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[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 2755 Introduced in Senate (IS)]

108th CONGRESS
  2d Session
                                S. 2755

   To amend the Consumer Credit Protection Act to ban abusive credit 
 practices, enhance consumer disclosures, protect underage consumers, 
                        and for other purposes.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                             July 22, 2004

   Mr. Dodd introduced the following bill; which was read twice and 
    referred to the Committee on Banking, Housing, and Urban Affairs

_______________________________________________________________________

                                 A BILL

 
   To amend the Consumer Credit Protection Act to ban abusive credit 
 practices, enhance consumer disclosures, protect underage consumers, 
                        and for other purposes.

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    This Act may be cited as the ``Credit Card Accountability 
Responsibility and Disclosure Act of 2004'' or the ``Credit CARD Act of 
2004''.

SEC. 2. REGULATORY AUTHORITY.

    The Board of Governors of the Federal Reserve System may issue such 
rules or publish such model forms as it considers necessary to carry 
out this Act and the amendments made by this Act.

                       TITLE I--ABUSIVE PRACTICES

                   Subtitle A--Use of Default Clauses

SEC. 111. PRIOR NOTICE OF RATE INCREASES REQUIRED.

    Section 127 of the Truth in Lending Act (15 U.S.C. 1637) is amended 
by adding at the end the following:
    ``(h) Advance Notice of Increase in Interest Rate Required.--
            ``(1) In general.--In the case of any credit card account 
        under an open end consumer credit plan, no increase in any 
        annual percentage rate of interest (other than an increase due 
        to the expiration of any introductory percentage rate of 
        interest, or due solely to a change in another rate of interest 
        to which such rate is indexed)--
                    ``(A) may take effect before the beginning of the 
                billing cycle which begins not less than 15 days after 
                the obligor receives notice of such increase; or
                    ``(B) may apply to any outstanding balance of 
                credit under such plan as of the date of the notice of 
                the increase required under paragraph (1).
            ``(2) Notice of right to cancel.--The notice referred to in 
        paragraph (1) with respect to an increase in any annual 
        percentage rate of interest shall be made in a clear and 
        conspicuous manner and shall contain a brief statement of the 
        right of the obligor to cancel the account before the effective 
        date of the increase.''.

SEC. 112. FREEZE ON INTEREST RATE TERMS AND FEES ON CANCELED CARDS.

    Section 127 of the Truth in Lending Act (15 U.S.C. 1637), as 
amended by this Act, is amended by adding at the end the following:
    ``(i) Freeze on Interest Rate Terms and Fees on Canceled Cards.--If 
an obligor referred to in subsection (h) closes or cancels a credit 
card account before the beginning of the billing cycle referred to in 
subsection (h)(1)--
            ``(1) an annual percentage rate of interest applicable 
        after the cancellation with respect to the outstanding balance 
        on the account as of the date of cancellation may not exceed 
        any annual percentage rate of interest applicable with respect 
        to such balance under the terms and conditions in effect before 
        the date of the notice of any increase referred to in 
        subsection (h)(1); and
            ``(2) the repayment of the outstanding balance after the 
        cancellation shall be subject to all other terms and conditions 
        applicable with respect to such account before the date of the 
        notice of the increase referred to in subsection (h).''.

SEC. 113. LIMITS ON FINANCE AND INTEREST CHARGES FOR ON-TIME PAYMENTS.

    Section 127 of the Truth in Lending Act (15 U.S.C. 1637), as 
amended by this Act, is amended by adding at the end the following:
    ``(j) Prohibition on Penalties for On-Time Payments.--
            ``(1) Prohibition on finance charges for on-time 
        payments.--In the case of any credit card account under an open 
        end credit plan, where no other balance is owing on the 
        account, no finance or interest charge may be imposed with 
        regard to any amount of a new extension of credit that was paid 
        on or before the date on which it was due.
            ``(2) Prohibition on cancellation or additional fees for 
        on-time payments or payment in full.--In the case of any credit 
        card account under an open end consumer credit plan, no fee or 
        other penalty may be imposed on the consumer in connection with 
        the payment in full of an existing account balance, or payment 
        of more than the minimum required payment of an existing 
        account balance.''.

SEC. 114. PROHIBITION ON OVER-THE-LIMIT FEES FOR CREDITOR-APPROVED 
              TRANSACTIONS.

    Section 127 of the Truth in Lending Act (15 U.S.C. 1637), as 
amended by this Act, is amended by adding at the end the following:
    ``(k) Limitation on Imposition of Over-the-Limit Fees.--In the case 
of any credit card account under an open end consumer credit plan, a 
creditor may not impose any fees on the obligor for any extension of 
credit in excess of the amount of credit authorized to be extended with 
respect to such account, if the extension of credit is made in 
connection with a credit transaction which the creditor approves in 
advance or at the time of the transaction.''.

