II 

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. 

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

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Credit Cardholders’ 

5 Bill of Rights Act of 2009’’. 

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

7 (a) RETROACTIVE RATE INCREASES AND UNIVERSAL

8 DEFAULT LIMITED.—Chapter 2 of the Truth in Lending 


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1 Act (15 U.S.C. 1631 et seq.) is amended by inserting after 

2 section 127A the following new section: 

3 ‘‘§ 127B. Additional requirements for credit card ac4 counts under an open end credit plan 

5 ‘‘(a) RETROACTIVE RATE INCREASES AND UNI6 VERSAL DEFAULT LIMITED.— 

7 ‘‘(1) IN GENERAL.—Except as provided in sub8 section (b), no creditor may increase any annual per9 centage rate of interest applicable to the existing 

10 balance on a credit card account of the consumer 

11 under an open end credit plan. 

12 ‘‘(2) EXISTING BALANCE DEFINED.—For pur13 poses of this subsection and subsections (b) and (c), 

14 the term ‘existing balance’ means the amount owed 

15 on a consumer credit card account as of the end of 

16 the 14th day after the creditor provides notice of an 

17 increase in the annual percentage rate in accordance 

18 with subsection (c). 

19 ‘‘(3) TREATMENT OF EXISTING BALANCES FOL20 LOWING RATE INCREASE.—If a creditor increases 

21 any annual percentage rate of interest applicable to 

22 the credit card account of a consumer under an open 

23 end credit plan and there is an existing balance in 

24 the account to which such increase may not apply, 

25 the creditor shall allow the consumer to repay the 


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1 existing balance using a method provided by the 

2 creditor which is at least as beneficial to the con3 sumer as one of the following methods: 

4 ‘‘(A) An amortization period for the exist5 ing balance of at least 5 years starting from the 

6 date on which the increased annual percentage 

7 rate went into effect. 

8 ‘‘(B) The percentage of the existing bal9 ance that was included in the required min10 imum periodic payment before the rate increase 

11 cannot be more than doubled. 

12 ‘‘(4) LIMITATION ON CERTAIN FEES.—If— 

13 ‘‘(A) a creditor increases any annual per14 centage rate of interest applicable on a credit 

15 card account of the consumer under an open 

16 end credit plan; and 

17 ‘‘(B) the creditor is prohibited by this sec18 tion from applying the increased rate to an ex19 isting balance, 

20 the creditor may not assess any fee or charge based 

21 solely on the existing balance.’’. 

22 (b) EXCEPTIONS TO THE AMENDMENT MADE BY

23 SUBSECTION (a).—Section 127B of the Truth in Lending 

24 Act is amended by inserting after subsection (a) (as added 

25 by subsection (a)) the following new subsection: 


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1 ‘‘(b) EXCEPTIONS.— 

2 ‘‘(1) IN GENERAL.—A creditor may increase 

3 any annual percentage rate of interest applicable to 

4 the existing balance on a credit card account of the 

5 consumer under an open end credit plan only under 

6 the following circumstances: 

7 ‘‘(A) CHANGE IN INDEX.—The increase is 

8 due solely to the operation of an index that is 

9 not under the creditor’s control and is available 

10 to the general public. 

11 ‘‘(B) EXPIRATION OR LOSS OF PRO12 MOTIONAL RATE.—The increase is due solely 

13 to— 

14 ‘‘(i) the expiration of a promotional 

15 rate; or 

16 ‘‘(ii) the loss of a promotional rate for 

17 a reason specified in the account agree18 ment (e.g., late payment). 

19 ‘‘(C) PAYMENT NOT RECEIVED DURING 30- 

20 DAY GRACE PERIOD AFTER DUE DATE.—The 

21 increase is due solely to the fact that the con22 sumer’s minimum payment has not been re23 ceived within 30 days after the due date for 

24 such minimum payment. 


