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[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[S. 235 Introduced in Senate (IS)]

111th CONGRESS
  1st Session
                                 S. 235

  To amend the Truth in Lending Act to establish fair and transparent 
    practices relating to the extension of credit under an open end 
             consumer credit plan, and for other purposes.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                            January 14, 2009

  Mr. Schumer (for himself and Mr. Udall of Colorado) introduced the 
 following bill; which was read twice and referred to the Committee on 
                  Banking, Housing, and Urban Affairs

_______________________________________________________________________

                                 A BILL

 
  To amend the Truth in Lending Act to establish fair and transparent 
    practices relating to the extension of credit under an open end 
             consumer credit plan, and for other purposes.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Credit Cardholders' Bill of Rights 
Act of 2009''.

SEC. 2. CREDIT CARDS ON TERMS CONSUMERS CAN REPAY.

    (a) Retroactive Rate Increases and Universal Default Limited.--
Chapter 2 of the Truth in Lending Act (15 U.S.C. 1631 et seq.) is 
amended by inserting after section 127A the following new section:
``Sec. 127B. Additional requirements for credit card accounts under an 
              open end credit plan
    ``(a) Retroactive Rate Increases and Universal Default Limited.--
            ``(1) In general.--Except as provided in subsection (b), no 
        creditor may increase any annual percentage rate of interest 
        applicable to the existing balance on a credit card account of 
        the consumer under an open end credit plan.
            ``(2) Existing balance defined.--For purposes of this 
        subsection and subsections (b) and (c), the term `existing 
        balance' means the amount owed on a consumer credit card 
        account as of the end of the 14th day after the creditor 
        provides notice of an increase in the annual percentage rate in 
        accordance with subsection (c).
            ``(3) Treatment of existing balances following rate 
        increase.--If a creditor increases any annual percentage rate 
        of interest applicable to the credit card account of a consumer 
        under an open end credit plan and there is an existing balance 
        in the account to which such increase may not apply, the 
        creditor shall allow the consumer to repay the existing balance 
        using a method provided by the creditor which is at least as 
        beneficial to the consumer as one of the following methods:
                    ``(A) An amortization period for the existing 
                balance of at least 5 years starting from the date on 
                which the increased annual percentage rate went into 
                effect.
                    ``(B) The percentage of the existing balance that 
                was included in the required minimum periodic payment 
                before the rate increase cannot be more than doubled.
            ``(4) Limitation on certain fees.--If--
                    ``(A) a creditor increases any annual percentage 
                rate of interest applicable on a credit card account of 
                the consumer under an open end credit plan; and
                    ``(B) the creditor is prohibited by this section 
                from applying the increased rate to an existing 
                balance,
        the creditor may not assess any fee or charge based solely on 
        the existing balance.''.
    (b) Exceptions to the Amendment Made by Subsection (a).--Section 
127B of the Truth in Lending Act is amended by inserting after 
subsection (a) (as added by subsection (a)) the following new 
subsection:
    ``(b) Exceptions.--
            ``(1) In general.--A creditor may increase any annual 
        percentage rate of interest applicable to the existing balance 
        on a credit card account of the consumer under an open end 
        credit plan only under the following circumstances:
                    ``(A) Change in index.--The increase is due solely 
                to the operation of an index that is not under the 
                creditor's control and is available to the general 
                public.
                    ``(B) Expiration or loss of promotional rate.--The 
                increase is due solely to--
                            ``(i) the expiration of a promotional rate; 
                        or
                            ``(ii) the loss of a promotional rate for a 
                        reason specified in the account agreement 
                        (e.g., late payment).
                    ``(C) Payment not received during 30-day grace 
                period after due date.--The increase is due solely to 
                the fact that the consumer's minimum payment has not 
                been received within 30 days after the due date for 
                such minimum payment.
            ``(2) Limitation on increases due to loss of promotional 
        rate.--Notwithstanding paragraph (1)(B)(ii), the annual 
        percentage rate in effect after the increase permitted under 
        such subsection due to the loss of a promotional rate may not 
        exceed the annual percentage rate that would have applied under 
        the terms of the agreement after the expiration of the 
        promotional rate.''.
    (c) Advance Notice of Rate Increases.--Section 127B of the Truth in 
Lending Act is amended by inserting after subsection (b) (as added by 
subsection (b)) the following new subsection:
    ``(c) Advance Notice of Rate Increases.--In the case of any credit 
card account under an open end credit plan, no increase in any annual 
percentage rate of interest may take effect unless the creditor 
provides a written notice to the consumer at least 45 days before the 
increase takes effect which fully describes the changes in the annual 
percentage rate, in a complete and conspicuous manner, and the extent 
to which such increase would apply to an existing balance.''.
    (d) Clerical Amendment.--The table of sections for chapter 2 of the 
Truth in Lending Act (15 U.S.C. 1631 et seq.) is amended by inserting 
after the item relating to section 127A the following new item:

