79–010 

Calendar No. 54 

111TH CONGRESS REPORT " ! SENATE 1st Session 111–16 

AMENDING THE CONSUMER CREDIT PROTECTION ACT, TO BAN ABUSIVE 

CREDIT PRACTICES, ENHANCE CONSUMER DISCLOSURES, PROTECT UNDERAGE CONSUMERS, AND FOR OTHER PURPOSES 

MAY 4, 2009.—Ordered to be printed 

Mr. DODD, from the Committee on Banking, Housing, and Urban 

Affairs, submitted the following 

R E P O R T 

[To accompany S. 414] 

The Committee on Banking, Housing, and Urban Affairs, to 

which was referred the bill (S. 414) to amend the Consumer Credit 

Protection Act, to ban abusive credit practices, enhance consumer 

disclosures, protect underage consumers, and for other purposes, 

having considered the same, reports favorably thereon with an 

amendment and recommends that the bill as amended do pass. 

INTRODUCTION

The Committee on Banking, Housing, and Urban Affairs met in 

open session on March 31, 2009, and ordered S. 414, the ‘‘Credit 

Card Accountability Responsibility and Disclosure Act of 2009,’’ as 

amended, favorably reported to the Senate for consideration. 

HEARING RECORD AND WITNESSES

On Thursday, January 25, 2007, the Committee held a hearing 

entitled ‘‘Examining the Billing, Marketing and Disclosure Practices of the Credit Card Industry, and Their Impact on Consumers.’’ At that hearing, the Committee heard testimony from 

Elizabeth Warren, Leo Gottleib Professor of Law, Harvard Law 

School; Michael Donovan, Esq., Donovan & Searles; Carter Franke, 

Executive Vice President of Marketing, JP Morgan Chase & Co.; 

Robert Manning, Professor of Finance, Rochester Institute of Technology; John Finneran, President of Corporate Reputation and Governance, CapitalOne Financial; Tamara Draut, Director, Economic 

Opportunity Programs, Demos; Richard Vague, CEO, Barclaycard 

USA; and Travis Plunkett, Legislative Director, Consumer Federation of America. 


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On February 12, 2009, the Committee heard testimony from 

Travis Plunkett, Legislative Director, Consumer Federation of 

America; James Sturdevant, Esq., The Sturdevant Law Firm; Ken 

Clayton, Sr. VP & General Counsel, Card Policy Council, American 

Bankers Association; Lawrence Ausubel, Professor of Economics, 

University of Maryland; Todd Zywicki, Professor, George Mason 

University School of Law; and Adam J. Levitin, Associate Professor 

of Law, Georgetown University Law Center, at its hearing on 

‘‘Modernizing Consumer Protection in the U.S. Financial Regulatory System: Strengthening Credit Card Protections.’’ 

PURPOSE AND SUMMARY OF THE LEGISLATION

The ‘‘Credit Card Accountability Responsibility and Disclosure 

Act of 2009’’ was developed to implement needed reforms and help 

protect consumers by prohibiting various unfair, misleading and 

deceptive practices in the credit card market. 

The bill contains numerous provisions which provide protection 

to consumers from unreasonable interest rate increases. The bill 

prohibits retroactive rate increases on existing balances, and requires creditors to provide a written notice of any rate increase at 

least 45 days before the increase takes effect. The bill protects consumers from rate increases based on information not related to the 

consumer’s behavior with regard to the credit card account. The bill 

prevents interminable penalty rates by requiring issuers to lower 

penalty rates that have been imposed on a cardholder after 6 

months if the cardholder commits no further violations. The bill 

also extends to consumers the right to cancel an account with the 

opportunity to repay the balance under existing terms. 

The bill also provides a number of protections from unreasonable 

credit card fees. The bill restricts over-limit fees, and permits consumers to request a fixed credit limit in order to prevent such fees. 

The bill also limits currency exchange fees, and bans fees on interest-only balances. The bill ensures that interest on credit card balances is computed in a fair manner, and requires creditors to allocate payments towards balances with higher rates first. 

The legislation enhances the supervision of credit card issuers 

and the transparency of their practices and includes measures that 

seek to protect consumers against misleading use of terms in credit 

card statements and solicitations. Among other provisions, the bill 

establishes a single definition of the terms ‘‘fixed’’ and ‘‘prime’’ with 

regard to interest rates, and requires additional disclosure of minimum payment information, including the total interest incurred if 

only minimum payments were made. The bill also gives consumers 

more time to make their payments by requiring creditors to provide 

consumers with a reasonable time to pay off the balance and to 

send periodic statements to consumers no less than 25 days before 

the due date. 

The bill provides that no gift cards or prepaid general-use cards 

be sold with an expiration date of less than five years, and generally prohibits dormancy, inactivity, and service charges and fees 

on any such card. 

The bill also limits the marketing of credit cards to individuals 

under age 21. Under this legislation, credit card issuers would be 

unable to make pre-screened credit card solicitations to individuals 

under age 21 unless the consumer expressly opted into receiving 


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1Federal Reserve Statistical Release G.19: Consumer Credit Outstanding (Historical). Available at: http://www.federalreserve.gov/releases/g19/hist/cclhistlsa.html 2Thomas A. Durkin. ‘‘Credit Cards: Use and Consumer Attitudes, 1970–2000.’’ Federal Reserve Bulletin, September 2000 (Vol. 86 Issue 9); Brian K. Bucks et al., ‘‘Changes in U.S. Family 

Finances from 2004 to 2007: Evidence from the Survey of Consumer Finances.’’ Federal Reserve 

Bulletin, February 2009 (Vol. 95). 3Government Accountability Office, Credit Cards: Increased Complexity in Rates and Fees 

Heightens Need for More Effective Disclosures to Consumers. GAO–06–929, at 5. 4Government Accountability Office, Credit Cards: Increased Complexity in Rates and Fees 

Heightens Need for More Effective Disclosures to Consumers. GAO–06–929, at 72. 

these solicitations. Extension of credit to consumers under 21 

would be limited to those circumstances where the consumer could 

demonstrate an independent means to repay obligations under the 

card agreement, the consumer had the signature of a parent or 

guardian indicating joint liability for the consumer’s debts on the 

account, or the consumer had completed an approved financial literacy course. 

The legislation further strengthens protections for consumers by 

increasing existing penalties for credit card companies that violate 

the Truth in Lending Act. 

Additionally, the bill will provide for additional data collection 

from credit card issuers to enhance oversight and regulation. The 

bill also amends the Federal Trade Commission Act to provide each 

federal banking agency the authority to prescribe regulations governing unfair or deceptive practices with respect to the depository 

institutions it supervises. 