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1 ‘‘(2) LIMITATION ON INCREASES DUE TO LOSS

2 OF PROMOTIONAL RATE.—Notwithstanding para3 graph (1)(B)(ii), the annual percentage rate in effect 

4 after the increase permitted under such subsection 

5 due to the loss of a promotional rate may not exceed 

6 the annual percentage rate that would have applied 

7 under the terms of the agreement after the expira8 tion of the promotional rate.’’. 

9 (c) ADVANCE NOTICE OF RATE INCREASES.—Section 

10 127B of the Truth in Lending Act is amended by inserting 

11 after subsection (b) (as added by subsection (b)) the fol12 lowing new subsection: 

13 ‘‘(c) ADVANCE NOTICE OF RATE INCREASES.—In the 

14 case of any credit card account under an open end credit 

15 plan, no increase in any annual percentage rate of interest 

16 may take effect unless the creditor provides a written no17 tice to the consumer at least 45 days before the increase 

18 takes effect which fully describes the changes in the an19 nual percentage rate, in a complete and conspicuous man20 ner, and the extent to which such increase would apply 

21 to an existing balance.’’. 

22 (d) CLERICAL AMENDMENT.—The table of sections 

23 for chapter 2 of the Truth in Lending Act (15 U.S.C. 

24 1631 et seq.) is amended by inserting after the item relat25 ing to section 127A the following new item: 


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‘‘127B. Additional requirements for credit card accounts under an open end 

credit plan.’’. 

1 SEC. 3. ADDITIONAL PROVISIONS REGARDING ACCOUNT 

2 FEATURES, TERMS, AND PRICING. 

3 (a) DOUBLE CYCLE BILLING PROHIBITED.—Section 

4 127B of the Truth in Lending Act is amended by inserting 

5 after subsection (c) (as added by section 2(c)) the fol6 lowing new subsection: 

7 ‘‘(d) DOUBLE CYCLE BILLING.— 

8 ‘‘(1) IN GENERAL.—No finance charge may be 

9 imposed by a creditor with respect to any balance on 

10 a credit card account under an open end credit plan 

11 that is based on balances for days in billing cycles 

12 preceding the most recent billing cycle. 

13 ‘‘(2) EXCEPTIONS.—Paragraph (1) shall not 

14 apply so as to prohibit a creditor from— 

15 ‘‘(A) charging a consumer for deferred in16 terest even though that interest may have ac17 crued over multiple billing cycles; or 

18 ‘‘(B) adjusting finance charges following 

19 resolution of a billing error dispute.’’. 

20 (b) LIMITATIONS RELATING TO ACCOUNT BALANCES

21 ATTRIBUTABLE ONLY TO ACCRUED INTEREST.—Section 

22 127B is amended by inserting after subsection (d) (as 

23 added by subsection (a)) the following new subsection: 


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1 ‘‘(e) LIMITATIONS RELATING TO ACCOUNT BAL2 ANCES ATTRIBUTABLE ONLY TO ACCRUED INTEREST.— 

3 ‘‘(1) IN GENERAL.—If the outstanding balance 

4 on a credit card account under an open end credit 

5 plan at the end of a billing period represents an 

6 amount attributable only to interest accrued during 

7 the preceding billing period on an outstanding bal8 ance that was fully repaid during the preceding bill9 ing period— 

10 ‘‘(A) no fee may be imposed or collected in 

11 connection with such balance attributable only 

12 to interest before such end of the billing period; 

13 and 

14 ‘‘(B) any failure to make timely repay15 ments of the balance attributable only to inter16 est before such end of the billing period shall 

17 not constitute a default on the account. 

18 Such balance remains a legally binding debt obliga19 tion. 

20 ‘‘(2) RULE OF CONSTRUCTION.—Paragraph (1) 

21 shall not be construed as affecting— 

22 ‘‘(A) the consumer’s obligation to pay any 

23 accrued interest on a credit card account under 

24 an open end credit plan; or 


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1 ‘‘(B) the accrual of interest on the out2 standing balance on any such account in ac3 cordance with the terms of the account and this 

4 title.’’. 

