II

106TH CONGRESS

1ST SESSION S. 787

To amend the Truth in Lending Act to enhance consumer disclosures regarding credit card terms and charges, to restrict issuance of credit cards

to students, to expand protections in connection with unsolicited credit

cards and third-party checks, and to protect consumers from unreasonable practices that result in unnecessary credit costs or loss of credit,

and for other purposes.

IN THE SENATE OF THE UNITED STATES

APRIL 13, 1999

Mr. SCHUMER (for himself and Mr. DURBIN) 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 enhance consumer

disclosures regarding credit card terms and charges, to

restrict issuance of credit cards to students, to expand

protections in connection with unsolicited credit cards

and third-party checks, and to protect consumers from

unreasonable practices that result in unnecessary credit

costs or loss of credit, 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,
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1 SECTION 1. SHORT TITLE.

2 This Act may be cited as the ‘‘Consumer Credit Card

3 Protection Amendments of 1999’’.

4 SEC. 2. DISCLOSURES REGARDING MINIMUM MONTHLY

5 PAYMENTS.

6 (a) IN GENERAL.—Section 127(a)(3) of the Truth in

7 Lending Act (15 U.S.C. 1637(a)(3)) is amended by insert8 ing before the period ‘‘, or the method of determining the

9 required minimum payment amount, if a minimum pay10 ment is required that is different from the amount of any

11 finance charge, and the charges or penalties, if any, that

12 may be imposed for failure by the obligor to pay the re13 quired finance charge or minimum payment amount’’.

14 (b) REPAYMENT INFORMATION.—Section 127(b) of

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

16 by adding at the end the following:

17 ‘‘(11) In a clear and conspicuous manner, re18 payment information that would apply to the out19 standing balance of the obligor under the credit

20 plan, including—

21 ‘‘(A) the required minimum monthly pay22 ment on that balance, represented as both a

23 dollar figure and as a percentage of that

24 balance;

25 ‘‘(B) the number of months (rounded to

26 the nearest month) that it would take to pay
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1 the entire amount of that current balance if the

2 obligor pays only the required minimum month3 ly payments, and if no further advances are

4 made;

5 ‘‘(C) the total cost to the obligor, including

6 interest and principal payments, of paying that

7 balance in full if the obligor pays only the re8 quired minimum monthly payments, and if no

9 further advances are made; and

10 ‘‘(D) the following statement: ‘If your cur11 rent rate of interest is a temporary introductory

12 rate, your total costs may be higher.’ ’’.

13 (c) MINIMUM PAYMENT AMOUNT.—Section

14 127(c)(1)(A) of the Truth in Lending Act (15 U.S.C.

15 1637(c)(1)(A)) is amended by adding at the end the fol16 lowing:

17 ‘‘(v) MINIMUM PAYMENT AMOUNT.—

18 The method for determining the required

19 minimum payment amount to be paid for

20 each billing cycle, and the charge or pen21 alty, if any, to be imposed for any failure

22 by the obligor to pay the required min23 imum payment amount.’’.
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1 SEC. 3. DISCLOSURE OF LATE PAYMENT DEADLINES AND

2 PENALTIES.

3 Section 127(b) of the Truth in Lending Act (15

4 U.S.C. 1637(b)) is amended by adding at the end the fol5 lowing:

6 ‘‘(12) If a charge is to be imposed due to the

7 failure of the obligor to make payment on or before

8 a required payment due date, the date that payment

9 is due or, if different, the date on which a late pay10 ment fee will be charged, shall be stated prominently

11 in a conspicuous location on the billing statement,

12 together with the amount of the charge to be im13 posed if payment is made after such date.’’.

14 SEC. 4. WORLDWIDE WEB-BASED CREDIT CARD SOLICITA15 TIONS.

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

17 U.S.C. 1637(c)) is amended—

18 (1) by redesignating paragraphs (3), (4), and

19 (5) as paragraphs (4), (5), and (8), respectively; and

20 (2) by inserting after paragraph (2) the fol21 lowing:

22 ‘‘(3) INTERNET BASED APPLICATIONS AND SO23 LICITATIONS.—

24 ‘‘(A) IN GENERAL.—In any solicitation to

25 open a credit card account for any person under

26 an open end consumer credit plan using the
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1 Internet or an interactive computer service, the

2 person making the solicitation shall clearly and

3 conspicuously disclose—

4 ‘‘(i) the information described in sub5 paragraphs (A) and (B) of paragraph (1);

6 and

7 ‘‘(ii) the disclosures described in para8 graph (6).

9 ‘‘(B) FORM OF DISCLOSURE.—The disclo10 sures required by subparagraph (A) shall be—

11 ‘‘(i) readily accessible to consumers in

12 close proximity to the solicitation to open

13 a credit card account; and

14 ‘‘(ii) updated regularly to reflect the

15 current policies, terms, and fee amounts

16 applicable to the credit card account.