The bill requires that the GAO conduct a study of credit card 

interchange fees and a study of the advisability of establishing a 

Credit Card Safety Rating Commission. 

BACKGROUND AND NEED FOR LEGISLATION

Revolving consumer credit in the United States has more than 

quadrupled over the past two decades, from $238.6 billion in December 1990 to a peak of $977 billion in September 2008.1 Over the 

same period, households’ credit card debt also increased significantly. Today, nearly 75 percent of American households have a 

general-purpose credit card, compared to only 16 percent of households in 1970.2 In the current economic downturn, households are 

increasingly using credit cards for routine expenses. 

As usage of credit cards has grown, the variety of fees and practices has also increased. As the GAO mentioned in its 2006 report 

on credit card disclosures, ‘‘After 1990, card issuers began to introduce cards with a greater variety of interest rates and fees, and the 

amounts that cardholders can be charged have been growing.’’ 3

GAO’s analysis found that some issuers charged up to three different interest rates for different types of transactions; penalty fees 

that more than doubled since 1990; penalty rates above 30 percent; 

and various new fees for foreign currency exchange, bill payment 

by telephone, cash advances, and balance transfers that were not 

necessarily incorporated in written disclosures. The six largest 

credit card issuers, who represent above three-quarters of the credit card market, earned approximately $7.4 billion in revenue in 

2005 from over-limit and late payment fees alone.4 In 2008, penalty 

rates averaged 16.9 percentage points above the standard rate, 

more than doubling from an 8.1 percentage point difference beVerDate Nov 24 2008 04:01 May 07, 2009 Jkt 079010 PO 00000 Frm 00003 Fmt 6659 Sfmt 6602 E:\HR\OC\SR016.XXX SR016

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5 Joshua M. Frank. ‘‘Priceless or Just Expensive? The Use of Penalty Rates in the Credit Card 

Industry.’’ Center for Responsible Lending, December 16, 2008. 6Government Accountability Office, Credit Cards: Increased Complexity in Rates and Fees 

Heightens Need for More Effective Disclosures to Consumers. GAO–06–929, at 5. 7http://www.cardtrak.com/questions/AveragelFamilylDebt, visited April 29, 2009. 8 Chu, Kathy, ‘‘November Credit-Card Payoff Rate Fell Sharply,’’ USA Today, February 8, 

2009. The monthly payment rate fell by 2.5 percentage points to 16.1 percent in November 2008, 

according to CardTrak.com. 9 30-day credit card delinquencies during first three quarters of 2008 were between 4.79 and 

4.88 percent, the highest levels since 2002. Federal Reserve Board, ‘‘Charge-Off and Delinquency 

Rates on Loans and Leases at 100 Largest Commercial Banks’’ ‘‘U.S. Credit Card Delinquencies 

at Record Highs—Fitch,’’ Reuters, February 4, 2009. 

tween standard and penalty rates in 2000.5 Among 28 popular 

credit cards, the average late fee rose to $34 in 2005, up from about 

$13 in 1995, and average fees charged for exceeding a credit limit 

more than doubled to $31 a month from $13.6

These penalties are contributing to the significant credit card 

debt under which American consumers increasingly find themselves buried. Evidence shows that consumers are struggling under 

the large amounts of credit card debt they have amassed. The average household that carries a credit card balance owes close to 

$10,000 in revolving debt on their credit cards.7 The amount of 

credit card debt paid off by Americans monthly, is now at one of 

the lowest levels ever recorded.8 Thirty-day credit card delinquencies are now at their highest point in six years, since the last 

economic recession ended.9 Personal bankruptcies have increased 

while the average savings rate is going down. 

The increase in fees and rates and increase in consumer debt 

load have come at a time when credit card issuers are increasingly 

engaging in ‘‘risk-based’’ pricing, where issuers charge certain consumers more to cover potential losses, usually in the form of higher 

interest rates. Issuers have argued that risk-based pricing is beneficial to consumers by allowing issuers to provide greater access to 

credit as the decision to grant credit has expanded significantly beyond a simple ‘‘yes or no’’ decision for lenders. Card issuers contend 

that the new pricing models enable them to offer cards to more individuals and charge lower interest rates to those with better credit 

scores. In response, consumer advocates have questioned whether 

pricing is truly based on the risk posed by the consumer. They 

have argued that the fees and penalty pricing that have evolved 

from the risk-based pricing environment are intended primarily to 

increase fee income, and contend that risk-based pricing generally 

works to consumers’ detriment. As issuers’ usage of fees and penalty pricing has increased, they have come under more scrutiny for 

engaging in the following practices: 

Universal default 

One of the most common consumer credit card complaints involves the practice by which card issuers increase the rate on a 

credit card account not because of the cardholder’s payment history 

with the card, but because of unrelated information, a practice 

known as universal default. Under universal default, consumers 

can make their credit card payment on time every month, but see 

their interest rate increase because the issuer has determined that 

their risk profile has increased. Issuers may apply universal default rate increases as a result of a consumer’s late payment on another account, such as a different credit card, a mortgage or car 


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10 Bennish, Steve, ‘‘Credit Reporting Policy Helps Most Customers, DP&L Says,’’ Dayton Daily 

News, February 26, 2009. 

payment, or a utility bill.10 Further, under current law issuers may 

apply universal default rate increases when a consumer doesn’t pay 

late at all, but rather when the issuer has determined that there 

has been a change in the consumer’s risk profile because he or she 

has taken out a new loan or utilized more of his or her available 

credit. 

Issuers argue that this practice is necessary to allow issuers to 

price consumers’ accounts according to the consumer’s overall risk 

profile. Consumer advocates contend that this practice is unfair because it allows issuers to raise rates even on cardholders who have 

always paid on time and have consistently met the terms of their 

contract, for reasons unrelated to the consumer’s behavior, such as 

changes in market conditions. They further note that when a penalty rate is triggered by the cardholder’s behavior, there is no limit 

on how long the increased rate will last. 

The Credit CARD Act prohibits this practice by permitting 

issuers to raise interest rates on cardholders only in response to a 

specific, material violation of the card agreement by the issuer. In 

addition, the bill would require issuers to lower penalty rates that 

have been imposed on a cardholder after 6 months if the cardholder 

meets the obligations of the credit card terms. 

Unilateral change in terms/‘‘Any Time, Any Reason’’ Provisions 

In addition to the rate increases based on universal default, 

many credit card issuers include clauses in their contracts allowing 

credit card issuers to raise rates and change terms on their credit 

card customers at any time for any reason. According to a 2008 

survey by Consumer Action, 77 percent of credit card issuers reserve the right to increase a consumer’s interest rate on both prospective balances and on consumers’ pre-existing balances under 

‘‘any time, any reason’’ clauses. This practice is prohibited by the 

Credit CARD Act, which prevents issuers from changing the terms 

of a credit card contract for the length of the card agreement, with 

limited exceptions. 