5 (c) ACCESS TO PAYOFF BALANCE INFORMATION.— 

6 Section 127B of the Truth in Lending Act is amended 

7 by inserting after subsection (e) (as added by subsection 

8 (b)) the following new subsection: 

9 ‘‘(f) PAYOFF BALANCE INFORMATION.—Each peri10 odic statement provided by a creditor to a consumer with 

11 respect to a credit card account under an open end credit 

12 plan shall contain the telephone number, Internet address, 

13 and worldwide website at which the consumer may request 

14 the payoff balance on the account.’’. 

15 (d) CONSUMER RIGHT TO REJECT CARD BEFORE

16 NOTICE IS PROVIDED OF OPEN ACCOUNT.—Section 127B 

17 of the Truth in Lending Act is amended by inserting after 

18 subsection (g) (as added by subsection (c)) the following 

19 new subsection: 

20 ‘‘(g) CONSUMER RIGHT TO REJECT CARD BEFORE

21 NOTICE OF NEW ACCOUNT IS PROVIDED TO CONSUMER

22 REPORTING AGENCY.— 

23 ‘‘(1) IN GENERAL.—A creditor may not furnish 

24 any information to a consumer reporting agency (as 

25 defined in section 603) concerning the establishment 


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1 of a newly opened credit card account under an open 

2 end credit plan until the credit card has been used 

3 or activated by the consumer. 

4 ‘‘(2) RULE OF CONSTRUCTION.—Paragraph (1) 

5 shall not be construed as prohibiting a creditor from 

6 furnishing information about any application for a 

7 credit card account under an open end credit plan 

8 or any inquiry about any such account to a con9 sumer reporting agency (as so defined).’’. 

10 (e) USE OF TERMS CLARIFIED.—Section 127B of the 

11 Truth in Lending Act is amended by inserting after sub12 section (g) (as added by subsection (d)) the following new 

13 subsection: 

14 ‘‘(h) USE OF TERMS.—The following requirements 

15 shall apply with respect to the terms of any credit card 

16 account under any open end credit plan: 

17 ‘‘(1) ‘FIXED’ RATE.—The term ‘fixed’, when 

18 appearing in conjunction with a reference to the an19 nual percentage rate or interest rate applicable with 

20 respect to such account, may only be used to refer 

21 to an annual percentage rate or interest rate that 

22 will not change or vary for any reason over the pe23 riod clearly and conspicuously specified in the terms 

24 of the account. 


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1 ‘‘(2) PRIME RATE.—The term ‘prime rate’, 

2 when appearing in any agreement or contract for 

3 any such account, may only be used to refer to the 

4 bank prime rate published in the Federal Reserve 

5 Statistical Release on selected interest rates (daily or 

6 weekly), and commonly referred to as the H.15 re7 lease (or any successor publication). 

8 ‘‘(3) DUE DATE.— 

9 ‘‘(A) IN GENERAL.—Each periodic state10 ment for any such account shall contain a date 

11 by which the next periodic payment on the ac12 count must be made to avoid a late fee or be 

13 considered a late payment, and any payment re14 ceived by 5 p.m., local time at the location spec15 ified by the creditor for the receipt of payment, 

16 on such date shall be treated as a timely pay17 ment for all purposes. 

18 ‘‘(B) CERTAIN ELECTRONIC FUND TRANS19 FERS.—Any payment with respect to any such 

20 account made by a consumer online to the 

21 website of the credit card issuer or by telephone 

22 directly to the credit card issuer before 5 p.m., 

23 local time at the location specified by the cred24 itor for the receipt of payment, on any business 


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1 day shall be credited to the consumer’s account 

2 that business day. 

3 ‘‘(C) PRESUMPTION OF TIMELY PAY4 MENT.—Any evidence provided by a consumer 

5 in the form of a receipt from the United States 

6 Postal Service or other common carrier indi7 cating that a payment on a credit card account 

8 was sent to the issuer not less than 7 days be9 fore the due date contained in the periodic 

10 statement under subparagraph (A) for such 

11 payment shall create a presumption that such 

12 payment was made by the due date, which may 

13 be rebutted by the creditor for fraud or dishon14 esty on the part of the consumer with respect 

15 to the mailing date.’’. 

