II

106TH CONGRESS

1ST SESSION S. 480

To amend the Truth in Lending Act to protect consumers from certain

unreasonable practices of creditors which result in higher fees or rates

of interest for credit cardholders, and for other purposes.

IN THE SENATE OF THE UNITED STATES

FEBRUARY 25, 1999

Mr. SCHUMER 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 protect consumers

from certain unreasonable practices of creditors which

result in higher fees or rates of interest for credit cardholders, 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 Card Consumer

5 Protection Act of 1999’’.

6 SEC. 2. FEES FOR ON-TIME PAYMENTS PROHIBITED.

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

8 1637) is amended by adding at the end the following:
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1 ‘‘(h) FEES FOR ON-TIME PAYMENTS PROHIBITED.—

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

3 card account under an open end credit plan, no min4 imum finance charge for any period (including any

5 annual period), and no fee in lieu of a minimum fi6 nance charge, may be imposed with regard to the ac7 count or credit extended under the account solely be8 cause the credit extended has been repaid in full be9 fore the end of any grace period applicable with re10 spect to the extension of credit.

11 ‘‘(2) SCOPE OF APPLICATION.—Paragraph (1)

12 may not be construed as—

13 ‘‘(A) prohibiting the imposition of any flat

14 annual fee that may be imposed on the con15 sumer in advance of any annual period to cover

16 the cost of maintaining a credit card account

17 referred to in paragraph (1) during that annual

18 period, without regard to whether any credit is

19 actually extended under the account during that

20 annual period; or

21 ‘‘(B) otherwise affecting the imposition of

22 the actual finance charge applicable with re23 spect to any credit extended under the account

24 during that annual period at the annual per25 centage rate disclosed to the consumer in ac-
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1 cordance with this title for the period of time

2 during which any such credit is outstanding.’’.

3 SEC. 3. FREEZE ON INTEREST RATE TERMS AND FEES ON

4 CANCELED CARDS.

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

6 1637) is amended by adding at the end the following:

7 ‘‘(i) FREEZE ON INTEREST RATE TERMS AND FEES

8 ON CANCELED CARDS.—

9 ‘‘(1) ADVANCE NOTICE OF INCREASE IN INTER10 EST RATE REQUIRED.—In the case of any credit

11 card account under an open end credit plan, no in12 crease in any annual percentage rate of interest

13 (other than an increase due solely to a change in an14 other rate of interest to which such rate is indexed)

15 applicable to any outstanding balance of credit

16 under such plan may take effect before the begin17 ning of the billing cycle that begins not earlier than

18 15 days after the cardholder receives notice of such

19 increase.

20 ‘‘(2) INCREASE NOT EFFECTIVE FOR CANCELED

21 ACCOUNTS.—If a cardholder referred to in para22 graph (1) cancels the credit card account before the

23 beginning of the billing cycle referred to in that

24 paragraph and surrenders all unexpired credit cards

25 issued in connection with the account—
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1 ‘‘(A) an annual percentage rate of interest

2 applicable after the cancellation with respect to

3 the outstanding balance on the account as of

4 the date of cancellation may not exceed any an5 nual percentage rate of interest applicable with

6 respect to such balance under the terms and

7 conditions in effect before the increase referred

8 to in paragraph (1); and

9 ‘‘(B) the repayment of the outstanding bal10 ance after the cancellation shall be subject to all

11 other terms and conditions applicable with re12 spect to the account before the increase referred

13 to in paragraph (1).

14 ‘‘(3) NOTICE OF RIGHT TO CANCEL.—The no15 tice referred to in paragraph (1) with respect to an

16 increase in annual percentage rate of interest shall

17 contain a brief description of the right of the

18 consumer—

19 ‘‘(A) to cancel the account before the effec20 tive date of the increase; and

21 ‘‘(B) after such cancellation, to pay any

22 balance outstanding on the account at the time

23 of cancellation in accordance with the terms

24 and conditions in effect before the cancella25 tion.’’.
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1 SEC. 4. DISCLOSURE OF FEES AND INTEREST RATES ON

2 CREDIT ADVANCES THROUGH THE USE OF

3 THIRD PARTY CHECKS.

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

5 1637) is amended by adding at the end the following:

6 ‘‘(j) FEES AND INTEREST RATES ON CREDIT AD7 VANCES THROUGH THE USE OF THIRD PARTY

8 CHECKS.—

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

10 card account under an open end credit plan, a credi11 tor may not provide the cardholder with any nego12 tiable or transferable instrument for use in making

13 an extension of credit to the cardholder for the pur14 pose of making a transfer to a third party unless the

15 creditor has fully satisfied the notice requirements of

16 paragraph (2) with respect to that instrument.