``127B. Additional requirements for credit card accounts under an open 
                            end credit plan.''.

SEC. 3. ADDITIONAL PROVISIONS REGARDING ACCOUNT FEATURES, TERMS, AND 
              PRICING.

    (a) Double Cycle Billing Prohibited.--Section 127B of the Truth in 
Lending Act is amended by inserting after subsection (c) (as added by 
section 2(c)) the following new subsection:
    ``(d) Double Cycle Billing.--
            ``(1) In general.--No finance charge may be imposed by a 
        creditor with respect to any balance on a credit card account 
        under an open end credit plan that is based on balances for 
        days in billing cycles preceding the most recent billing cycle.
            ``(2) Exceptions.--Paragraph (1) shall not apply so as to 
        prohibit a creditor from--
                    ``(A) charging a consumer for deferred interest 
                even though that interest may have accrued over 
                multiple billing cycles; or
                    ``(B) adjusting finance charges following 
                resolution of a billing error dispute.''.
    (b) Limitations Relating to Account Balances Attributable Only to 
Accrued Interest.--Section 127B is amended by inserting after 
subsection (d) (as added by subsection (a)) the following new 
subsection:
    ``(e) Limitations Relating to Account Balances Attributable Only to 
Accrued Interest.--
            ``(1) In general.--If the outstanding balance on a credit 
        card account under an open end credit plan at the end of a 
        billing period represents an amount attributable only to 
        interest accrued during the preceding billing period on an 
        outstanding balance that was fully repaid during the preceding 
        billing period--
                    ``(A) no fee may be imposed or collected in 
                connection with such balance attributable only to 
                interest before such end of the billing period; and
                    ``(B) any failure to make timely repayments of the 
                balance attributable only to interest before such end 
                of the billing period shall not constitute a default on 
                the account.
        Such balance remains a legally binding debt obligation.
            ``(2) Rule of construction.--Paragraph (1) shall not be 
        construed as affecting--
                    ``(A) the consumer's obligation to pay any accrued 
                interest on a credit card account under an open end 
                credit plan; or
                    ``(B) the accrual of interest on the outstanding 
                balance on any such account in accordance with the 
                terms of the account and this title.''.
    (c) Access to Payoff Balance Information.--Section 127B of the 
Truth in Lending Act is amended by inserting after subsection (e) (as 
added by subsection (b)) the following new subsection:
    ``(f) Payoff Balance Information.--Each periodic statement provided 
by a creditor to a consumer with respect to a credit card account under 
an open end credit plan shall contain the telephone number, Internet 
address, and worldwide website at which the consumer may request the 
payoff balance on the account.''.
    (d) Consumer Right To Reject Card Before Notice Is Provided of Open 
Account.--Section 127B of the Truth in Lending Act is amended by 
inserting after subsection (g) (as added by subsection (c)) the 
following new subsection:
    ``(g) Consumer Right To Reject Card Before Notice of New Account Is 
Provided to Consumer Reporting Agency.--
            ``(1) In general.--A creditor may not furnish any 
        information to a consumer reporting agency (as defined in 
        section 603) concerning the establishment of a newly opened 
        credit card account under an open end credit plan until the 
        credit card has been used or activated by the consumer.
            ``(2) Rule of construction.--Paragraph (1) shall not be 
        construed as prohibiting a creditor from furnishing information 
        about any application for a credit card account under an open 
        end credit plan or any inquiry about any such account to a 
        consumer reporting agency (as so defined).''.
    (e) Use of Terms Clarified.--Section 127B of the Truth in Lending 
Act is amended by inserting after subsection (g) (as added by 
subsection (d)) the following new subsection:
    ``(h) Use of Terms.--The following requirements shall apply with 
respect to the terms of any credit card account under any open end 
credit plan:
            ``(1) `Fixed' rate.--The term `fixed', when appearing in 
        conjunction with a reference to the annual percentage rate or 
        interest rate applicable with respect to such account, may only 
        be used to refer to an annual percentage rate or interest rate 
        that will not change or vary for any reason over the period 
        clearly and conspicuously specified in the terms of the 
        account.
            ``(2) Prime rate.--The term `prime rate', when appearing in 
        any agreement or contract for any such account, may only be 
        used to refer to the bank prime rate published in the Federal 
        Reserve Statistical Release on selected interest rates (daily 
        or weekly), and commonly referred to as the H.15 release (or 