Retroactive interest rate increases 

Currently, when a credit card issuer raises a cardholder’s interest rate, this increased rate is applied not only to the purchases 

that the consumer will make in the future, but also to the balances 

that the consumer has already incurred at a lower rate, with the 

effect that an existing credit card debt which the consumer may 

have been paying on time costs significantly more to repay. Issuers 

contend that the ability to raise interest rates on cardholders is 

necessary to ensure that they are able to price for increased risk 

by the cardholder. Consumer advocates argue that this retroactive 

application of rate increase is unfair, and is not justified by the 

risk to the issuer since cardholders’ rates can be raised even when 

they have consistently met their obligations under the card contract. The CARD Act will prohibit retroactive interest rate increases, and require that interest rate increases apply only to future debt. 


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11For example: A consumer uses a convenience check sent in the mail, promising 0% for 12 months, to purchase a $9000 car. She also makes $300 in purchases, which carry a 12% APR. 

There is no way for the consumer to make payment on the $300 since any payment would first 

be applied to the $9000 carrying a 0% rate. 12 ‘‘Credit Cards: Increased Complexity in Rates and Fees Heightens Need for More Effective 

Disclosures to Consumers,’’ U.S. Government Accountability Office, September 2006, p. 18. 

Allocation of payments 

Card companies impose multiple interest rates for various types 

of transactions (e.g., balance transfers, ordinary purchases, and 

cash advances). When the cardholder makes a payment, industry 

practice is to apply the monthly payment first to the balance with 

the lowest APR, while letting the higher interest balance collect 

more interest and more debt. Under this method of payment allocation, the cardholder is prevented from paying off his or her higher 

rate balance until the balance with the least expensive rate is paid 

off, maximizing the amount of interest that the consumer pays. 

One result of this method of allocation is that consumers do not receive the full benefit of lower promotional interest rates because a 

consumer can never take full advantage of lower promotional rates 

while still using the card.11 The CARD Act requires payments to 

be credited to the highest balance first, and to be applied in a way 

that minimizes finance charges. 

Misleading prescreened offers of credit 

Prescreened credit card solicitations often target people with 

blemished or no credit card histories with offers for credit cards 

that have low interest rates and high ‘‘up to’’ credit limits that exceed what the consumer is likely to qualify for and receive. Consumers who receive these solicitations that prominently advertise 

very low interest rates and high credit limits believe that when 

they apply, they will receive a credit card reflecting these advertised rates and limits. Ultimately, however, these consumers receive cards that have less attractive terms and features than the 

card for which they applied, including higher interest rates and 

lower credit limits. A consumer who is offered one rate or a range 

of rates, and receives a card at the high end of that range effectively cannot decline the card and start the process over with another card company without penalty, because multiple credit requests can depress the consumer’s credit score, thereby affecting 

the consumer’s ability to obtain another card at a competitive rate. 

The CARD Act would allow cardholders to reject a card until they 

activate it without having their credit adversely affected. 

Unreasonable and excessive fees 

An analysis by the United States Government Accountability Office (GAO) found that ‘‘typical cards today now include higher and 

more complex fees than they did in the past for making late payments, exceeding credit limits, and processing returned payments.’’ 12 For example, credit card issuers in the past rejected 

transactions that exceeded a cardholder’s credit limit, but it has 

now become common practice for issuers to accept the transaction 

and then apply an overlimit fee on cardholders who exceed their 

credit limits. In addition, the GAO found that late fees have been 

steadily rising over the past decade, averaging $34 per incident in 

2005. 


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The Credit Card Act will help put an end to unreasonable penalty fees. For example, the Act prohibits issuers from charging a 

fee to allow a consumer to pay a credit card debt, whether payment 

is by mail, telephone, electronic transfer, or otherwise. With respect 

to overlimit fees, the Act prevents issuers from charging multiple 

overlimit fees for exceeding a card limit, and allows such fees only 

when a cardholder’s action, rather than a fee or finance charge, 

causes the limit to be exceeded. The Act also permits overlimit 

charges to be applied only once during a billing cycle. The CARD 

Act further addresses fees by requiring that the penalty fees 

charged to cardholders be reasonably related to the issuers’ costs, 

and by requiring that currency exchange fees be reasonable. The 

Committee understands that the Federal Reserve Board, in determining reasonable relation to cost, will take into account a number 

of factors, including; costs associated with individual transactions; 

costs of managing the portfolio; credit risk associated with both the 

portfolio and the individual; the conduct of the cardholder; and circumstances leading to such omission or violation; and such other 

factors as the Board may deem appropriate. 

Unfair methods of computing finance charges 

Issuers use different methods for computing finance charges on 

balances that have already been paid on time. These methods are 

difficult for consumers to understand and can result in substantial 

additional finance charges on a cardholder over the course of a 

year. Under the double cycle billing method of computing finance 

charges, an issuer considers not only the current balance on the 

credit card, but also the balance from previous billing periods in assessing interest on a consumer’s balance. This method results in a 

consumer paying more interest on the current outstanding balance 

on the card. In addition to double cycle billing, issuers use interest 

computation practices to charge consumers interest on the portion 

of balances repaid during a grace period, when the consumer pays 

some but not all of the outstanding balances. Using this method, 

a consumer who begins with no balance from the previous billing 

cycle (month 1) and then pays off a portion of the current balance 

(month 2), would be charged interest (in month 3) for the entire 

amount of the balance, even the portion that was paid (in month 

2) . 

The Card Act would address these practices by preventing 

issuers from requiring consumers to pay interest on portions of 

debt already repaid, helping to ensure a fair billing process that 

only results in an interest charge on the amount of the unpaid balance. The Act would require finance charges on outstanding credit 

card balances to be computed based on purchases made in the current cycle rather than going back to the previous billing cycle to 

calculate interest charges. 

Minimal notice and lack of disclosure 

The large volume of the card industry’s solicitations is exacerbated by the confusing complexity of those solicitations. It is common industry practice to use promotional interest rates to attract 

customers and to induce new and existing customers to transfer 

balances from other credit cards. Direct mail solicitations prominently display low interest rates to lure consumers but often fail 


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13 In 2006, the Government Accountability Office (GAO) found that current ‘‘disclosures have 

serious weaknesses that likely reduced consumers’ ability to understand the costs of using credit 

cards’’ because they were too complicated for many consumers to understand. Government Accountability Office, Credit Cards; Increased Complexity in Rates and Fees Heightens Need for 

More Effective Disclosures to Consumers 6 (2006). 

to fully or prominently disclose the fact that the low rate is for a 

limited period of time, that circumstances exist that could shorten 

the promotional period or cause the promotional interest rate to increase, or that there may be fees associated with transferring balances to lower interest rate cards. In addition, credit card issuers 

are currently required to mail notices only 15 days in advance of 

a proposed increase in interest rate, with the result that consumers 

have very little opportunity to avoid the increased interest rate and 

thus face significant additional interest payments without advance 

notice. 