16 (f) PRO RATA PAYMENT ALLOCATIONS.—Section 

17 127B of the Truth in Lending Act is amended by inserting 

18 after subsection (h) (as added by subsection (e)) the fol19 lowing new subsection: 

20 ‘‘(i) PRO RATA PAYMENT ALLOCATIONS.— 

21 ‘‘(1) IN GENERAL.—Except as permitted under 

22 paragraph (2), if the outstanding balance on a credit 

23 card account under an open end credit plan accrues 

24 interest at two or more different annual percentage 

25 rates, the total amount of each periodic payment 


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1 made on such account shall be allocated by the cred2 itor between or among the outstanding balances at 

3 each such annual percentage rate in the same pro4 portion as each such balance bears to the total out5 standing balance on the account. 

6 ‘‘(2) ALLOCATION TO HIGHER RATE.—Notwith7 standing paragraph (1), a creditor may elect, in any 

8 case described in such paragraph, to allocate more 

9 than a pro rata share of any payment to a portion 

10 of the outstanding balance that bears a higher an11 nual percentage rate than another portion of such 

12 outstanding balance. 

13 ‘‘(3) SPECIAL RULES FOR ACCOUNTS WITH

14 PROMOTIONAL RATE BALANCES OR DEFERRED IN15 TEREST BALANCES.— 

16 ‘‘(A) IN GENERAL.—Notwithstanding para17 graph (1) or (2), in the case of a credit card 

18 account under an open end credit plan the cur19 rent terms of which allow the consumer to re20 ceive the benefit of a promotional rate or de21 ferred interest plan, amounts paid in excess of 

22 the required minimum payment shall be allo23 cated to the promotional rate balance or the de24 ferred interest balance only if other balances 

25 have been fully paid. 


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1 ‘‘(B) EXCEPTION FOR DEFERRED INTER2 EST BALANCES.—Notwithstanding subpara3 graph (A), a creditor may allocate the entire 

4 amount paid by the consumer in excess of the 

5 required minimum periodic payment to a bal6 ance on which interest is deferred during the 2 

7 billing cycles immediately preceding the expira8 tion of the period during which interest is de9 ferred. 

10 ‘‘(4) PROHIBITION ON RESTRICTED GRACE PE11 RIODS UNDER CERTAIN CIRCUMSTANCES.—If, with 

12 respect to any credit card account under an open 

13 end credit, a creditor offers a time period in which 

14 to repay credit extended without incurring finance 

15 charges to cardholders who pay the balance in full, 

16 the creditor may not deny a consumer who takes ad17 vantage of a promotional rate balance or deferred in18 terest rate balance offer with respect to such an ac19 count any such time period for repaying credit with20 out incurring finance charges.’’. 

21 (g) TIMELY PROVISION OF PERIODIC STATE22 MENTS.—Section 127B of the Truth in Lending Act is 

23 amended by inserting after subsection (i) (as added by 

24 subsection (f)) the following new subsection: 


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1 ‘‘(j) TIMELY PROVISION OF PERIODIC STATE2 MENTS.—Each periodic statement with respect to a credit 

3 card account under an open end credit plan shall be sent 

4 by the creditor to the consumer not less than 25 calendar 

5 days before the due date identified in such statement for 

6 the next payment on the outstanding balance on such ac7 count, and section 163(a) shall be applied with respect to 

8 any such account by substituting ‘25’ for ‘fourteen’.’’. 

9 SEC. 4. CONSUMER CHOICE WITH RESPECT TO OVER-THE10 LIMIT TRANSACTIONS. 

11 Section 127B of the Truth in Lending Act is amend12 ed by inserting after subsection (j) (as added by section 

13 3(g)) the following new subsections: 

14 ‘‘(k) OPT-OUT OF CREDITOR AUTHORIZATION OF

15 OVER-THE-LIMIT TRANSACTIONS IF FEES ARE IM16 POSED.— 

17 ‘‘(1) IN GENERAL.—In the case of any credit 

18 card account under an open end credit plan under 

19 which an over-the-limit fee may be imposed by the 

20 creditor for any extension of credit in excess of the 

21 amount of credit authorized to be extended under 

22 such account, the consumer may elect to prohibit the 

23 creditor, with respect to such account, from com24 pleting any transaction involving the extension of 

25 credit, with respect to such account, in excess of the 


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1 amount of credit authorized by notifying the creditor 

2 of such election in accordance with paragraph (2). 