                TITLE II--ENHANCED CONSUMER DISCLOSURES

SEC. 211. DISCLOSURES RELATED TO ``TEASER RATES''.

    Section 127(c) of the Truth in Lending Act (15 U.S.C. 1637(c)) is 
amended--
            (1) by redesignating paragraph (5) as paragraph (7); and
            (2) by inserting after paragraph (4) the following:
            ``(5) Additional notice concerning `teaser rates'.--
                    ``(A) In general.--An application or solicitation 
                for a credit card for which a disclosure is required 
                under this subsection shall contain the disclosures 
                referred to in subparagraph (B) or (C), as applicable, 
                if the application or solicitation offers, for an 
                introductory period of less than 1 year, an annual 
                percentage rate of interest that--
                            ``(i) is less than the annual percentage 
                        rate of interest which will apply after the end 
                        of the introductory period; or
                            ``(ii) in the case of an annual percentage 
                        rate which varies in accordance with an index, 
                        is less than the current annual percentage rate 
                        under the index which will apply after the end 
                        of the introductory period.
                    ``(B) Fixed annual percentage rate.--If the annual 
                percentage rate which will apply after the end of the 
                introductory period will be a fixed rate, the 
                application or solicitation shall include the following 
                disclosure: `The annual percentage rate of interest 
                applicable during the introductory period is not the 
                annual percentage rate which will apply after the end 
                of the introductory period. The non-introductory annual 
                percentage rate will apply after [insert applicable 
                date] and will be [insert applicable percentage 
                rate].'.
                    ``(C) Variable annual percentage rate.--If the 
                annual percentage rate which will apply after the end 
                of the introductory period will vary in accordance with 
                an index, the application or solicitation shall include 
                the following disclosure: `The annual percentage rate 
                of interest applicable during the introductory period 
                is not the annual percentage rate which will apply 
                after the end of the introductory period. The permanent 
                annual percentage rate will be determined by an index 
                and will apply after [insert applicable date]. If the 
                index which will apply after such date were applied to 
                your account today, the annual percentage rate would be 
                [insert applicable percentage rate].'.
                    ``(D) Conditions for introductory rates.--If the 
                annual percentage rate of interest which will apply 
                during the introductory period described in 
                subparagraph (A) is revocable or otherwise conditioned 
                upon any action by the obligor, including any failure 
                by the obligor to pay the minimum payment amount or 
                finance charge or to make any payment by the stated 
                monthly payment due date, the application or 
                solicitation shall include a disclosure of--
                            ``(i) the conditions that the obligor must 
                        meet in order to retain the annual percentage 
                        rate of interest during the introductory 
                        period; and
                            ``(ii) the annual percentage rate of 
                        interest that will apply as a result of the 
                        failure of the obligor to meet such conditions.
                    ``(E) Form of disclosures.--The disclosures 
                required under this paragraph shall be made in a clear 
                and conspicuous manner, in a format that is at least as 
                prominent as the disclosure of the annual percentage 
                rate of interest which will apply during the 
                introductory period.''.

SEC. 212. PAYOFF TIMING DISCLOSURES.