The Act makes a number of changes to enhance consumer disclosures. It requires issuers to provide 45 days advance notice of interest rate increases, and grants cardholders the right to cancel the 

card and pay it off under the old terms. 

Aggressive marketing to students 

Credit card issuers engage in extensive marketing on college 

campuses with offers of easy credit to students and encourage them 

to obtain and use credit cards without verifying the student’s ability to repay the resultant debt. In contrast, if any other adult applies for a credit card, an issuer generally verifies the consumer’s 

ability to pay by checking their credit history and obtaining information about the applicant’s income. A consumer with a less positive credit history or lack of income either gets a lower limit, higher interest rate card or is required to have a co-signer. An even less 

creditworthy consumer would be denied, or required to obtain a secured credit card. 

The CARD Act requires credit card issuers to consider ability to 

repay when issuing credit cards to students and other young consumers. The Act requires that credit card issuers, when extending 

credit to persons under the age of 21, obtain an application that 

contains: (1) the signature of a parent, guardian, or other qualified 

individual willing to take financial responsibility for the debt; (2) 

information indicating an independent means of repaying any credit extended; or (3) proof that the applicant has completed a certified 

financial literacy or financial education course. 

CREDIT CARD FINAL RULES 

In the face of evidence that disclosure was insufficient to protect 

consumers from many abusive practices,13 the Federal Reserve 

Board, Office of Thrift Supervision and the National Credit Union 

Administration finalized rules to prohibit unfair or deceptive practices regarding credit cards and overdraft services in December of 

2008. The Agencies exercised their authority under the Federal 

Trade Commission Act to prescribe regulations to end certain unfair or deceptive credit card practices under Regulation AA (Unfair 

Acts and Practices). During the comment period, the public responded to the proposed rules with an unprecedented number of 

comments—over 66,000—submitted to the agencies. 


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Among other provisions, the rules include the following credit 

card protections for consumers: 

(1) Credit card issuers will be prohibited from increasing the rate 

on a preexisting credit card balance. Exceptions to this provision 

are provided for: rate increases linked to an increase in an underlying index on a variable-rate card; the expiration of a specified 

promotional period provided that the higher rate was disclosed at 

account opening; the cardholder’s failure to comply with the terms 

of a workout or temporary hardship arrangement; and 30–day delinquency by the cardholder. 

(2) Issuers will be prohibited from allocating payments in excess 

of the minimum in a manner that maximizes interest charges. 

(3) Issuers will be prohibited from imposing interest charges 

using the ’’double-cycle’’ method, which computes interest on balances on days in billing cycles preceding the most recent billing 

cycle. 

(4) Issuers will be required to provide consumers a reasonable 

amount of time to make payments, with statement mailing or delivery 21 days prior to the due date considered a ‘‘safe harbor.’’ 

(5) Issuers would be prohibited from financing security deposits 

and fees for credit availability (such as account-opening fees or 

membership fees) if charges assessed during the first 12 months 

would exceed 50 percent of the initial credit limit. 

The Agencies also exercised their authority under the Truth in 

Lending Act to prescribe regulations on consumer disclosures in 

credit card solicitations, applications, and statements under Regulation Z. These regulations were proposed after consumer testing 

which included a series of focus groups as well as interviews with 

1,022 participants in seven cities. Final rules under Regulation Z 

include the following requirements: 

(1) Application and solicitation disclosures will be required to include the actions that would trigger a ‘‘penalty APR’’ along with 

the resulting penalty rate and the possibility of that rate to expire. 

The potentially confusing terms ‘‘default rate’’ and ‘‘grace period’’ 

will not be permitted. 

(2) Account opening disclosures will be required to include interest fees, minimum charges, transaction fees, annual fees, and penalty fees. 

(3) Periodic statement disclosures will be required to group together interest charges and fees, itemized by transaction type, with 

year-to-date totals. Payment due dates and the consequences of a 

late payment would be required on the front of each statement. 

(4) Advance notice for interest rate increases or other changes in 

terms will increase to a minimum of 45 days. Currently, the rules 

permit either immediate increases, or a minimum of 15 days advance notice, depending on actions triggering the change. 

(5) Cut-offs for accepting payments will be established at a ‘‘reasonable time,’’ no earlier than 5 p.m., with Sunday/holiday due 

dates postponed to the next business day for payments made by 

mail. 

It is the view of the Committee that these rules are an important 

first step in curbing some of the most abusive practices engaged in 

by credit card issuers. But there are a number of additional areas 

described in this report where Congress needs to act to ensure that 

consumers are adequately protected in the credit card marketplace. 


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In addition, the rules do not take effect and thus leave consumers 

unprotected until July 1, 2010. 

SECTION-BY-SECTION ANALYSIS

Section 1. Short title 

This section establishes the short title of the bill, the ‘‘Credit 

Card Accountability Responsibility and Disclosure Act,’’ and provides a table of contents. 

Section 2. Regulatory authority 

This section authorizes the Board of Governors of the Federal Reserve System (the Board) to issue rules and publish model forms 

as it considers necessary to carry out the Act and the amendments 

made by the Act. 

Section 3. Effective date 

This section provides an effective date of 9 months after passage 

of the Act. 

TITLE I—CONSUMER PROTECTION 

Section 101. Prior notice of rate increases required 

This section prevents issuers from increasing interest rates on 

cardholders without 45 days’ notice, and prohibits issuers from applying rate increases retroactively to existing balances. This section 

also requires issuers to provide cardholders with a clear notice of 

the cardholders’ right to cancel the credit card when the interest 

rate is raised. 

Section 102. Freeze on interest rate terms and fees on canceled cards 

This section prevents issuers from increasing the interest rate on 

a cardholder, or changing the terms of a credit card, if a cardholder 

cancels a card. 

Section 103. Limits on fees and interest charges 

This section prohibits credit card issuers from imposing interest 

charges on any portion of a balance that is paid by the due date. 

Under this section, cardholders must be given the option of having a fixed credit limit that cannot be exceeded, and card companies are prohibited from charging overlimit fees on cardholders 

with fixed limits. Cardholders may elect to prohibit their issuers 

from completing overlimit transactions that will result in a fee or 

constitute a default under the credit agreement. Overlimit charges 

can only be charged when an extension of credit, rather than a fee 

or interest charge, causes the credit limit to be exceeded, and can 

only be applied once during a billing cycle. 