3 ‘‘(2) NOTIFICATION BY CONSUMER.—A con4 sumer shall notify a creditor under paragraph (1)— 

5 ‘‘(A) through the notification system main6 tained by the creditor under paragraph (4); or 

7 ‘‘(B) by submitting to the creditor a signed 

8 notice of election, by mail or electronic commu9 nication, on a form issued by the creditor for 

10 purposes of this subparagraph. 

11 ‘‘(3) EFFECTIVENESS OF ELECTION.—An elec12 tion by a consumer under paragraph (1) shall be ef13 fective beginning 3 business days after the creditor 

14 receives notice from the consumer in accordance 

15 with paragraph (2) and shall remain effective until 

16 the consumer revokes the election. 

17 ‘‘(4) NOTIFICATION SYSTEM.—Each creditor 

18 that maintains credit card accounts under an open 

19 end credit plan shall establish and maintain a notifi20 cation system, including a toll-free telephone num21 ber, Internet address, and worldwide website, which 

22 permits any consumer whose credit card account is 

23 maintained by the creditor to notify the creditor of 

24 an election under this subsection in accordance with 

25 paragraph (2). 


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1 ‘‘(5) ANNUAL NOTICE TO CONSUMERS OF

2 AVAILABILITY OF ELECTION.—In the case of any 

3 credit card account under an open end credit plan, 

4 the creditor shall include a notice, in clear and con5 spicuous language, of the availability of an election 

6 by the consumer under this paragraph as a means 

7 of avoiding over-the-limit fees and a higher amount 

8 of indebtedness, and the method for providing such 

9 notice— 

10 ‘‘(A) in the periodic statement required 

11 under subsection (b) with respect to such ac12 count at least once each calendar year; and 

13 ‘‘(B) in any such periodic statement which 

14 includes a notice of the imposition of an over15 the-limit fee during the period covered by the 

16 statement. 

17 ‘‘(6) NO FEES IF CONSUMER HAS MADE AN

18 ELECTION.—If a consumer has made an election 

19 under paragraph (1), no over-the-limit fee may be 

20 imposed on the account for any reason that has 

21 caused the outstanding balance in the account to ex22 ceed the credit limit. 

23 ‘‘(7) REGULATIONS.— 

24 ‘‘(A) IN GENERAL.—The Board shall issue 

25 regulations allowing for the completion of overVerDate Nov 24 2008 04:47 Jan 15, 2009 Jkt 079200 PO 00000 Frm 00016 Fmt 6652 Sfmt 6201 E:\BILLS\S235.IS S235

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1 the-limit transactions that for operational rea2 sons exceed the credit limit by a de minimis 

3 amount, even where the cardholder has made 

4 an election under paragraph (1). 

5 ‘‘(B) SUBJECT TO NO FEE LIMITATION.— 

6 The regulations prescribed under subparagraph 

7 (A) shall not allow for the imposition of any fee 

8 or any rate increase based on the permitted 

9 over-the-limit transactions. 

10 ‘‘(l) OVER-THE-LIMIT FEE RESTRICTIONS.—With re11 spect to a credit card account under an open end credit 

12 plan, an over-the-limit fee may be imposed only once dur13 ing a billing cycle if, on the last day of such billing cycle, 

14 the credit limit on the account is exceeded, and an over15 the-limit fee, with respect to such excess credit, may be 

16 imposed only once in each of the 2 subsequent billing cy17 cles, unless the consumer has obtained an additional ex18 tension of credit in excess of such credit limit during any 

19 such subsequent cycle or the consumer reduces the out20 standing balance below the credit limit as of the end of 

21 such billing cycle. 

