I

106TH CONGRESS

1ST SESSION H. R. 1276

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 HOUSE OF REPRESENTATIVES

MARCH 24, 1999

Ms. ROYBAL-ALLARD (for herself, Mr. LUTHER, Mr. SHOWS, Mr. GREEN of

Texas, Mr. PASTOR, Mr. BROWN of California, Ms. LEE, Mr. STARK, Mr.

DAVIS of Illinois, Mr. FILNER, Mr. DIXON, Mr. OLVER, Mr. GEORGE

MILLER of California, Mr. HINCHEY, and Ms. WOOLSEY) introduced the

following bill; which was referred to the Committee on Banking and Financial Services

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’’.
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1 SEC. 2. FEES FOR ON-TIME PAYMENTS PROHIBITED.

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

3 1637) is amended by adding at the end the following new

4 subsection:

5 ‘‘(h) FEES FOR ON-TIME PAYMENTS PROHIBITED.—

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

7 card account under an open-end consumer credit

8 plan, no minimum finance charge for any period (in9 cluding any annual period), and no fee in lieu of a

10 minimum finance charge, may be imposed with re11 gard to such account or credit extended under such

12 account solely on the basis that any credit extended

13 has been repaid in full before the end of any grace

14 period applicable with respect to the extension of

15 credit.

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

17 shall not be construed as—

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

19 annual fee which may be imposed on the con20 sumer in advance of any annual period to cover

21 the cost of maintaining a credit card account

22 during such annual period without regard to

23 whether any credit is actually extended under

24 such account during such period; or

25 ‘‘(B) otherwise affecting the imposition of

26 the actual finance charge applicable with re-
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1 spect to any credit extended under such account

2 during such annual period at the annual per3 centage rate disclosed to the consumer in ac4 cordance with this title for the period of time

5 any such credit is outstanding.’’.

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

7 CANCELED CARDS.

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

9 1637) is amended by inserting after subsection (h) (as

10 added by section 2 of this Act) the following new sub11 section:

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

13 ON CANCELED CARDS.—

14 ‘‘(1) ADVANCE NOTICE OF INCREASE IN INTER15 EST RATE REQUIRED.—In the case of any credit

16 card account under an open-end consumer credit

17 plan, no increase in any annual percentage rate of

18 interest (other than an increase due solely to a

19 change in another rate of interest to which such rate

20 is indexed) applicable to any outstanding balance of

21 credit under such plan may take effect before the be22 ginning of the billing cycle which begins not less

23 than 15 days after the accountholder receives notice

24 of such increase.
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1 ‘‘(2) INCREASE NOT EFFECTIVE FOR CANCELED

2 ACCOUNTS.—If an accountholder referred to in para3 graph (1) cancels the credit card account before the

4 beginning of the billing cycle referred to in such

5 paragraph and surrenders all unexpired credit cards

6 issued in connection with such account—

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

8 applicable after the cancellation with respect to

9 the outstanding balance on such account as of

10 the date of cancellation may not exceed any an11 nual percentage rate of interest applicable with

12 respect to such balance under the terms and

13 conditions in effect before the increase referred

14 to in paragraph (1); and

15 ‘‘(B) the repayment of such outstanding

16 balance after the cancellation shall be subject to

17 all other terms and conditions applicable with

18 respect to such account before the increase re19 ferred to in such paragraph.

20 ‘‘(3) NOTICE OF RIGHT TO CANCEL.—The no21 tice referred to in paragraph (1) with respect to an

22 increase in annual percentage rate of interest shall

23 contain a brief description of the right of the

24 consumer—
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1 ‘‘(A) to cancel the account before the effec2 tive date of the increase; and

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

4 balance outstanding on such account at the

5 time of cancellation in accordance with the

6 terms and conditions in effect before the can7 cellation.’’.

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

9 CREDIT ADVANCES THROUGH THE USE OF 3d

10 PARTY CHECKS.

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

12 1637) is amended by inserting after subsection (i) (as

13 added by section 3 of this Act) the following new sub14 section:

15 ‘‘(j) FEES AND INTEREST RATES ON CREDIT AD16 VANCES THROUGH THE USE OF 3d PARTY CHECKS.—

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

18 card account under an open-end consumer credit

19 plan, a creditor may not provide the accountholder

20 with any negotiable or transferable instrument for

21 use in making an extension of credit to the

22 accountholder for the purpose of making a transfer

23 to a 3d party, unless the creditor has fully satisfied

24 the notice requirements of paragraph (2) with re25 spect to such instrument.
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1 ‘‘(2) NOTICE REQUIREMENTS.—A creditor

2 meets the notice requirements of this paragraph

3 with respect to an instrument referred to in para4 graph (1) if the creditor provides, to an

5 accountholder at the same time any such instrument

6 is provided, a notice which prominently and specifi7 cally describes—

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

9 which may be imposed for making an extension

10 of credit through the use of such instrument,

11 including the exact percentage rate to be used

12 in determining such amount if the amount of

13 the transaction fee is expressed as a percentage

14 of the amount of the credit extended; and

15 ‘‘(B) any annual percentage rate of inter16 est applicable in determining the finance charge

17 for any such extension of credit.’’.

18 SEC. 5. PROHIBITION ON OVER-THE-LIMIT FEES IN CRED19 ITOR-APPROVED TRANSACTIONS.

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

21 1637) is amended by inserting after subsection (j) (as

22 added by section 4 of this Act) the following new sub23 section:

24 ‘‘(k) LIMITATION ON IMPOSITION OF OVER-THE25 LIMIT FEES.—In the case of any credit card account
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1 under an open-end consumer credit plan, a creditor may

2 not impose any fee on the accountholder for any extension

3 of credit in excess of the amount of credit authorized to

4 be extended with respect to such account if the extension

5 of credit is made in connection with a credit transaction

6 which the creditor approves in advance or at the time of

7 the transaction.’’.