This section prohibits issuers from charging interest on credit 

card transaction fees, such as late fees and overlimit fees. 

This section prohibits credit card issuers from charging a fee to 

allow a credit card holder to pay a credit card debt, whether payment is by mail, telephone, electronic transfer, or otherwise. This 

section requires that penalty fees assessed to cardholders be reasonably related to the cost incurred by the issuer. Under this section, foreign currency exchange fees may only be imposed in an account transaction if the fee reasonably reflects costs incurred by 


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the creditor and the creditor publicly discloses its method for calculating the fee. 

Section 104. Consumer right to reject card before notice is provided 

of open account 

This section prohibits creditors from reporting the issuance of 

any credit card to a credit reporting agency until the cardholder 

uses or activates the card. 

Section 105. Use of terms clarified 

This section prevents card companies from using the terms ‘‘fixed 

rate’’ and ‘‘prime rate’’ in a misleading way by establishing a single 

definition. 

Section 106. Application of card payments 

This section prohibits credit card companies from setting early 

deadlines for credit card payments. The section requires payments 

to be applied first to the credit card balance with the highest rate 

of interest, and to minimize finance charges. The section prohibits 

late fees if the card issuer delayed crediting the payment. In addition, this section prohibits card companies from charging late fees 

when a cardholder presents proof of mailing payment within 7 days 

of the due date. 

Section 107. Length of billing period 

This section requires credit card statements to be mailed 21 days 

before the bill is due. 

Section 108. Prohibition on universal default and unilateral 

changes to cardholder agreements 

This section prevents credit card issuers from increasing interest 

rates on cardholders for reasons unrelated to the cardholder’s behavior with respect to that card. In addition, it prevents credit card 

issuers from changing the terms of a credit card contract for the 

length of the card agreement. The section allows penalty rate increases only for specific, material actions or omissions of the consumer specified in the card agreement. Lastly, this section requires 

issuers to lower penalty rates that have been imposed on a cardholder after 6 months if the cardholder commits no further violations. 

Section 109. Enhanced penalties 

This section increases existing penalties for companies that violate the Truth in Lending Act with respect to credit card customers. 

Section 110. Enhanced oversight 

This section requires a credit card issuer’s primary regulator to 

evaluate the credit card policies and procedures of card issuers to 

ensure compliance with credit card requirements and prohibitions. 

Improves existing data collection efforts related to credit card interest rates, fees, and profits. 


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Section 111. Clerical amendments 

This section makes clerical corrections to the Truth in Lending 

Act. 

TITLE II—ENHANCED CONSUMER DISCLOSURES 

Section 201. Payoff timing disclosures 

This section requires credit card issuers to provide individual 

consumer account information and to disclose the period of time it 

will take the cardholder to pay off the card balance if only minimum monthly payments are made. Under this section, issuers are 

required to disclose the total amount of interest the cardholder will 

pay in order to pay off the card balance if only minimum monthly 

payments are made. This section also requires issuers to provide a 

toll-free number for use by the consumer to receive information 

about accessing credit counseling and debt management services. 

Section 202. Requirements relating to late payment deadlines and 

penalties 

This section requires full disclosure in billing statements of required payment due dates and applicable late payment penalties. 

It further requires that cardholders be given a reasonable period to 

make payment, and that payment at local branches be credited 

same-day. 

Section 203. Renewal disclosures 

This section requires card issuers to provide a full set of account 

disclosures to cardholders upon card renewal when the terms of the 

card have changed. 

TITLE III—PROTECTION OF YOUNG CONSUMERS 

Section 301. Extensions of credit to underage consumers 

This section requires that credit card issuers, when extending 

credit to persons under the age of 21, obtain an application that 

contains either: (1) the signature of a parent, guardian, other qualified individual willing to take financial responsibility for the debt; 

(2) information indicating an independent means of repaying any 

credit extended; or (3) proof that the applicant has completed a certified financial literacy or financial education course. 

Section 302. Restrictions on certain affinity cards 

This section mandates that credit card issuers, as a condition for 

entering into commission-based affinity cards with higher education institutions, require that all affinity card customers under 

the age of 21, comply with the requirements listed above. 

Section 303. Protection of young consumers from prescreened offers 

of credit 

This section prohibits consumer reporting agencies from furnishing reports in connection with firm offers of credit or insurance 

that are not initiated by consumers under age 21. This section also 

allows consumers who are at least 18, but not yet 21, to elect, in 

writing, to have their names and addresses included in any list of 


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names provided by such agencies in connection with such transactions. 

Section 304. Issuance of credit cards to certain college students 

This section requires parental approval to increase credit lines on 

accounts where the parent is jointly liable. 

TITLE IV—FEDERAL AGENCY COORDINATION 

Section 401. Inclusion of all Federal banking agencies 

This section amends the Federal Trade Commission Act to authorize each federal banking agency to prescribe regulations governing unfair or deceptive practices with respect to the institutions 

they supervise. Existing authority is limited to the Federal Reserve 

Board, the Office of Thrift Supervision, and the National Credit 

Union Administration. This section would extend this authority to 

the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation. 

The section requires the federal banking agencies to prescribe 

such regulations: (1) jointly to the extent practicable; and (2) in 

consultation with the Federal Trade Commission (FTC). Under this 

section, the Comptroller General is instructed to report to Congress 

on the status of regulations by the federal banking agencies and 

the NCUA regarding unfair and deceptive acts or practices by depository institutions. 

Nothing in this section is intended to affect the scope of the authority granted to the financial regulators under the FTC Act, nor 

is the section intended to affect in any way the authority of the 

FTC. Nothing in this section is intended to affect the applicability 

of state unfair and deceptive practices laws to federally chartered 

institutions. 

TITLE V—GIFT CARDS 

Section 501. Definitions 

This section defines terms including ‘‘gift card,’’ ‘‘gift certificate’’ 

and ‘‘general-use prepaid card.’’ 

Section 502. Unfair or deceptive acts or practices regarding gift 

cards 

This section makes it unlawful for any person to impose a dormancy fee, inactivity charge or fee, or a service fee with respect to 

a gift certificate, store gift card, or general-use prepaid card. This 

section further provides that it is unlawful to sell or issue a gift 

certificate, gift card or general-use prepaid card that is subject to 

an expiration date of less than 5 years. An exception is provided 

allowing fees of not more than $1 for reloadable cards or certificates with less than $5 in value that have been inactive for over 

24 months. 

Section 503. Relation to state laws 

This section states that this title shall not supersede any provisions of State law with respect to dormancy fees, inactivity charges 

or fees, service fees, or expiration dates of gift certificates, store gift 

cards, or general-use prepaid cards. 