    (a) In General.--Section 127(b) of the Truth in Lending Act (15 
U.S.C. 1637(b)) is amended by adding at the end the following:
            ``(11)(A) Repayment information that would apply to the 
        outstanding balance of the consumer under the credit plan, 
        including--
                    ``(i) the required minimum monthly payment on that 
                balance, represented as both a dollar figure and as a 
                percentage of that balance;
                    ``(ii) the number of months (rounded to the nearest 
                month) that it would take to pay the entire amount of 
                that balance, if the consumer pays only the required 
                minimum monthly payments and if no further advances are 
                made;
                    ``(iii) the total cost to the consumer, including 
                interest and principal payments, of paying that balance 
                in full, if the consumer pays only the required minimum 
                monthly payments and if no further advances are made; 
                and
                    ``(iv) the monthly payments amount that would be 
                required for the consumer to eliminate the outstanding 
                balance in 36 months if no further advances are made.
            ``(B)(i) Subject to clause (ii), in making the disclosures 
        under subparagraph (A) the creditor shall apply the interest 
        rate in effect on the date on which the disclosure is made 
        until the date on which the balance would be paid in full.
            ``(ii) If the interest rate in effect on the date on which 
        the disclosure is made is a temporary rate that will change 
        under a contractual provision applying an index or formula for 
        subsequent interest rate adjustment, the creditor shall apply 
        the interest rate in effect on the date on which the disclosure 
        is made for as long as that interest rate will apply under that 
        contractual provision, and then apply an interest rate based on 
        the index or formula in effect on the applicable billing date.
            ``(C) Form of disclosure.--
                    ``(i) In general.--All of the information described 
                in subparagraph (A) shall--
                            ``(I) be disclosed in the form and manner 
                        which the Board shall prescribe by regulations; 
                        and
                            ``(II) be placed in a conspicuous and 
                        prominent location on the billing statement in 
                        typeface that is at least as large as the 
                        largest type on the statement, but in no 
                        instance less than 12-point in size.
            ``(D) Tabular format.--
                    ``(i) Form of table to be prescribed.--In the 
                regulations prescribed under subparagraph (C), the 
                Board shall require that the disclosure of such 
                information shall be in the form of a table that--
                            ``(I) contains clear and concise headings 
                        for each item of such information; and
                            ``(II) provides a clear and concise form 
                        stating each item of information required to be 
                        disclosed under each such heading.
            ``(E) Requirements regarding location and order of table.--
        In prescribing the form of the table under subparagraph (D), 
        the Board shall require that--
                    ``(i) all of the information in the table, and not 
                just a reference to the table, be placed on the billing 
                statement, as required by this subparagraph; and
                    ``(ii) the items required to be included in the 
                table shall be listed in the order in which such items 
                are set forth in subparagraph (A).
            ``(F) Board discretion in prescribing order and wording of 
        table.--In prescribing the form of the table under subparagraph 
        (C), the Board shall--
                    ``(i) employ terminology which is different than 
                the terminology which is employed in subparagraph (A), 
                if such terminology is easily understood and conveys 
                substantially the same meaning.''.
    (b) Civil Liability.--Section 130(a) of the Truth in Lending Act 
(15 U.S.C. 1640(a)) is amended, in the undesignated paragraph following 
paragraph (4), by striking the second sentence and inserting the 
following: ``In connection with the disclosures referred to in 
subsections (a) and (b) of section 127, a creditor shall have a 
liability determined under paragraph (2) only for failing to comply 
with the requirements of section 125, 127(a), or paragraph (4), (5), 
(6), (7), (8), (9), (10), or (11) of section 127(b), or for failing to 
comply with disclosure requirements under State law for any term or 
item that the Board has determined to be substantially the same in 
meaning under section 111(a)(2) as any of the terms or items referred 
to in section 127(a), or paragraph (4), (5), (6), (7), (8), (9), (10), 
or (11) of section 127(b).

SEC. 213. REQUIREMENTS RELATING TO LATE PAYMENT DEADLINES AND 
              PENALTIES.

    Section 127 of the Truth in Lending Act (15 U.S.C. 1637), as 
amended by this Act, is amended by adding at the end the following:
    ``(l) Requirements Relating to Late Payment Deadlines and 
Penalties.--
            ``(1) Late payment deadline and postmark date required to 
        be disclosed.--In the case of a credit card account under an 
        open end consumer credit plan under which a late fee or charge 
        may be imposed due to the failure of the obligor to make 
        payment on or before the due date for such payment, the 
        periodic statement required under subsection (b) with respect 
        to the account shall include, in a conspicuous location on the 
        billing statement--
                    ``(A) the date on which the payment is due or, if 
                different, the date on which a late payment fee will be 
                charged, together with the amount of the fee or charge 
                to be imposed if payment is made after that date;
                    ``(B) the date by which the payment must be 
                postmarked, if paid by mail, in order to avoid the 
                imposition of a late payment fee with respect to the 
                payment; and
                    ``(C) a statement that no late fee may be imposed 
                in connection with a payment made by mail which was 
                postmarked on or before the postmark date.
            ``(2) Disclosure of increase in interest rates for late 
        payments.--If 1 or more late payments under an open end 
        consumer credit plan may result in an increase in the annual 
        percentage rate the account, the statement required under 
        subsection (b) with respect to the account shall include 
        conspicuous notice of such fact, together with the applicable 
        penalty annual percentage rate, in close proximity to the 
        disclosure required in paragraph (1) of the date on which 
        payment is due under the terms of the account.
            ``(3) Requirements relating to postmark date.--
                    ``(A) In general.--The date included in a periodic 
                statement pursuant to paragraph (1)(B) with regard to 
                the postmark on a payment shall allow, in accordance 
                with regulations prescribed by the Board under 
subparagraph (B), a reasonable time for the consumer to make the 
payment and a reasonable time for the delivery of the payment by the 
due date.
                    ``(B) Board regulations.--The Board shall prescribe 
                guidelines for determining a reasonable period of time 
                for making a payment and delivery of a payment for 
                purposes of subparagraph (A), after consultation with 
                the Postmaster General and representatives of consumer 
                and trade organizations.
            ``(4) Payment at local branches.--If the creditor, in the 
        case of a credit card account referred to in paragraph (1), is 
        a financial institution which maintains branches or offices at 
        which payments on any such account are accepted from the 
        obliger in person, the date on which the obliger makes a 
        payment on the account at such branch or office shall be 
        considered as the date on which the payment is made for 
        purposes of determining whether a late fee or charge may be 
        imposed due to the failure of the obligor to make payment on or 
        before the due date for such payment, to the extent that such 
        payment is made before the close of business of the branch or 
        office on the business day immediately preceding the due date 
        for such payment.''.