17 ‘‘(2) NOTICE REQUIREMENTS.—A creditor

18 meets the notice requirements of this paragraph

19 with respect to an instrument referred to in para20 graph (1) if the creditor provides to a cardholder, at

21 the same time that any such instrument is provided,

22 a notice that prominently and specifically

23 describes—

24 ‘‘(A) the amount of any transaction fee

25 that may be imposed for making an extension

26 of credit through the use of the instrument, in-
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1 cluding the exact percentage rate to be used in

2 determining the amount, if the amount of the

3 transaction fee is expressed as a percentage of

4 the amount of the credit extended; and

5 ‘‘(B) any annual percentage rate of inter6 est applicable in determining the finance charge

7 for any such extension of credit.’’.

8 SEC. 5. PROHIBITION ON OVER-THE-LIMIT FEES IN CREDI9 TOR-APPROVED TRANSACTIONS.

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

11 1637) is amended by adding at the end the following:

12 ‘‘(k) LIMITATION ON IMPOSITION OF OVER-THE13 LIMIT FEES.—In the case of any credit card account

14 under an open end credit plan, a creditor may not impose

15 any fee on the cardholder for any extension of credit in

16 excess of the amount of credit authorized to be extended

17 with respect to the account if the extension of credit is

18 made in connection with a credit transaction that the cred19 itor approves in advance of or at the time of the trans20 action.’’.

21 SEC. 6. PROHIBITION ON 2-CYCLE BILLING.

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

23 1637) is amended by adding at the end the following:

24 ‘‘(l) PROHIBITION ON 2-CYCLE BILLING.—In the

25 case of any credit card account under an open end credit
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1 plan, if the creditor provides, with regard to any new ex2 tension of credit under the account, a period during which

3 the extension of credit may be repaid without incurring

4 a finance charge for the extension of credit, no finance

5 charge may subsequently be imposed for that period with

6 regard to any unpaid balance (as of the end of that period)

7 of the extension of credit.’’.

8 SEC. 7. DISCLOSURES RELATED TO ‘‘TEASER RATES’’.

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

10 U.S.C. 1637(c)) is amended—

11 (1) by redesignating paragraph (5) as para12 graph (6); and

13 (2) by inserting after paragraph (4) the follow14 ing new paragraph:

15 ‘‘(5) ADDITIONAL NOTICE CONCERNING ‘TEAS16 ER RATES’.—

17 ‘‘(A) IN GENERAL.—An application or so18 licitation for a credit card for which a disclo19 sure is required under this subsection shall con20 tain the disclosures contained in subparagraph

21 (B) or (C), as applicable, if the application or

22 solicitation offers, for an introductory period of

23 less than 1 year, an annual percentage rate of

24 interest that—
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1 ‘‘(i) is less than the annual percentage

2 rate of interest that will apply after the

3 end of the introductory period; or

4 ‘‘(ii) in the case of an annual percent5 age rate that varies in accordance with an

6 index that is less than the current annual

7 percentage rate under the index that will

8 apply after the end of the period.

9 ‘‘(B) FIXED ANNUAL PERCENTAGE

10 RATE.—If the annual percentage rate that will

11 apply after the end of the introductory period

12 will be a fixed rate, the application or solicita13 tion shall include the following disclosure: ‘The

14 annual percentage rate of interest applicable

15 during the introductory period is not the annual

16 percentage rate that will apply after the end of

17 the introductory period. The permanent annual

18 percentage rate will apply after [insert date]

19 and will be [insert percentage rate].’.

20 ‘‘(C) VARIABLE ANNUAL PERCENTAGE

21 RATE.—If the annual percentage rate that will

22 apply after the end of the introductory period

23 will vary in accordance with an index, the appli24 cation or solicitation shall include the following

25 disclosure: ‘The annual percentage rate of inter-
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1 est applicable during the introductory period is

2 not the annual percentage rate that will apply

3 after the end of the introductory period. The

4 permanent annual percentage rate will be deter5 mined by an index, and will apply after [insert

6 date]. If the index that will apply after such

7 date were applied to your account today, the

8 annual percentage rate would be [insert per9 centage rate].’.

10 ‘‘(D) FORM OF DISCLOSURE.—The disclo11 sures required under this paragraph shall be

12 made in a clear and conspicuous manner, in a

13 form at least as prominent as the disclosure of

14 the annual percentage rate of interest that will

15 apply during the introductory period.’’.

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