17 ‘‘(C) DEFINITIONS.—For purposes of this

18 paragraph—

19 ‘‘(i) the term ‘Internet’ means the

20 international computer network of both

21 Federal and non-Federal interoperable

22 packet switched data networks; and

23 ‘‘(ii) the term ‘interactive computer

24 service’ means any information service,

25 system, or access software provider that
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1 provides or enables computer access by

2 multiple users to a computer server, in3 cluding specifically a service or system that

4 provides access to the Internet and such

5 systems operated or services offered by li6 braries or educational institutions.’’.

7 SEC. 5. DISCLOSURES RELATED TO ‘‘TEASER RATES’’.

8 Section 127(c) (15 U.S.C. 1637(c)) is amended by

9 inserting after paragraph (5) (as so redesignated by sec10 tion 4 of this Act) the following:

11 ‘‘(6) ADDITIONAL NOTICE CONCERNING ‘TEAS12 ER RATES’.—

13 ‘‘(A) IN GENERAL.—An application or so14 licitation for a credit card for which a disclo15 sure is required under this subsection shall con16 tain the disclosure contained in subparagraph

17 (B) or (C), as appropriate, if the application or

18 solicitation offers, for an introductory period of

19 less than 1 year, an annual percentage rate of

20 interest that—

21 ‘‘(i) is less than the annual percentage

22 rate of interest that will apply after the

23 end of the introductory period; or

24 ‘‘(ii) in the case of an annual percent25 age rate that varies in accordance with an
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1 index, is less than the current annual per2 centage rate under the index that will

3 apply after the end of such period.

4 ‘‘(B) FIXED ANNUAL PERCENTAGE

5 RATE.—If the annual percentage rate that will

6 apply after the end of the introductory period

7 will be a fixed rate, the application or solicita8 tion shall include the following disclosure: ‘The

9 annual percentage rate of interest applicable

10 during the introductory period is not the annual

11 percentage rate that will apply after the end of

12 the introductory period. The permanent annual

13 percentage rate will apply after [insert applica14 ble date] and will be [insert applicable percent15 age rate].’.

16 ‘‘(C) VARIABLE ANNUAL PERCENTAGE

17 RATE.—If the annual percentage rate that will

18 apply after the end of the introductory period

19 will vary in accordance with an index, the appli20 cation or solicitation shall include the following

21 disclosure: ‘The annual percentage rate of inter22 est applicable during the introductory period is

23 not the annual percentage rate that will apply

24 after the end of the introductory period. The

25 permanent annual percentage rate will be deter-
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1 mined by an index, and will apply after [insert

2 applicable date]. If the index that will apply

3 after such date were applied to your account

4 today, the annual percentage rate would be [in5 sert applicable percentage rate].’.

6 ‘‘(D) CONDITIONS FOR INTRODUCTORY

7 RATES.—If the annual percentage rate of inter8 est that will apply during the introductory pe9 riod described in subparagraph (A) is revocable

10 or otherwise conditioned upon any action by the

11 obligor, including any failure by the obligor to

12 pay the minimum payment amount or finance

13 charge or to make any payment by the stated

14 monthly payment due date, the application or

15 solicitation shall include disclosure of—

16 ‘‘(i) the conditions that the obligor

17 must meet to retain the annual percentage

18 rate of interest during the introductory pe19 riod; and

20 ‘‘(ii) the annual percentage rate of in21 terest that will apply as a result of the fail22 ure of the obligor to meet such conditions.

23 ‘‘(E) FORM OF DISCLOSURE.—The disclo24 sures required under this paragraph shall be

25 made in a clear and conspicuous manner, in a
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1 form at least as prominent as the disclosure of

2 the annual percentage rate of interest that will

3 apply during the introductory period.’’.

4 SEC. 6. LIMIT ON INACTIVITY FEES.

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 ‘‘(h) LIMIT ON INACTIVITY FEES.—In the case of any

8 credit card account under an open end consumer credit

9 plan, a creditor may not impose a fee based on inactivity

10 for the account during any period during which no ad11 vances have been made, if the obligor maintains any out12 standing balance and is charged a finance charge applica13 ble to such balance.’’.

14 SEC. 7. ISSUANCE OF CREDIT CARDS TO UNDERAGE CON15 SUMERS.

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

17 U.S.C. 1637(c)) is amended by inserting after paragraph

18 (6) (as added by section 5 of this Act) the following:

19 ‘‘(7) APPLICATIONS FROM UNDERAGE OBLI20 GORS.—

21 ‘‘(A) PROHIBITION ON ISSUANCE.—No

22 credit card may be issued to, or open end credit

23 plan established on behalf of, any obligor who

24 has not attained the age of 21, except in re25 sponse to a written request or application to the
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1 card issuer that meets the requirements of sub2 paragraph (B).

