II 

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.

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; TABLE OF CONTENTS. 

4 This Act may be cited as the ‘‘Credit Card Account5 ability Responsibility and Disclosure Act of 2004’’ or the 

6 ‘‘Credit CARD Act of 2004’’. 

7 SEC. 2. REGULATORY AUTHORITY. 

8 The Board of Governors of the Federal Reserve Sys9 tem may issue such rules or publish such model forms as 
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1 it considers necessary to carry out this Act and the 

2 amendments made by this Act. 

3 TITLE I—ABUSIVE PRACTICES 

4 Subtitle A—Use of Default Clauses 

5 SEC. 111. PRIOR NOTICE OF RATE INCREASES REQUIRED. 

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

7 1637) is amended by adding at the end the following: 

8 ‘‘(h) ADVANCE NOTICE OF INCREASE IN INTEREST

9 RATE REQUIRED.—

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

11 card account under an open end consumer credit 

12 plan, no increase in any annual percentage rate of 

13 interest (other than an increase due to the expira14 tion of any introductory percentage rate of interest, 

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

16 to which such rate is indexed)—

17 ‘‘(A) may take effect before the beginning 

18 of the billing cycle which begins not less than 

19 15 days after the obligor receives notice of such 

20 increase; or 

21 ‘‘(B) may apply to any outstanding balance 

22 of credit under such plan as of the date of the 

23 notice of the increase required under paragraph 

24 (1). 
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1 ‘‘(2) NOTICE OF RIGHT TO CANCEL.—The no2 tice referred to in paragraph (1) with respect to an 

3 increase in any annual percentage rate of interest 

4 shall be made in a clear and conspicuous manner 

5 and shall contain a brief statement of the right of 

6 the obligor to cancel the account before the effective 

7 date of the increase.’’. 

8 SEC. 112. FREEZE ON INTEREST RATE TERMS AND FEES ON 

9 CANCELED CARDS. 

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

11 1637), as amended by this Act, is amended by adding at 

12 the end the following: 

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

14 ON CANCELED CARDS.—If an obligor referred to in sub15 section (h) closes or cancels a credit card account before 

16 the beginning of the billing cycle referred to in subsection 

17 (h)(1)—

18 ‘‘(1) an annual percentage rate of interest ap19 plicable after the cancellation with respect to the 

20 outstanding balance on the account as of the date of 

21 cancellation may not exceed any annual percentage 

22 rate of interest applicable with respect to such bal23 ance under the terms and conditions in effect before 

24 the date of the notice of any increase referred to in 

25 subsection (h)(1); and 
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1 ‘‘(2) the repayment of the outstanding balance 

2 after the cancellation shall be subject to all other 

3 terms and conditions applicable with respect to such 

4 account before the date of the notice of the increase 

5 referred to in subsection (h).’’. 

6 SEC. 113. LIMITS ON FINANCE AND INTEREST CHARGES 

7 FOR ON-TIME PAYMENTS. 

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

9 1637), as amended by this Act, is amended by adding at 

10 the end the following: 

11 ‘‘(j) PROHIBITION ON PENALTIES FOR ON-TIME

12 PAYMENTS.—

13 ‘‘(1) PROHIBITION ON FINANCE CHARGES FOR

14 ON-TIME PAYMENTS.—In the case of any credit card 

15 account under an open end credit plan, where no 

16 other balance is owing on the account, no finance or 

17 interest charge may be imposed with regard to any 

18 amount of a new extension of credit that was paid 

19 on or before the date on which it was due. 

20 ‘‘(2) PROHIBITION ON CANCELLATION OR ADDI21 TIONAL FEES FOR ON-TIME PAYMENTS OR PAYMENT

22 IN FULL.—In the case of any credit card account 

23 under an open end consumer credit plan, no fee or 

24 other penalty may be imposed on the consumer in 

25 connection with the payment in full of an existing 
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1 account balance, or payment of more than the min2 imum required payment of an existing account bal3 ance.’’. 

4 SEC. 114. PROHIBITION ON OVER-THE-LIMIT FEES FOR 

5 CREDITOR-APPROVED TRANSACTIONS. 

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

7 1637), as amended by this Act, is amended by adding at 

8 the end the following: 

9 ‘‘(k) LIMITATION ON IMPOSITION OF OVER-THE10 LIMIT FEES.—In the case of any credit card account 

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

12 not impose any fees on the obligor for any extension of 

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

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

15 credit is made in connection with a credit transaction 

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

17 the transaction.’’. 

18 TITLE II—ENHANCED 

19 CONSUMER DISCLOSURES 

20 SEC. 211. DISCLOSURES RELATED TO ‘‘TEASER RATES’’. 

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

22 U.S.C. 1637(c)) is amended—

23 (1) by redesignating paragraph (5) as para24 graph (7); and
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1 (2) by inserting after paragraph (4) the fol2 lowing: 

3 ‘‘(5) ADDITIONAL NOTICE CONCERNING ‘TEAS4 ER RATES’.—

5 ‘‘(A) IN GENERAL.—An application or so6 licitation for a credit card for which a disclo7 sure is required under this subsection shall con8 tain the disclosures referred to in subparagraph 

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

10 solicitation offers, for an introductory period of 

11 less than 1 year, an annual percentage rate of 

12 interest that—

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

14 rate of interest which will apply after the 

15 end of the introductory period; or 

16 ‘‘(ii) in the case of an annual percent17 age rate which varies in accordance with 

18 an index, is less than the current annual 

19 percentage rate under the index which will 

20 apply after the end of the introductory pe21 riod. 