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

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

10 1637) is amended by inserting after subsection (k) (as

11 added by section 5 of this Act) the following new sub12 section:

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

14 case of any credit card account under an open-end con15 sumer credit plan, if the creditor provides, with regard to

16 any new extension of credit under such account, a period

17 during which such extension of credit may be repaid with18 out incurring a finance charge for such extension of credit,

19 no finance charge may subsequently be imposed for such

20 period with regard to any unpaid balance (as of the end

21 of such period) of such extension of credit.’’.

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

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

24 U.S.C. 1637(c)) is amended—
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1 (1) by redesignating paragraph (5) as paragraph

2 (6); and

3 (2) by inserting after paragraph (4) the fol4 lowing new paragraph:

5 ‘‘(5) ADDITIONAL NOTICE CONCERNING ‘TEAS6 ER RATES’.—

7 ‘‘(A) IN GENERAL.—If any application or

8 solicitation for a credit card for which a disclo9 sure is required under this subsection offers, for

10 an introductory period of less than 1 year, an

11 annual percentage rate of interest which—

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

13 rate of interest which will apply after the

14 end of such introductory period; or

15 ‘‘(ii) in the case of an annual percent16 age rate which varies in accordance with

17 an index, which is less than the current

18 annual percentage rate under the index

19 which will apply after the end of such pe20 riod,

21 the application or solicitation shall contain the

22 disclosure contained in subparagraph (B) or

23 (C), as the case may be.

24 ‘‘(B) FIXED ANNUAL PERCENTAGE

25 RATE.—If the annual percentage rate which will
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1 apply after the end of the introductory period

2 will be a fixed rate, the application or solicita3 tion shall include the following disclosure: ‘‘The

4 annual percentage rate of interest applicable

5 during the introductory period is not the annual

6 percentage rate which will apply after the end

7 of the introductory period. The permanent an8 nual percentage rate will apply after (insert

9 date) and will be (insert percentage rate).’’.

10 ‘‘(C) VARIABLE ANNUAL PERCENTAGE

11 RATE.—If the annual percentage rate which will

12 apply after the end of the introductory period

13 will vary in accordance with an index, the appli14 cation or solicitation shall include the following

15 disclosure: ‘‘The annual percentage rate of in16 terest applicable during the introductory period

17 is not the annual percentage rate which will

18 apply after the end of the introductory period.

19 The permanent annual percentage rate will be

20 determined by an index and will apply after (in21 sert date). If the index which will apply after

22 such date were applied to your account today,

23 the annual percentage rate would be (insert

24 percentage rate).’’.
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1 ‘‘(D) FORM OF DISCLOSURE.—The disclo2 sure required under this paragraph shall be

3 made in a clear and conspicuous manner in a

4 form at least as prominent as the disclosure of

5 the annual percentage rate of interest which

6 will apply during the introductory period.’’.

7 SEC. 8. DISCLOSURES RELATING TO THE DATES PAYMENTS

8 ARE DUE.

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

10 U.S.C. 1637(b)(9)) is amended by striking ‘‘The date by

11 which or the period (if any) within which, payment must

12 be made to avoid additional finance charges,’’ and insert13 ing ‘‘In a prominent place on the face of the statement,

14 the date of the last full business day on which payment

15 may be received before the imposition of late fees or addi16 tional finance charges (without regard to whether payment

17 may be received on a subsequent nonbusiness day or dur18 ing a portion of a subsequent business day before any such

19 fee or charge is imposed) and a conspicuous notice that

20 the failure to remit payment in sufficient time for the pay21 ment to be processed by such date may result in substan22 tial late fees or additional finance charges,’’.
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1 SEC. 9. PROHIBITION ON MINIMUM PAYMENT AMOUNTS

2 THAT RESULT IN NEGATIVE AMORTIZATION.

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

4 1637) is amended by inserting after subsection (l) (as

5 added by section 6 of this Act) the following new sub6 section:

7 ‘‘(m) PROHIBITION ON MINIMUM PAYMENT

8 AMOUNTS THAT RESULT IN NEGATIVE AMORTIZATION.—

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

10 card account under an open-end consumer credit

11 plan, the minimum amount of any periodic payment

12 required to be made on any outstanding balance may

13 not be less than the finance charge applicable with

14 respect to such outstanding balance for such period.

15 ‘‘(2) DISCLOSURES REQUIRED IN CASE OF LOW

16 AMORTIZATION RATE.—If, in the case of any credit

17 card account under an open-end consumer credit

18 plan, the minimum amount of any periodic payment

19 required to be made on any outstanding balance re20 duces the outstanding balance by less than 2 percent

21 of such balance, after payment of any finance charge

22 and fees imposed for such period, the periodic state23 ment required under subsection (b) with respect to

24 such account shall include a conspicuous notice in a

25 prominent place on the statement of—
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1 ‘‘(A) the fact that the outstanding balance

2 will be reduced by less than 2 percent if the

3 consumer only pays the minimum amount; and

4 ‘‘(B) the period of time which would be re5 quired to pay off the outstanding balance if the

6 consumer paid only the minimum amount of

7 each periodic payment required until such

8 balance is fully repaid.

9 ‘‘(3) EXCEPTION UNDER EXIGENT CIR10 CUMSTANCES.—In addition to any other authority of

11 the Board under this title to prescribe regulations,

12 the Board may prescribe regulations which permit

13 exceptions to the application of paragraph (1) with

14 respect to any consumer who requests a creditor to

15 agree to a payment deferral plan for a limited period

16 of time due to loss of employment, illness, or inca17 pacity, or such other exigent circumstances the

18 Board may describe in such regulations.’’.

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