        any successor publication).
            ``(3) Due date.--
                    ``(A) In general.--Each periodic statement for any 
                such account shall contain a date by which the next 
                periodic payment on the account must be made to avoid a 
                late fee or be considered a late payment, and any 
                payment received by 5 p.m., local time at the location 
                specified by the creditor for the receipt of payment, 
                on such date shall be treated as a timely payment for 
                all purposes.
                    ``(B) Certain electronic fund transfers.--Any 
                payment with respect to any such account made by a 
                consumer online to the website of the credit card 
                issuer or by telephone directly to the credit card 
                issuer before 5 p.m., local time at the location 
                specified by the creditor for the receipt of payment, 
                on any business day shall be credited to the consumer's 
                account that business day.
                    ``(C) Presumption of timely payment.--Any evidence 
                provided by a consumer in the form of a receipt from 
                the United States Postal Service or other common 
                carrier indicating that a payment on a credit card 
                account was sent to the issuer not less than 7 days 
                before the due date contained in the periodic statement 
                under subparagraph (A) for such payment shall create a 
                presumption that such payment was made by the due date, 
                which may be rebutted by the creditor for fraud or 
                dishonesty on the part of the consumer with respect to 
                the mailing date.''.
    (f) Pro Rata Payment Allocations.--Section 127B of the Truth in 
Lending Act is amended by inserting after subsection (h) (as added by 
subsection (e)) the following new subsection:
    ``(i) Pro Rata Payment Allocations.--
            ``(1) In general.--Except as permitted under paragraph (2), 
        if the outstanding balance on a credit card account under an 
        open end credit plan accrues interest at two or more different 
        annual percentage rates, the total amount of each periodic 
        payment made on such account shall be allocated by the creditor 
        between or among the outstanding balances at each such annual 
        percentage rate in the same proportion as each such balance 
        bears to the total outstanding balance on the account.
            ``(2) Allocation to higher rate.--Notwithstanding paragraph 
        (1), a creditor may elect, in any case described in such 
        paragraph, to allocate more than a pro rata share of any 
        payment to a portion of the outstanding balance that bears a 
        higher annual percentage rate than another portion of such 
        outstanding balance.
            ``(3) Special rules for accounts with promotional rate 
        balances or deferred interest balances.--
                    ``(A) In general.--Notwithstanding paragraph (1) or 
                (2), in the case of a credit card account under an open 
                end credit plan the current terms of which allow the 
                consumer to receive the benefit of a promotional rate 
                or deferred interest plan, amounts paid in excess of 
                the required minimum payment shall be allocated to the 
                promotional rate balance or the deferred interest 
                balance only if other balances have been fully paid.
                    ``(B) Exception for deferred interest balances.--
                Notwithstanding subparagraph (A), a creditor may 
                allocate the entire amount paid by the consumer in 
                excess of the required minimum periodic payment to a 
                balance on which interest is deferred during the 2 
                billing cycles immediately preceding the expiration of 
                the period during which interest is deferred.
            ``(4) Prohibition on restricted grace periods under certain 
        circumstances.--If, with respect to any credit card account 
        under an open end credit, a creditor offers a time period in 
        which to repay credit extended without incurring finance 
        charges to cardholders who pay the balance in full, the 
        creditor may not deny a consumer who takes advantage of a 
        promotional rate balance or deferred interest rate balance 
        offer with respect to such an account any such time period for 
        repaying credit without incurring finance charges.''.
    (g) Timely Provision of Periodic Statements.--Section 127B of the 
Truth in Lending Act is amended by inserting after subsection (i) (as 
added by subsection (f)) the following new subsection:
    ``(j) Timely Provision of Periodic Statements.--Each periodic 
statement with respect to a credit card account under an open end 
credit plan shall be sent by the creditor to the consumer not less than 
25 calendar days before the due date identified in such statement for 
the next payment on the outstanding balance on such account, and 
section 163(a) shall be applied with respect to any such account by 
substituting `25' for `fourteen'.''.