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Section 504. Enforcement 

This section makes this title enforceable under section 18(a)(1)(B) 

of the Federal Trade Commission Act. 

TITLE VI—MISCELLANEOUS PROVISIONS 

Section 601. Study and report on interchange fees 

This section requires the Comptroller General of the GAO to conduct a study on interchange fees and their effects on merchants 

and consumers, and to report the findings to Congress in 180 days. 

Section 602. Study and report on credit card rating system 

This section requires the Comptroller General of the GAO to establish a Credit Card Safety Rating Commission that will determine whether a rating system to allow cardholders to quickly assess the level of safety of credit card agreements would be beneficial to consumers, and to make recommendations to Congress concerning how such a system should be devised. 

Section 603. Increased borrowing authority of the FDIC and the 

NCUA 

This section increases the maximum borrowing authority of the 

Federal Deposit Insurance Corporation from $30 billion to $100 billion and of the National Credit Union Administration from 

$100,000,000 to $6 billion. 

This section further authorizes a temporary increase in borrowing authority through calendar year 2010 up to a maximum of 

$500 billion for the FDIC and $18 billion for the NCUA, if the Secretary of the Treasury, in consultation with the President, determines that additional amounts are necessary, pursuant to the written recommendation of the Federal Reserve Board and either the 

FDIC Board or the NCUA Board, respectively. 

Additionally, this section requires that the NCUA Board establish a restoration plan for the Share Insurance Fund when the 

Board determines that the equity ratio of the Fund will fall below 

1.2%, the minimum equity level required by statute. 

REGULATORY IMPACT STATEMENT

In accordance with paragraph 11(b), rule XXVI, of the Standing 

Rules of the Senate, the Committee makes the following statement 

concerning the regulatory impact of the bill. 

The ‘‘Credit Card Accountability Responsibility and Disclosure 

Act of 2009’’ modifies the Truth in Lending Act to prohibit certain 

practices by credit card issuers, and to require that they provide 

additional disclosures to borrowers. The bill requires the Federal 

Reserve Board to issue regulations to implement the Act. 

The bill modifies the Federal Trade Commission Act to give each 

federal banking agency, with respect to the depository institutions 

it supervises, the authority to prescribe regulations governing unfair or deceptive practices. 

The bill also modifies the Federal Deposit Insurance Act and the 

Federal Credit Union Act. 

The bill has no discernible impact on personal privacy. The bill 

is not expected to result in substantial additional paperwork. 


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COST OF THE LEGISLATION

April 24, 2009. 

Hon. CHRISTOPHER J. DODD, 

Chairman, Committee on Banking, Housing, and Urban Affairs, 

U.S. Senate, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for S. 414, the Credit Card Accountability Responsibility and Disclosure Act of 2009. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contacts are Kathleen Gramp and 

Leigh Angres (federal deposit insurance), Barbara Edwards (revenues), and Jacob Kuipers (private-sector mandates). 

Sincerely, 

DOUGLAS W. ELMENDORF. 

Enclosure. 

S. 414—Credit Card Accountability Responsibility and Disclosure 

Act of 2009 

Summary: S. 414 would amend the Truth in Lending Act to restrict the use of a number of billing practices applied to consumer 

credit cards. S. 414 would direct the Board of Governors of the Federal Reserve System (Federal Reserve), in consultation with other 

financial regulatory agencies, to issue regulations implementing 

the new standards. The Federal Reserve also would be required to 

annually report to the Congress about certain profitability measures on the credit card operations of depository institutions. Finally, the bill would establish a commission to study the feasibility 

of instituting a rating system to reflect the riskiness of credit card 

agreements. 

S. 414 also would make changes to the insurance funds administered by the Federal Deposit Insurance Corporation (FDIC) and the 

National Credit Union Administration (NCUA). The bill would increase the amounts that the FDIC and NCUA can borrow from the 

Treasury for their deposit insurance funds. S. 414 also would allow 

NCUA to lengthen the amount of time available to impose industry 

assessments for the purpose of replenishing its insurance fund. 

CBO estimates that enacting S. 414 would increase direct spending by $1.4 billion over the 2010–2014 period and reduce direct 

spending by $500 million over the 2010–2019 period. We estimate 

that implementing S. 414 would increase discretionary spending by 

$9 million over the 2010–2014 period, assuming appropriation of 

the estimated amounts. CBO estimates that enacting the bill would 

not have a significant effect on revenues. 

The effects on direct spending over the 2009–2013 and 2009– 

2018 periods are relevant for enforcing the Senate’s pay-as-you-go 

rule under the current budget resolution. CBO estimates that enacting S. 414 would increase direct spending by $2.5 billion over 

the 2009–2013 period and reduce direct spending by $500 million 

over the 2009–2018 period. Enacting S. 414 would not have a significant effect on revenues over those time periods. Pursuant to 

Section 311 of S. Con. Res. 70, CBO estimates that S. 414 would 

not cause a net increase in deficits in excess of $5 billion in any 

of the four 10–year periods beginning after fiscal year 2018. 


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S. 414 contains no intergovernmental mandates as defined in the 

Unfunded Mandates Reform Act (UMRA) and would impose no 

costs on state, local, or tribal governments. 

S. 414 contains several private-sector mandates, as defined in 

UMRA. The bill would require creditors to submit detailed information on a semiannual basis to the Federal Reserve and prohibit 

them from engaging in certain credit card billing and issuing practices. The bill also would prohibit issuers of gift cards from collecting certain fees or establishing expiration dates. Based on information from the Federal Reserve and industry sources, CBO estimates that the aggregate cost of those requirements would likely 

exceed the annual threshold established in UMRA for private-sector mandates ($139 million in 2009, adjusted annually for inflation) 

in at least one of the first five years the mandates are in effect. 

Estimated cost to the Federal Government: The estimated impact 

of enacting S. 414 is shown in the following table. The costs of this 

legislation fall within budget functions 370 (commerce and housing 

credit) and 800 (general government). 

Basis of estimate: For this estimate, CBO assumes that S. 414 

will be enacted near the end of fiscal year 2009. 

Direct spending 

CBO estimates that enacting S. 414 would increase direct spend- ing by $1.4 billion over the 2010–2014 period, but would reduce direct spending by $500 million over the 2010–2019 period as a result of changes related to federal deposit insurance programs. 