3 ‘‘(B) APPLICATION REQUIREMENTS.—An

4 application to open a credit card account by an

5 individual who has not reached the age of 21 as

6 of the date of submission of the application

7 shall require—

8 ‘‘(i) the signature of the parent or

9 guardian of that individual indicating joint

10 liability for debts incurred by the consumer

11 in connection with the account before the

12 consumer has reached the age of 21; or

13 ‘‘(ii) submission by that individual of

14 financial information indicating an inde15 pendent means of repaying any obligation

16 arising from the proposed extension of

17 credit in connection with the account.’’.

18 SEC. 8. PENALTIES FOR ON-TIME PAYMENT PROHIBITED.

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

20 1637) is amended by adding at the end the following:

21 ‘‘(i) PENALTIES FOR ON-TIME PAYMENT PROHIB22 ITED.—

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

24 card account under an open end consumer credit

25 plan, no creditor may cancel an account, impose a
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1 minimum finance charge for any period (including

2 any annual period), impose any fee in lieu of a min3 imum finance charge, or impose any other charge or

4 penalty with regard to such account or credit ex5 tended under such account solely on the basis that

6 any credit extended has been repaid in full before

7 the end of any grace period applicable with respect

8 to the extension of credit.

9 ‘‘(2) PAYMENT DUE DATES.—For purposes of

10 paragraph (1), a creditor shall be deemed to have

11 imposed a prohibited charge or penalty on an ac12 count under an open end consumer credit plan if the

13 creditor regularly transmits to the obligor of such

14 plan a statement for a billing cycle in which credit

15 has been extended under such plan that includes a

16 payment due date, as required by subsection (b)(9),

17 that—

18 ‘‘(A) is different from and in advance of—

19 ‘‘(i) the date by which payment would

20 have to be made for any credit extended

21 under such credit plan to avoid incurring a

22 finance change that was disclosed to such

23 obligor pursuant to subsection

24 (c)(1)(A)(iii); or
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1 ‘‘(ii) the actual date by which pay2 ment would otherwise have to be made to

3 avoid incurring a finance charge if cal4 culated on the same basis as the date by

5 which or the period within which any pay6 ment would have to be made to avoid in7 curring a finance charge that was disclosed

8 to such obligor pursuant to subsection

9 (c)(1)(A)(iii); and

10 ‘‘(B) has the purpose or effect of inducing

11 the obligor of such plan to transmit payment to

12 the creditor earlier than otherwise would be re13 quired to avoid incurring a finance charge.

14 ‘‘(3) SCOPE OF APPLICATION.—Paragraph (1)

15 may not be construed as—

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

17 annual fee which may be imposed on the con18 sumer in advance of any annual period to cover

19 the cost of maintaining a credit card account

20 during such annual period without regard to

21 whether any credit is actually extended under

22 such account during such period; or

23 ‘‘(B) otherwise affecting the imposition of

24 the actual finance charge applicable with re25 spect to any credit extended under such account
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1 during such annual period at the annual per2 centage rate disclosed to the consumer in ac3 cordance with this title for the period of time

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

5 SEC. 9. FREEZE ON INTEREST RATE TERMS AND FEES ON

6 CANCELED CARDS.

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

8 1637) is amended by adding at the end the following:

9 ‘‘(j) FREEZE ON INTEREST RATE TERMS AND FEES

10 ON CANCELED CARDS.—

11 ‘‘(1) ADVANCE NOTICE OF INCREASE IN INTER12 EST RATE REQUIRED.—In the case of any credit

13 card account under an open end consumer credit

14 plan, no increase in any annual percentage rate of

15 interest (other than an increase due to the expira16 tion of any introductory percentage rate of interest,

17 or due solely to a change in another rate of interest

18 to which such rate is indexed) applicable to any out19 standing balance of credit under such plan may take

20 effect before the beginning of the billing cycle that

21 begins not less than 15 days after the date on which

22 the obligor receives notice of such increase.

23 ‘‘(2) INCREASE NOT EFFECTIVE FOR CANCELED

24 ACCOUNTS.—If an obligor referred to in paragraph

25 (1) cancels the credit card account before the begin-
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1 ning of the billing cycle referred to in paragraph

2 (1)—

3 ‘‘(A) an annual percentage rate of interest

4 applicable after the cancellation with respect to

5 the outstanding balance on the account as of

6 the date of cancellation may not exceed any an7 nual percentage rate of interest applicable with

8 respect to that balance under the terms and

9 conditions in effect before the increase referred

10 to in paragraph (1); and

11 ‘‘(B) the repayment of the outstanding

12 balance after the cancellation shall be subject to

13 all other terms and conditions applicable with

14 respect to the account before the increase re15 ferred to in such paragraph.