SEC. 4. CONSUMER CHOICE WITH RESPECT TO OVER-THE-LIMIT TRANSACTIONS.

    Section 127B of the Truth in Lending Act is amended by inserting 
after subsection (j) (as added by section 3(g)) the following new 
subsections:
    ``(k) Opt-Out of Creditor Authorization of Over-the-Limit 
Transactions if Fees Are Imposed.--
            ``(1) In general.--In the case of any credit card account 
        under an open end credit plan under which an over-the-limit fee 
        may be imposed by the creditor for any extension of credit in 
        excess of the amount of credit authorized to be extended under 
        such account, the consumer may elect to prohibit the creditor, 
        with respect to such account, from completing any transaction 
        involving the extension of credit, with respect to such 
        account, in excess of the amount of credit authorized by 
        notifying the creditor of such election in accordance with 
        paragraph (2).
            ``(2) Notification by consumer.--A consumer shall notify a 
        creditor under paragraph (1)--
                    ``(A) through the notification system maintained by 
                the creditor under paragraph (4); or
                    ``(B) by submitting to the creditor a signed notice 
                of election, by mail or electronic communication, on a 
                form issued by the creditor for purposes of this 
                subparagraph.
            ``(3) Effectiveness of election.--An election by a consumer 
        under paragraph (1) shall be effective beginning 3 business 
        days after the creditor receives notice from the consumer in 
        accordance with paragraph (2) and shall remain effective until 
        the consumer revokes the election.
            ``(4) Notification system.--Each creditor that maintains 
        credit card accounts under an open end credit plan shall 
        establish and maintain a notification system, including a toll-
        free telephone number, Internet address, and worldwide website, 
        which permits any consumer whose credit card account is 
        maintained by the creditor to notify the creditor of an 
        election under this subsection in accordance with paragraph 
        (2).
            ``(5) Annual notice to consumers of availability of 
        election.--In the case of any credit card account under an open 
        end credit plan, the creditor shall include a notice, in clear 
        and conspicuous language, of the availability of an election by 
        the consumer under this paragraph as a means of avoiding over-
        the-limit fees and a higher amount of indebtedness, and the 
        method for providing such notice--
                    ``(A) in the periodic statement required under 
                subsection (b) with respect to such account at least 
                once each calendar year; and
                    ``(B) in any such periodic statement which includes 
                a notice of the imposition of an over-the-limit fee 
                during the period covered by the statement.
            ``(6) No fees if consumer has made an election.--If a 
        consumer has made an election under paragraph (1), no over-the-
        limit fee may be imposed on the account for any reason that has 
        caused the outstanding balance in the account to exceed the 
        credit limit.
            ``(7) Regulations.--
                    ``(A) In general.--The Board shall issue 
                regulations allowing for the completion of over-the-
                limit transactions that for operational reasons exceed 
                the credit limit by a de minimis amount, even where the 
                cardholder has made an election under paragraph (1).
                    ``(B) Subject to no fee limitation.--The 
                regulations prescribed under subparagraph (A) shall not 
                allow for the imposition of any fee or any rate 
                increase based on the permitted over-the-limit 
                transactions.
    ``(l) Over-the-Limit Fee Restrictions.--With respect to a credit 
card account under an open end credit plan, an over-the-limit fee may 
be imposed only once during a billing cycle if, on the last day of such 
billing cycle, the credit limit on the account is exceeded, and an 
over-the-limit fee, with respect to such excess credit, may be imposed 
only once in each of the 2 subsequent billing cycles, unless the 
consumer has obtained an additional extension of credit in excess of 
such credit limit during any such subsequent cycle or the consumer 
reduces the outstanding balance below the credit limit as of the end of 
such billing cycle.
    ``(m) Over-the-Limit Fees Prohibited in Conjunction With Certain 
Credit Holds.--Notwithstanding subsection (l), an over-the-limit fee 
may not be imposed if the credit limit was exceeded due to a hold 
unless the actual amount of the transaction for which the hold was 
placed would have resulted in the consumer exceeding the credit 
limit.''.