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By fiscal year, in millions of dollars— 

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2010– 2014 2010– 2019 

CHANGES IN DIRECT SPENDING 1

Increase FDIC Borrowing Authority: 

Estimated Budget Authority .................................................................. 0 0 0 0 0 0 0 0 0 0 0 0 Estimated Outlays ................................................................................. 7,700 ¥2,160 ¥2,310 ¥1,330 ¥860 ¥820 ¥630 ¥30 0 0 1,040 ¥440 

Lengthening Time to Restore the SIF: 

Estimated Budget Authority .................................................................. 0 0 0 0 0 0 0 0 0 0 0 0 Estimated Outlays ................................................................................. 1,460 ¥260 ¥280 ¥290 ¥310 ¥290 ¥90 0 0 0 320 ¥60 

Total Changes: 

Estimated Budget Authority ......................................................... 0 0 0 0 0 0 0 0 0 0 0 0 Estimated Outlays ........................................................................ 9,160 ¥2,420 ¥2,590 ¥1,620 ¥1,170 ¥1,110 ¥720 ¥30 0 0 1,360 ¥500 

CHANGES IN SPENDING SUBJECT TO APPROPRIATION 

Estimated Authorization Level ........................................................................ 2 2 2 2 2 2 2 2 2 2 10 20 Estimated Outlays .......................................................................................... 1 2 2 2 2 2 2 2 2 2 9 19 

1 CBO estimates that enacting S. 414 would have an insignificant effect on revenues over the 2010–2019 period. 

Note: FDIC = Federal Deposit Insurance Corporation; SIF = Share Insurance Fund. 


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Higher Borrowing Limit for FDIC. The bill would provide a permanent increase in the FDIC’s authority to borrow from $30 billion to $100 billion and would provide a temporary increase of up 

to $500 billion under certain conditions. Raising the FDIC’s borrowing authority would give the agency more flexibility in setting 

the insurance premiums it charges depository institutions, managing the resolution of failed institutions, and providing alternative 

forms of assistance to financial institutions (for example, guaranteeing debt issued by banks). CBO estimates that such changes 

would increase net outlays by about $1 billion over the next five 

years, but would result in savings of $440 million over the 2010– 

2019 period. We assume that, if this bill is enacted, the FDIC 

would reduce certain special assessments on the financial industry 

that otherwise would take effect within the next 12 months, resolve 

certain cases more quickly, and reduce its reliance on loss-sharing 

methods to resolve failed institutions in some situations. 

Changes to National Credit Union Share Insurance Fund 

(SIF). The SIF normally provides insurance for deposits of $100,000 in individual credit unions. (Under Public Law 110–43, 

the SIF currently provides insurance up to $250,000 through December 31, 2009.) SIF is structured to be entirely self-supporting 

through the biannual premiums paid by credit unions. 

Current law requires that, over the course of the year, the SIF 

balance total between 1.2 percent and 1.3 percent of insured deposits (including amounts credited to the fund from interest earned on 

its unspent balances). If the fund balance (including interest) falls 

below 1.2 percent of insured deposits, the NCUA must assess a premium on credit unions. As of March 2009, the SIF has about $8 

billion in fund balances (1.3 percent of insured deposits). CBO estimates that the SIF will incur losses totaling about $7 

billion over the next three years. The majority of those losses will 

stem from an NCUA program created in January 2009 that provides a temporary guarantee of uninsured deposits at most corporate credit unions through December 31, 2010. The remaining 

losses will result from payments to a corporate credit union in January 2009 and from other anticipated credit union failures. 

Lengthening the Time to Restore the SIF. S. 414 would lengthen 

the amount of time available to restore the fund balances of the 

SIF to at least 1.2 percent of insured deposits. Agency regulations 

state that the SIF balance must be restored to at least 1.2 percent 

of insured deposits within one year. Under the bill, the SIF balance 

would have to be at 1 percent within a year, but the restoration 

from 1 percent to at least 1.2 percent of insured deposits could be 

spread out for a period of up to five years (or longer under extraordinary circumstances as determined by NCUA). 

Under the bill, CBO expects that future SIF premiums would be 

paid over seven years given the extraordinary losses the SIF is expected to incur. Accordingly, CBO estimates that the agency’s net 

outlays would increase by $320 million over the 2010–2014 period, 

as losses would exceed premium collections, but would decrease by 

about $60 million over the 2010–2019 period, as the remaining premiums would be collected. 

Higher Borrowing Limit for NCUA. The legislation also would increase the SIF’s borrowing authority from $100 million to $6 billion 

and allow for additional borrowing of up to $18 billion under cerVerDate Nov 24 2008 04:01 May 07, 2009 Jkt 079010 PO 00000 Frm 00018 Fmt 6659 Sfmt 6602 E:\HR\OC\SR016.XXX SR016

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tain circumstances. Currently, NCUA is using its borrowing authority through the Central Liquidity Facility (CLF) to address certain liquidity needs. Based on information provided by the NCUA, 

the agency would likely substitute borrowing from the CLF with 

borrowing under the bill’s authority. CBO therefore estimates that 

the increased borrowing authority would have no net effect on direct spending. 

Revenues 

The bill would provide more consumer protection for credit card 

holders through a number of requirements on credit card issuers. 

For example, the bill would require advance notification to consumers of any rate increases, limits on fees and interest charges 

on credit card accounts, longer time between the mailing of bills 

and the payment due dates, and enhanced disclosures regarding 

payoff timings and penalties. The bill also would provide more 

stringent requirements for the issuance of credit cards to individuals below age 21. The bill would impose some restrictions on fees 

charged for gift cards. The bill would require the Federal Reserve 

to issue any rules and model forms, as needed, to implement the 

requirements of the bill. To ensure the requirements are uniform 

for all financial institutions, the Federal Reserve would need to coordinate with other financial regulatory agencies. 

According to the Federal Reserve and other agencies, the regulatory activities required by S. 414 would not have a significant effect on their workload or budgets. In May 2008, the Federal Reserve proposed a number of regulatory changes that covered some 

of the same issues addressed by S. 414 and issued those regulations in December 2008. The related changes are scheduled to become effective July 2010. CBO does not expect the additional data 

collection and reporting requirements of the Federal Reserve to 

have a significant effect on its workload, and we anticipate that existing resources would be used to comply with S. 414. The budgetary effects on the Federal Reserve are recorded as changes in 

revenues (governmental receipts). Costs incurred by the other financial regulatory agencies affect direct spending, but most of 

those expenses are offset by fees or income from insurance premiums. Thus, CBO estimates that enacting this bill would not significantly affect revenues, and that the regulatory requirements 

would have a negligible net effect on direct spending. 

Spending subject to appropriation 

S. 414 would establish a commission to determine whether a rating system for credit card agreements would benefit consumers, 

and if so, to recommend ways such a rating system could be devised. Based on historical spending for similar activities, CBO estimates that creating the commission would cost about $9 million 

over the 2010–2014 period and $19 million over the 2010–2019 period, assuming appropriation of the necessary amounts. 

