I

107TH CONGRESS

1ST SESSION H. R. 1060

To amend the Truth in Lending Act to prohibit unfair or deceptive creditor

acts or practices, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

MARCH 15, 2001

Mr. LAFALCE (for himself, Mrs. MALONEY of New York, Mr. GUTIERREZ, Ms.

LEE, Mrs. JONES of Ohio, Mr. CAPUANO, Mr. CLAY, Mr. HINCHEY, and

Ms. SCHAKOWSKY) introduced the following bill; which was referred to

the Committee on Financial Services

A BILL

To amend the Truth in Lending Act to prohibit unfair or

deceptive creditor acts or practices, 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 Predatory

5 Practices Prevention Act of 2001’’.
2

•HR 1060 IH

1 SEC. 2. PROHIBITION ON UNFAIR OR DECEPTIVE CRED2 ITOR ACTS OR PRACTICES IN SOLICITATIONS

3 FOR CREDIT CARDS.

4 (a) IN GENERAL.—Section 127 of the Consumer

5 Credit Protection Act (15 U.S.C. 1637) is amended by

6 adding at the end the following new subsection:

7 ‘‘(h) UNFAIR OR DECEPTIVE CREDITOR ACTS AND

8 PRACTICES.—

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

10 account under an open-end consumer credit plan, a

11 creditor shall not engage in an unfair or deceptive

12 act or practice.

13 ‘‘(2) BOARD DEFINITION OF UNFAIR OR DECEP14 TIVE CREDITOR ACT OR PRACTICE.—The Board

15 shall, in regulations, define what constitutes an un16 fair or deceptive creditor act or practice in violation

17 of this subsection.

18 ‘‘(3) SPECIFIC ACTS AND PRACTICES ARE UN19 FAIR AND DECEPTIVE.—For purposes of such regu20 lations, a creditor shall be determined to have en21 gaged in an unfair and deceptive act or practice if—

22 ‘‘(A) in connection with any solicitation to

23 open a credit card account for any consumer

24 under an open end consumer credit plan, the

25 creditor—
3

•HR 1060 IH

1 ‘‘(i) requires a consumer to pay an

2 application, processing or other fee as a

3 condition for applying for a credit card ac4 count, or in advance of receiving the disclo5 sures required by this section;

6 ‘‘(ii) requires a consumer to purchase

7 any membership, product or service, in8 cluding any credit protection, credit anal9 ysis, or credit education product or service,

10 as a condition for receiving a credit card

11 account;

12 ‘‘(iii) represents that the credit card

13 account does not require an annual fee,

14 when the consumer is required to pay an

15 enrollment fee, membership fee, or any

16 form of service fee on a recurring basis;

17 ‘‘(iv) represents that a consumer is

18 pre-approved, guaranteed approval, or oth19 erwise has met the creditor’s underwriting

20 standards to qualify for a specific offer of

21 credit, when the consumer does not meet

22 the standards for such credit, no such

23 standards exist, or the solicitation con24 stitutes only an invitation to apply for
4

•HR 1060 IH

1 credit or anything other than a firm offer

2 of credit to the consumer;

3 ‘‘(v) represents that a consumer quali4 fies to receive, or qualifies to apply to re5 ceive, a credit card account, in which any

6 stated term, including the line of credit

7 amount, annual interest rate, annual fee

8 amount or other term—

9 ‘‘(I) is not available to the con10 sumer upon initiation of the account,

11 but is made available, or is intended

12 at the time of the representation to be

13 made available, in installments over

14 time in response to the consumer’s

15 positive record of credit use and pay16 ment;

17 ‘‘(II) is an annual interest rate

18 or other term the issuer no longer

19 makes available as part of credit card

20 accounts for which the consumer

21 qualifies, or that the issuer has reason

22 to know will no longer be available to

23 such consumer prior to the expiration

24 of such period, as defined by regula25 tion, that permits reasonable time for
5

•HR 1060 IH

1 consumer response to the solicitation;

2 and

3 ‘‘(III) is an annual interest rate

4 or other term that the issuer makes

5 available only to selected consumers,

6 or to consumers with preferred credit

7 scores or ratings;