16 ‘‘(3) NOTICE OF RIGHT TO CANCEL.—The no17 tice referred to in paragraph (1) with respect to an

18 increase in any annual percentage rate of interest

19 shall be made in a clear and conspicuous manner,

20 and shall contain a brief statement of the right of

21 the obligor—

22 ‘‘(A) to cancel the account before the effec23 tive date of the increase; and

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

25 any balance outstanding on the account at the
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1 time of cancellation, in accordance with the

2 terms and conditions in effect before the can3 cellation.’’.

4 SEC. 10. DISCLOSURE OF INTEREST RATES AND FEES ON

5 CREDIT ADVANCES THROUGH THIRD-PARTY

6 CHECKS.

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

8 1637) is amended by adding at the end the following:

9 ‘‘(k) FEES AND INTEREST RATES ON CREDIT AD10 VANCES THROUGH THE USE OF THIRD-PARTY

11 CHECKS.—

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

13 card account under an open end consumer credit

14 plan, a creditor may not provide the obligor with any

15 negotiable or transferable instrument for use in

16 making an extension of credit to the obligor for the

17 purpose of making a transfer to a third party, unless

18 the creditor has fully satisfied the notice require19 ments of paragraph (2) with respect to such instru20 ment.

21 ‘‘(2) NOTICE REQUIREMENTS.—A creditor sat22 isfies the notice requirements of this paragraph with

23 respect to an instrument referred to in paragraph

24 (1) if the creditor provides to an obligor, at the same
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1 time at which any such instrument is provided, a

2 notice that prominently and specifically describes—

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

4 that may be imposed for making an extension

5 of credit through the use of such instrument,

6 including the exact percentage rate to be used

7 in determining such amount if the amount of

8 the transaction fee is expressed as a percentage

9 of the amount of the credit extended; and

10 ‘‘(B) any annual percentage rate of inter11 est applicable in determining the finance charge

12 for any such extension of credit, if different

13 from the finance charge applicable to other ex14 tensions of credit under such account.’’.

15 SEC. 11. PROHIBITION ON OVER-THE-LIMIT FEES FOR

16 CREDITOR-APPROVED TRANSACTIONS.

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

18 1637) is amended by adding at the end the following:

19 ‘‘(l) LIMITATION ON IMPOSITION OF OVER-THE20 LIMIT FEES.—In the case of any credit card account

21 under an open end consumer credit plan, a creditor may

22 not impose any fee on the obligor for any extension of

23 credit in excess of the amount of credit authorized to be

24 extended with respect to such account, if the extension of

25 credit is made in connection with a credit transaction that
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1 the creditor approves in advance or at the time of the

2 transaction.’’.

3 SEC. 12. UNSOLICITED DUAL-PURPOSE CARDS.

4 Section 132 of the Truth in Lending Act (15 U.S.C.

5 1642) is amended—

6 (1) by inserting ‘‘(a) IN GENERAL.—’’ before

7 ‘‘No’’; and

8 (2) by adding at the end the following:

9 ‘‘(b) CERTAIN CARDS INCLUDED.—For purposes of

10 this section, the term ‘credit card’ includes any dual pur11 pose or multifunction card, including a stored-value card,

12 debit card, check card, check guarantee card, or purchase13 price discount card, that is connected with an open end

14 credit plan and can be used, either on issuance or upon

15 later activation, to obtain credit directly or indirectly.’’.

16 SEC. 13. CIVIL LIABILITY.

17 Section 130(a) of the Truth in Lending Act (15

18 U.S.C. 1640(a)) is amended in the undesignated para19 graph following paragraph (4)—

20 (1) in the second sentence, by striking ‘‘or

21 (10)’’ and inserting ‘‘(10), (11), or (12)’’; and

22 (2) by striking the third sentence.

23 SEC. 14. REGULATIONS.

24 Not later than 6 months after the date of enactment

25 of this Act, the Board of Governors of the Federal Reserve
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1 System (hereafter in this section referred to as the

2 ‘‘Board’’) shall—

3 (1) issue final regulations to implement the

4 amendments made by this Act; and

5 (2) issue such staff commentary or publish such

6 model disclosure statements and forms as the Board

7 considers necessary—

8 (A) to carry out the intent of the amend9 ments made by this Act;

10 (B) to implement any initiative to prevent

11 the circumvention of any of the amendments

12 made by this Act; and

13 (C) to facilitate compliance with the re14 quirements in the amendments made by this

15 Act.

Æ