22 ‘‘(m) OVER-THE-LIMIT FEES PROHIBITED IN CON23 JUNCTION WITH CERTAIN CREDIT HOLDS.—Notwith24 standing subsection (l), an over-the-limit fee may not be 

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1 less the actual amount of the transaction for which the 

2 hold was placed would have resulted in the consumer ex3 ceeding the credit limit.’’. 

4 SEC. 5. STRENGTHEN CREDIT CARD INFORMATION COL5 LECTION. 

6 Section 136(b) of the Truth in Lending Act (15 

7 U.S.C. 1646(b)) is amended— 

8 (1) in paragraph (1)— 

9 (A) by striking ‘‘COLLECTION RE10 QUIRED.—The Board shall’’ and inserting 

11 ‘‘COLLECTION REQUIRED.— 

12 ‘‘(A) IN GENERAL.—The Board shall’’. 

13 (B) by adding at the end the following new 

14 subparagraph: 

15 ‘‘(B) INFORMATION TO BE INCLUDED.— 

16 The information under subparagraph (A) shall 

17 include, for the relevant semiannual period, the 

18 following information with respect each creditor 

19 in connection with any consumer credit card ac20 count: 

21 ‘‘(i) A list of each type of transaction 

22 or event during the semiannual period for 

23 which one or more creditors has imposed a 

24 separate interest rate upon a consumer 

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1 chases, cash advances, and balance trans2 fers. 

3 ‘‘(ii) For each type of transaction or 

4 event identified under clause (i)— 

5 ‘‘(I) each distinct interest rate 

6 charged by the card issuer to a con7 sumer credit card account holder dur8 ing the semiannual period; and 

9 ‘‘(II) the number of cardholders 

10 to whom each such interest rate was 

11 applied during the last calendar 

12 month of the semiannual period, and 

13 the total amount of interest charged 

14 to such account holders at each such 

15 rate during such month. 

16 ‘‘(iii) A list of each type of fee that 

17 one or more of the creditors has imposed 

18 upon a consumer credit card account hold19 er during the semiannual period, including 

20 any fee imposed for obtaining a cash ad21 vance, making a late payment, exceeding 

22 the credit limit on an account, making a 

23 balance transfer, or exchanging United 

24 States dollars for foreign currency. 


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1 ‘‘(iv) For each type of fee identified 

2 under clause (iii), the number of account 

3 holders upon whom the fee was imposed 

4 during each calendar month of the semi5 annual period, and the total amount of 

6 fees imposed upon cardholders during such 

7 month. 

8 ‘‘(v) The total number of consumer 

9 credit card account holders that incurred 

10 any finance charge or any other fee during 

11 the semiannual period. 

12 ‘‘(vi) The total number of consumer 

13 credit card accounts maintained by each 

14 creditor as of the end of the semiannual 

15 period. 

16 ‘‘(vii) The total number and value of 

17 cash advances made during the semiannual 

18 period under a consumer credit card ac19 count. 

20 ‘‘(viii) The total number and value of 

21 purchases involving or constituting con22 sumer credit card transactions during the 

23 semiannual period. 

24 ‘‘(ix) The total number and amount of 

25 repayments on outstanding balances on 


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1 consumer credit card accounts in each 

2 month of the semiannual period. 

3 ‘‘(x) The percentage of all consumer 

4 credit card account holders (with respect 

5 to any creditor) who— 

6 ‘‘(I) incurred a finance charge in 

7 each month of the semiannual period 

8 on any portion of an outstanding bal9 ance on which a finance charge had 

10 not previously been incurred; and 

11 ‘‘(II) incurred any such finance 

12 charge at any time during the semi13 annual period. 

14 ‘‘(xi) The total number and amount of 

15 balances accruing finance charges during 

16 the semiannual period. 

17 ‘‘(xii) The total number and amount 

18 of the outstanding balances on consumer 

19 credit card accounts as of the end of such 

20 semiannual period. 