8 ‘‘(vi) represents that a credit card ac9 count provides for credit protection, over10 draft protection, travel insurance, or other

11 account-related benefits and services that

12 the issuer makes available separately, and

13 at additional charge, to card holders; or

14 ‘‘(vii) issues a credit card account to

15 a consumer who has responded to a direct

16 solicitation, the account terms of which are

17 materially different, in terms of being less

18 favorable to the consumer, than the terms

19 included in the solicitation that resulted in

20 the consumer’s application;

21 ‘‘(B) in administering a credit card ac22 count for any consumer under an open end con23 sumer credit plan, the creditor—

24 ‘‘(i) enrolls a consumer in paid mem25 berships or in any account-related service
6

•HR 1060 IH

1 or program, including credit insurance or

2 credit protection, without the clear and un3 ambiguous consent of the consumer after

4 receiving complete disclosure of the terms

5 and conditions for such membership, serv6 ice, or program, as provided in regulation;

7 ‘‘(ii) posts a charge or debit to a con8 sumer’s account for any product, service,

9 or membership without the clear and un10 ambiguous consent of the consumer after

11 receiving complete disclosure of the terms

12 and conditions for such membership, serv13 ice, or program, as provided in regulation;

14 ‘‘(iii) engages in a pattern or practice

15 of—

16 ‘‘(I) failing to mail the initial

17 periodic statement required under

18 subsection (b) of this section, or de19 laying or withholding any subsequent

20 periodic statement, for the purpose, or

21 with the effect, of causing the con22 sumer to incur late payment fees or

23 other fees or penalties, or additional

24 interest charges with respect to such

25 account;
7

•HR 1060 IH

1 ‘‘(II) scheduling payment due

2 dates in periodic statements to coin3 cide with holidays, weekend days, or

4 other days that the creditor is not

5 open for business, or otherwise not

6 available to receive or process billing

7 payments, for the purpose, or with the

8 effect, of causing the consumer to

9 incur late payment fees or other pen10 alties or additional interest charges

11 with respect to the account; or

12 ‘‘(III) withholding the posting of

13 payments to a credit card account re14 ceived on or before the payment due

15 date stated in periodic statements for

16 the purpose, or with the effect, of

17 causing the consumer to incur late

18 payment fees or other penalties or ad19 ditional interest charges with respect

20 to such account;

21 ‘‘(iv) increases the annual interest

22 rate on a credit card account, or removes

23 or increases any introductory interest rate

24 applicable to such account, for reasons

25 other than actions or omissions of the card
8

•HR 1060 IH

1 holder that are directly related to such ac2 count, which shall be clearly and conspicu3 ously described to the card holder in the

4 information required to be disclosed under

5 subsection (a), and then only after the con6 sumer has been provided with appropriate

7 notice, as provided in regulation; or

8 ‘‘(v) subject to paragraph (5), refuses

9 to cancel or close a credit card account

10 upon the request of a consumer; or

11 ‘‘(C) the creditor engages in any other

12 practice that the Board shall determine, by reg13 ulation or order, to be unfair, deceptive, in14 tended to misrepresent or confuse the terms of

15 a credit offer, or designed to evade the provi16 sions of this subsection.

17 ‘‘(4) NOTICE TO CONSUMER OF FAILURE TO

18 QUALIFY.—The Board shall prescribe regulations for

19 procedures under which the creditor shall provide

20 notice to any consumer of—

21 ‘‘(A) any failure of the consumer to qualify

22 for an extension of credit or a credit card under

23 the terms and conditions in an offer or solicita24 tion and the reasons for such failure to qualify;
9

•HR 1060 IH

1 ‘‘(B) the terms of a credit card account, if

2 any, that the consumer is qualified to receive,

3 which shall include all disclosures required

4 under subsection (c)(1) and shall meet all re5 quirements of this section; and

6 ‘‘(C) the procedures required of the con7 sumer to receive, or to apply to receive, the

8 credit card account disclosed under subpara9 graph (B).

10 ‘‘(5) PROCEDURES FOR CANCELLATION.—A

11 creditor may define procedures for requesting can12 cellation of an account, which shall be clearly de13 scribed in the information required to be disclosed

14 under subsection (a) and shall be reasonable.’’.