Other provisions of S. 414 would require the Federal Reserve and 

other financial regulatory agencies to consult with the Federal 

Trade Commission when developing regulations to implement the 

new standards and require the Government Accountability Office 

to undertake two studies and prepare reports of its findings. The 

first study, due six months after enactment of S. 414, would review 


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interchange fees and their effects on consumers and merchants. 

The second, due 18 months after enactment of the bill, would report on the status of regulations adopted by the financial regulatory agencies regarding unfair and deceptive acts by depository 

institutions and federal credit unions. Taken together, CBO estimates that those consultation and reporting requirements would 

cost less than $1 million per year, assuming the availability of appropriated funds. 

Estimated impact on state, local, and tribal governments: S. 414 

contains no intergovernmental mandates as defined in UMRA and 

would impose no costs on state, local, or tribal governments. 

Estimated impact on the private sector: The bill contains several 

private-sector mandates, as defined in UMRA, principally affecting 

creditors and institutions that issue gift cards. Mandates on creditors would: 

• Impose additional reporting requirements; 

• Place limits on fees and interest charges; 

• Set standards for issuing credit cards to individuals under 

the age of 21; and 

• Impose requirements on several features of credit accounts. 

The bill also would impose private-sector mandates on issuers of 

gift cards by prohibiting them from collecting certain fees or establishing expiration dates, except as directed in the bill. 

The aggregate costs to comply with those mandates would likely 

exceed the annual threshold established in UMRA for private-sector mandates ($139 million in 2009, adjusted annually for inflation) 

in at least one of the first five years the mandates are in effect. 

The bill also would codify several requirements included in credit 

card regulations recently established by the Federal Reserve and 

other financial regulatory agencies. CBO believes that action would 

not constitute a new mandate. 

Mandates on creditors 

Reporting Requirements. The bill would require the Federal 

Reserve to collect additional data from creditors on the profitability 

of their credit card operations, the percentages of income derived 

from different sources, fees on cardholders, fees on merchants, and 

any other specified material sources of income. Under current law, 

the Federal Reserve collects financial data semiannually from a 

large sample of creditors. Those data are readily compiled by creditors, and the cost of submitting the data is minimal. However, according to the Federal Reserve and industry sources, in order to 

comply with the new requirement, creditors would need to develop 

and implement new software programs and systems to compile the 

necessary data. Based on information from the Federal Reserve 

and industry sources, CBO estimates that the mandate would affect a large number of creditors, and the cost to set up the systems 

could be significant. 

Limits on Credit Card Fees and Interest Charges. The bill 

would place limits on fees and interest charges creditors could collect. This includes over-the-limit fees, interest charges, and other 

fees. The industry currently collects billions of dollars in such fees 

and interest charges annually. According to the Federal Reserve 


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and industry sources, the limits imposed by the bill could significantly affect the amount that creditors collect each year. 

Over-the-Limit Fees. The bill would require creditors to allow 

cardholders to establish a credit limit that cannot be exceeded, 

which is known as a hard credit limit. As such, creditors would be 

prevented from completing any transaction that would put the 

cardholder in excess of their credit limit. Under current practice, 

most cardholders are allowed to exceed their credit limit and are 

charged a fee for doing so. Under the bill, creditors would be prohibited from charging over-the-limit fees on accounts for which the 

cardholder has requested a hard credit limit. In addition, the bill 

would limit the situations when creditors could charge over-thelimit fees. Because the bill also would require creditors to notify 

their cardholders of the option to establish a credit limit and provide the necessary tools for cardholders to do so, the Federal Reserve and industry representatives believe that many cardholders 

would elect to use the option. 

Credit Card Interest Charges. The bill would impose several new 

requirements regarding a creditor’s ability to collect interest 

charges from credit cards that have been cancelled and from certain credit card transaction fees. The bill also would require creditors to apply a cardholder’s payment to the balance with the highest rate of interest to minimize finance charges. 

Credit Card Fees. The bill also would impose limits on the fees 

charged to cardholders and when creditors could charge certain 

fees. 

Standards for Issuing Credit Cards to Individuals Under 

the Age of 21. The bill also would require creditors, when soliciting to persons under the age of 21, to obtain a credit card application that contains either a guardian’s signature, information indicating an independent income, or proof that the applicant has completed a certified financial education course. In addition, a creditor 

would be prohibited from increasing such a cardholder’s line of 

credit unless a guardian approves in writing and assumes joint liability of such increase. A creditor also would be prohibited from 

soliciting prescreened credit offers to individuals under the age of 

21. Similarly, credit-reporting agencies would be prohibited from 

furnishing credit-related information to creditors unless explicitly 

authorized by the individual. Even though only a small percentage 

of cardholders are under the age of 21, creditors collect hundreds 

of millions of dollars each year from cardholders between the ages 

of 18 and 21. CBO is uncertain whether the mandates would affect 

the number of persons under 21 who would acquire credit cards. 

Therefore, we cannot determine if the cost of complying with this 

mandate would be significant to creditors. 

Requirements on Credit Account Features. S. 414 would impose several new requirements on creditors related to providing account disclosures, using certain terms, and activating credit cards. 

The bill would require creditors to disclose payment and interest 

information as well as termination procedures prominently as described in the bill. In addition, the bill would prohibit creditors 

from using the term ‘‘prime rate’’ unless its use is based on the definition provided in the bill and would prohibit creditors from informing credit bureaus of a cardholder’s line of credit until the 

cardholder has activated his or her card. The cost for creditors to 


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comply with those mandates would likely be minimal because compliance would involve only a small adjustment in current procedures. 

Mandates on issuers of gift cards 

S. 414 would prohibit issuers of gift cards from collecting certain 

fees and establishing expiration dates for gift certificates, store gift 

cards, or general-use prepaid cards except as allowed by the bill. 

According to industry sources, those requirements could significantly affect the amount that issuers of gift cards collect in fees 

each year. Currently, those issuers collect more than $6 billion 

each year from fees and expired cards. Even if this provision affected only a small portion of those fees, the amount of forgone collections by card issuers could be substantial. 

Estimate prepared by: Federal costs: Federal Banking—Kathleen 

Gramp and Leigh Angres; Revenues—Barbara Edwards; Impact on 

state, local, and tribal governments: Leo Lex; Impact on the private 

sector: Jacob Kuipers. 

Estimate approved by: Theresa Gullo, Deputy Assistant Director 

for Budget Analysis; Frank J. Sammartino, Acting Assistant Director for Tax Analysis. 

CHANGES IN EXISTING LAW (CORDON RULE)

On March 31, 2009 the Committee unanimously approved a motion by Senator Dodd to waive the Cordon rule. Thus, in the opinion of the Committee, it is necessary to dispense with the requirement of section 12 of rule XXVI of the Standing Rules of the Senate 

in order to expedite the business of the Senate. 

Æ 


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