SEC. 5. STRENGTHEN CREDIT CARD INFORMATION COLLECTION.

    Section 136(b) of the Truth in Lending Act (15 U.S.C. 1646(b)) is 
amended--
            (1) in paragraph (1)--
                    (A) by striking ``Collection required.--The Board 
                shall'' and inserting ``Collection required.--
                    ``(A) In general.--The Board shall''.
                    (B) by adding at the end the following new 
                subparagraph:
                    ``(B) Information to be included.--The information 
                under subparagraph (A) shall include, for the relevant 
                semiannual period, the following information with 
                respect each creditor in connection with any consumer 
                credit card account:
                            ``(i) A list of each type of transaction or 
                        event during the semiannual period for which 
                        one or more creditors has imposed a separate 
                        interest rate upon a consumer credit card 
                        account holder, including purchases, cash 
                        advances, and balance transfers.
                            ``(ii) For each type of transaction or 
                        event identified under clause (i)--
                                    ``(I) each distinct interest rate 
                                charged by the card issuer to a 
                                consumer credit card account holder 
                                during the semiannual period; and
                                    ``(II) the number of cardholders to 
                                whom each such interest rate was 
                                applied during the last calendar month 
                                of the semiannual period, and the total 
                                amount of interest charged to such 
                                account holders at each such rate 
                                during such month.
                            ``(iii) A list of each type of fee that one 
                        or more of the creditors has imposed upon a 
                        consumer credit card account holder during the 
                        semiannual period, including any fee imposed 
                        for obtaining a cash advance, making a late 
                        payment, exceeding the credit limit on an 
                        account, making a balance transfer, or 
                        exchanging United States dollars for foreign 
                        currency.
                            ``(iv) For each type of fee identified 
                        under clause (iii), the number of account 
                        holders upon whom the fee was imposed during 
                        each calendar month of the semiannual period, 
                        and the total amount of fees imposed upon 
                        cardholders during such month.
                            ``(v) The total number of consumer credit 
                        card account holders that incurred any finance 
                        charge or any other fee during the semiannual 
                        period.
                            ``(vi) The total number of consumer credit 
                        card accounts maintained by each creditor as of 
                        the end of the semiannual period.
                            ``(vii) The total number and value of cash 
                        advances made during the semiannual period 
                        under a consumer credit card account.
                            ``(viii) The total number and value of 
                        purchases involving or constituting consumer 
                        credit card transactions during the semiannual 
                        period.
                            ``(ix) The total number and amount of 
                        repayments on outstanding balances on consumer 
                        credit card accounts in each month of the 
                        semiannual period.
                            ``(x) The percentage of all consumer credit 
                        card account holders (with respect to any 
                        creditor) who--
                                    ``(I) incurred a finance charge in 
                                each month of the semiannual period on 
                                any portion of an outstanding balance 
                                on which a finance charge had not 
                                previously been incurred; and
                                    ``(II) incurred any such finance 
                                charge at any time during the 
                                semiannual period.
                            ``(xi) The total number and amount of 
                        balances accruing finance charges during the 
                        semiannual period.
                            ``(xii) The total number and amount of the 
                        outstanding balances on consumer credit card 
                        accounts as of the end of such semiannual 
                        period.
                            ``(xiii) Total credit limits in effect on 
                        consumer credit card accounts as of the end of 
                        such semiannual period and the amount by which 
                        such credit limits exceed the credit limits in 
                        effect as of the beginning of such period.
                            ``(xiv) Any other information related to 
                        interest rates, fees, or other charges that the 
                        Board deems of interest.''; and
            (2) by adding at the end the following new paragraph:
            ``(5) Report to congress.--The Board shall, on an annual 
        basis, transmit to Congress and make public a report containing 
        estimates by the Board of the approximate, relative percentage 
        of income derived by the credit card operations of depository 
        institutions from--
                    ``(A) the imposition of interest rates on 
                cardholders, including separate estimates for--
                            ``(i) interest with an annual percentage 
                        rate of less than 25 percent; and
                            ``(ii) interest with an annual percentage 
                        rate equal to or greater than 25 percent;
                    ``(B) the imposition of fees on cardholders;
                    ``(C) the imposition of fees on merchants; and
                    ``(D) any other material source of income, while 
                specifying the nature of that income.''.