21 ‘‘(xiii) Total credit limits in effect on 

22 consumer credit card accounts as of the 

23 end of such semiannual period and the 

24 amount by which such credit limits exceed 


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1 the credit limits in effect as of the begin2 ning of such period. 

3 ‘‘(xiv) Any other information related 

4 to interest rates, fees, or other charges 

5 that the Board deems of interest.’’; and 

6 (2) by adding at the end the following new 

7 paragraph: 

8 ‘‘(5) REPORT TO CONGRESS.—The Board shall, 

9 on an annual basis, transmit to Congress and make 

10 public a report containing estimates by the Board of 

11 the approximate, relative percentage of income de12 rived by the credit card operations of depository in13 stitutions from— 

14 ‘‘(A) the imposition of interest rates on 

15 cardholders, including separate estimates for— 

16 ‘‘(i) interest with an annual percent17 age rate of less than 25 percent; and 

18 ‘‘(ii) interest with an annual percent19 age rate equal to or greater than 25 per20 cent; 

21 ‘‘(B) the imposition of fees on cardholders; 

22 ‘‘(C) the imposition of fees on merchants; 

23 and 

24 ‘‘(D) any other material source of income, 

25 while specifying the nature of that income.’’. 


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1 SEC. 6. STANDARDS APPLICABLE TO INITIAL ISSUANCE OF 

2 SUBPRIME OR ‘‘FEE HARVESTER’’ CARDS. 

3 Section 127B of the Truth in Lending Act is amend4 ed by inserting after subsection (m) (as added by section 

5 4) the following new subsection: 

6 ‘‘(n) STANDARDS APPLICABLE TO INITIAL ISSUANCE

7 OF SUBPRIME OR ‘FEE HARVESTER’ CARDS.— 

8 ‘‘(1) IN GENERAL.—In the case of any credit 

9 card account under an open end credit plan the 

10 terms of which require the payment of fees (other 

11 than late fees or over-the-limit fees) by the consumer 

12 in the first year the account is opened in an amount 

13 in excess of 25 percent of the total amount of credit 

14 authorized under the account, no payment of any 

15 fees (other than late fees or over-the-limit fees) may 

16 be made from the credit made available by the card. 

17 ‘‘(2) RULE OF CONSTRUCTION.—No provision 

18 of this subsection may be construed as authorizing 

19 any imposition or payment of advance fees otherwise 

20 prohibited by any provision of law.’’. 

21 SEC. 7. EXTENSIONS OF CREDIT TO UNDERAGE CON22 SUMERS. 

23 Section 127(c) of the Truth in Lending Act (15 

24 U.S.C. 1637(c)) is amended by adding at the end the fol25 lowing new paragraph: 


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1 ‘‘(8) EXTENSIONS OF CREDIT TO UNDERAGE

2 CONSUMERS.— 

3 ‘‘(A) IN GENERAL.—No credit card may be 

4 knowingly issued to, or open end credit plan es5 tablished on behalf of, a consumer who has not 

6 attained the age of 18, unless the consumer is 

7 emancipated under applicable State law. 

8 ‘‘(B) RULE OF CONSTRUCTION.—For the 

9 purposes of determining the age of an appli10 cant, the submission of a signed application by 

11 a consumer stating that the consumer is over 

12 18 shall be considered sufficient proof of age.’’. 

13 SEC. 8. EFFECTIVE DATE. 

14 (a) IN GENERAL.—The amendments made by this 

15 Act shall apply to all credit card accounts under open end 

16 credit plans as of the end of the 3-month period beginning 

17 on the date of the enactment of this Act. 

18 (b) REGULATIONS.—The Board of Governors of the 

19 Federal Reserve System, in consultation with the Comp20 troller of the Currency, the Director of the Office of Thrift 

21 Supervision, the Federal Deposit Insurance Corporation, 

22 the National Credit Union Administration Board, and the 

23 Federal Trade Commission, shall prescribe regulations, in 

24 final form, implementing the amendments made by this 


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1 Act before the end of the 3-month period referred to in 

2 subsection (a). 

Æ 


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