15 (b) IMPROVED ENFORCEMENT AUTHORITY.—Section

16 127 of the Consumer Credit Protection Act (15 U.S.C.

17 1637) is amended by inserting after subsection (h) (as

18 added by subsection (a) of this section) the following new

19 subsection:

20 ‘‘(i) STATE ACTION FOR VIOLATIONS.—

21 ‘‘(1) AUTHORITY OF THE STATES.—In addition

22 to such other remedies as are provided under State

23 law, if the attorney general of a State, or an officer

24 authorized by the State, has reason to believe that
10

•HR 1060 IH

1 any creditor has violated or is violating subsection

2 (h), the State may—

3 ‘‘(A) bring an action on behalf of the resi4 dents of the State to enjoin such violation in

5 any appropriate United States district court or

6 in any other court of competent jurisdiction;

7 and

8 ‘‘(B) bring an action on behalf of the resi9 dents of the State to enforce compliance with

10 subsection (h), to obtain damages, restitution,

11 or other compensation on behalf of the resi12 dents of such State, or to obtain such further

13 and other relief as the court may deem appro14 priate.

15 ‘‘(2) RIGHTS OF FEDERAL AGENCIES.—

16 ‘‘(A) NOTICE.—The State shall serve prior

17 written notice of any action commenced under

18 paragraph (1) with respect to any depository in19 stitution upon the Federal agency described in

20 subsection (a) or (c) of section 108 with respect

21 to such creditor and shall provide such agency

22 with a copy of the complaint unless such prior

23 notice is not feasible, in which case the State

24 shall serve such notice immediately upon insti25 tuting such action.
11

•HR 1060 IH

1 ‘‘(B) INTERVENING ACTION.—Any agency

2 described in subsection (a) or (c) of section 108

3 which receives a notice from a State under sub4 paragraph (A) with respect to any action de5 scribed in such subparagraph shall have the

6 right—

7 ‘‘(i) to move to stay the action, pend8 ing the final disposition of a pending Fed9 eral matter as described in paragraph (4);

10 ‘‘(ii) to intervene in an action under

11 paragraph (1);

12 ‘‘(iii) upon so intervening, to be heard

13 on all matters arising therein;

14 ‘‘(iv) to remove the action to the ap15 propriate United States district court; and

16 ‘‘(v) to file petitions for appeal.

17 ‘‘(3) INVESTIGATORY POWERS.—For purposes

18 of bringing any action under this subsection, nothing

19 in this subsection shall prevent the attorney general,

20 or officers of such State who are authorized by such

21 State to bring such actions, from exercising the pow22 ers conferred on the attorney general or such offi23 cers by the laws of such State to conduct investiga24 tions or to administer oaths or affirmations or to
12

•HR 1060 IH

1 compel the attendance of witnesses or the production

2 of documentary and other evidence.

3 ‘‘(4) LIMITATION ON STATE ACTION WHILE

4 FEDERAL ACTION IS PENDING.—If any Federal

5 agency described in subsection (a) or (c) of section

6 108 has instituted an enforcement action for a viola7 tion of subsection (h), no State may, during the

8 pendency of such action, bring an action under this

9 subsection against any creditor named in the en10 forcement action for any violation of subsection (h)

11 that is alleged in that action.’’.

12 (c) EFFECTIVE DATE OF REGULATIONS.—

13 (1) PUBLICATION OF FINAL REGULATIONS.—

14 Notwithstanding section 105(d) of the Truth in

15 Lending Act, the Board of Governors of the Federal

16 Reserve System shall publish in final form in the

17 Federal Register before the end of the 6-month pe18 riod beginning on the date of the enactment of this

19 Act any regulations required under the amendments

20 made by subsection (a) or (b) and such regulations

21 as the Board determines to be appropriate to imple22 ment such amendments.

23 (2) EFFECTIVE DATE.—The regulations pub24 lished in final form in accordance with paragraph
13

•HR 1060 IH

1 (1) shall take effect not later than 90 days after the

2 date of such publication.

Æ