               TITLE III--RESPONSIBILITIES IN BANKRUPTCY

SEC. 311. AMENDMENTS TO THE BANKRUPTCY CODE.

    Section 523(a)(2)(C) of title 11, United States Code, is amended by 
adding at the end the following: ``However, this subparagraph shall not 
apply for any portion of debt incurred under an open end credit plan, 
as defined in section 103 of the Truth in Lending Act, if the annual 
rate of interest charged with respect to the account was more than 20 
percentage points above the Federal prime lending rate on the last day 
of month during which the interest was charged.''.

                TITLE IV--PROTECTION OF YOUNG CONSUMERS

SEC. 411. EXTENSIONS OF CREDIT TO UNDERAGE CONSUMERS.

    Section 127(c) of the Truth in Lending Act (15 U.S.C. 1637(c)) is 
amended by inserting after paragraph (5), as added by this Act, the 
following:
            ``(6) Applications from underage consumers.--
                    ``(A) Prohibition on issuance.--No credit card may 
                be issued to, or open end credit plan established on 
                behalf of, a consumer who has not attained the age of 
                21, unless the consumer has submitted a written 
                application to the card issuer that meets the 
                requirements of subparagraph (B).
                    ``(B) Application requirements.--An application to 
                open a credit card account by an individual who has not 
                attained the age of 21 as of the date of submission of 
                the application shall require--
                            ``(i) the signature of the parent, legal 
                        guardian, or spouse of the consumer, or any 
                        other individual having a means to repay debts 
                        incurred by the consumer in connection with the 
                        account, indicating joint liability for debts 
                        incurred by the consumer in connection with the 
                        account before the consumer has attained the 
                        age of 21;
                            ``(ii) submission by the consumer of 
                        financial information indicating an independent 
                        means of repaying any obligation arising from 
                        the proposed extension of credit in connection 
                        with the account; or
                            ``(iii) proof by the consumer that the 
                        consumer has completed a credit counseling 
                        course of instruction by a nonprofit budget and 
                        credit counseling agency approved by the Board 
                        for such purpose.
                    ``(C) Minimum requirements for counseling 
                agencies.--To be approved by the Board under 
                subparagraph (B)(iii), a credit counseling agency 
                shall, at a minimum--
                            ``(i) be a nonprofit budget and credit 
                        counseling agency, the majority of the board of 
                        directors of which--
                                    ``(I) is not employed by the 
                                agency; and
                                    ``(II) will not directly or 
                                indirectly benefit financially from the 
                                outcome of a credit counseling session;
                            ``(ii) if a fee is charged for counseling 
                        services, charge a reasonable fee, and provide 
                        services without regard to ability to pay the 
                        fee; and
                            ``(iii) provide trained counselors who 
                        receive no commissions or bonuses based on 
                        referrals, and demonstrate adequate experience 
                        and background in providing credit 
                        counseling.''.

SEC. 412. ENHANCED PENALTIES.

    Section 130(a)(2)(A) of the Truth in Lending Act (15 U.S.C. 1640 
(a)(2)(A)(iii)) is amended by striking ``or (iii) in the'' and 
inserting the following:
            ``(iii) in the case of an individual action relating to an 
        open end credit plan that is not secured by real property or a 
        dwelling, twice the amount of any finance charge in connection 
        with the transaction, with a minimum of $500 and a maximum of 
        $5,000 or such higher amount as may be appropriate in the case 
        of an established pattern or practice of such failures; or
            ``(iv) in the''.

SEC. 413. RESTRICTIONS ON CERTAIN AFFINITY CARDS.

    Section 127 of the Truth in Lending Act (15 U.S.C. 1637), as 
amended by this Act, is amended by adding at the end the following:
    ``(m) Restrictions on Issuance of Affinity Cards to Students.--No 
credit card account under an open end credit plan may be established by 
an individual who has not attained the age of 21 as of the date of 
submission of the application pursuant to any agreement relating to 
affinity cards, as defined by the Board, between the creditor and an 
institution of higher education, as defined in section 101(a) of the 
Higher Education Act of 1965 (20 U.S.C. 1001(a)), unless the 
requirements of section 127(c)(6) are met with respect to the 
obliger.''.
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