirements, and other terms of the

19 plan.’’.

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