SEC. 6. STANDARDS APPLICABLE TO INITIAL ISSUANCE OF SUBPRIME OR ``FEE 
              HARVESTER'' CARDS.

    Section 127B of the Truth in Lending Act is amended by inserting 
after subsection (m) (as added by section 4) the following new 
subsection:
    ``(n) Standards Applicable to Initial Issuance of Subprime or `Fee 
Harvester' Cards.--
            ``(1) In general.--In the case of any credit card account 
        under an open end credit plan the terms of which require the 
        payment of fees (other than late fees or over-the-limit fees) 
        by the consumer in the first year the account is opened in an 
        amount in excess of 25 percent of the total amount of credit 
        authorized under the account, no payment of any fees (other 
        than late fees or over-the-limit fees) may be made from the 
        credit made available by the card.
            ``(2) Rule of construction.--No provision of this 
        subsection may be construed as authorizing any imposition or 
        payment of advance fees otherwise prohibited by any provision 
        of law.''.

SEC. 7. EXTENSIONS OF CREDIT TO UNDERAGE CONSUMERS.

    Section 127(c) of the Truth in Lending Act (15 U.S.C. 1637(c)) is 
amended by adding at the end the following new paragraph:
            ``(8) Extensions of credit to underage consumers.--
                    ``(A) In general.--No credit card may be knowingly 
                issued to, or open end credit plan established on 
                behalf of, a consumer who has not attained the age of 
                18, unless the consumer is emancipated under applicable 
                State law.
                    ``(B) Rule of construction.--For the purposes of 
                determining the age of an applicant, the submission of 
                a signed application by a consumer stating that the 
                consumer is over 18 shall be considered sufficient 
                proof of age.''.

SEC. 8. EFFECTIVE DATE.

    (a) In General.--The amendments made by this Act shall apply to all 
credit card accounts under open end credit plans as of the end of the 
3-month period beginning on the date of the enactment of this Act.
    (b) Regulations.--The Board of Governors of the Federal Reserve 
System, in consultation with the Comptroller of the Currency, the 
Director of the Office of Thrift Supervision, the Federal Deposit 
Insurance Corporation, the National Credit Union Administration Board, 
and the Federal Trade Commission, shall prescribe regulations, in final 
form, implementing the amendments made by this Act before the end of 
the 3-month period referred to in subsection (a).
                                 <all>
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