22 ‘‘(B) FIXED ANNUAL PERCENTAGE

23 RATE.—If the annual percentage rate which will 

24 apply after the end of the introductory period 

25 will be a fixed rate, the application or solicita-
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1 tion shall include the following disclosure: ‘The 

2 annual percentage rate of interest applicable 

3 during the introductory period is not the annual 

4 percentage rate which will apply after the end 

5 of the introductory period. The non-introduc6 tory annual percentage rate will apply after [in7 sert applicable date] and will be [insert applica8 ble percentage rate].’. 

9 ‘‘(C) VARIABLE ANNUAL PERCENTAGE

10 RATE.—If the annual percentage rate which will 

11 apply after the end of the introductory period 

12 will vary in accordance with an index, the appli13 cation or solicitation shall include the following 

14 disclosure: ‘The annual percentage rate of inter15 est applicable during the introductory period is 

16 not the annual percentage rate which will apply 

17 after the end of the introductory period. The 

18 permanent annual percentage rate will be deter19 mined by an index and will apply after [insert 

20 applicable date]. If the index which will apply 

21 after such date were applied to your account 

22 today, the annual percentage rate would be [in23 sert applicable percentage rate].’. 

24 ‘‘(D) CONDITIONS FOR INTRODUCTORY

25 RATES.—If the annual percentage rate of inter-
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1 est which will apply during the introductory pe2 riod described in subparagraph (A) is revocable 

3 or otherwise conditioned upon any action by the 

4 obligor, including any failure by the obligor to 

5 pay the minimum payment amount or finance 

6 charge or to make any payment by the stated 

7 monthly payment due date, the application or 

8 solicitation shall include a disclosure of—

9 ‘‘(i) the conditions that the obligor 

10 must meet in order to retain the annual 

11 percentage rate of interest during the in12 troductory period; and 

13 ‘‘(ii) the annual percentage rate of in14 terest that will apply as a result of the fail15 ure of the obligor to meet such conditions. 

16 ‘‘(E) FORM OF DISCLOSURES.—The disclo17 sures required under this paragraph shall be 

18 made in a clear and conspicuous manner, in a 

19 format that is at least as prominent as the dis20 closure of the annual percentage rate of interest 

21 which will apply during the introductory pe22 riod.’’. 
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1 SEC. 212. PAYOFF TIMING DISCLOSURES. 

2 (a) IN GENERAL.—Section 127(b) of the Truth in 

3 Lending Act (15 U.S.C. 1637(b)) is amended by adding 

4 at the end the following: 

5 ‘‘(11)(A) Repayment information that would 

6 apply to the outstanding balance of the consumer 

7 under the credit plan, including—

8 ‘‘(i) the required minimum monthly pay9 ment on that balance, represented as both a 

10 dollar figure and as a percentage of that bal11 ance; 

12 ‘‘(ii) the number of months (rounded to 

13 the nearest month) that it would take to pay 

14 the entire amount of that balance, if the con15 sumer pays only the required minimum monthly 

16 payments and if no further advances are made; 

17 ‘‘(iii) the total cost to the consumer, in18 cluding interest and principal payments, of pay19 ing that balance in full, if the consumer pays 

20 only the required minimum monthly payments 

21 and if no further advances are made; and 

22 ‘‘(iv) the monthly payments amount that 

23 would be required for the consumer to eliminate 

24 the outstanding balance in 36 months if no fur25 ther advances are made.
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1 ‘‘(B)(i) Subject to clause (ii), in making the dis2 closures under subparagraph (A) the creditor shall 

3 apply the interest rate in effect on the date on which 

4 the disclosure is made until the date on which the 

5 balance would be paid in full. 

6 ‘‘(ii) If the interest rate in effect on the date on 

7 which the disclosure is made is a temporary rate 

8 that will change under a contractual provision apply9 ing an index or formula for subsequent interest rate 

10 adjustment, the creditor shall apply the interest rate 

11 in effect on the date on which the disclosure is made 

12 for as long as that interest rate will apply under 

13 that contractual provision, and then apply an inter14 est rate based on the index or formula in effect on 

15 the applicable billing date. 

16 ‘‘(C) FORM OF DISCLOSURE.—

17 ‘‘(i) IN GENERAL.—All of the information 

18 described in subparagraph (A) shall—

19 ‘‘(I) be disclosed in the form and 

20 manner which the Board shall prescribe by 

21 regulations; and 

22 ‘‘(II) be placed in a conspicuous and 

23 prominent location on the billing statement 

24 in typeface that is at least as large as the 
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1 largest type on the statement, but in no in2 stance less than 12-point in size. 

3 ‘‘(D) TABULAR FORMAT.—

4 ‘‘(i) FORM OF TABLE TO BE PRE5 SCRIBED.—In the regulations prescribed under 

6 subparagraph (C), the Board shall require that 

7 the disclosure of such information shall be in 

8 the form of a table that—

9 ‘‘(I) contains clear and concise head10 ings for each item of such information; and 

11 ‘‘(II) provides a clear and concise 

12 form stating each item of information re13 quired to be disclosed under each such 

14 heading. 

15 ‘‘(E) REQUIREMENTS REGARDING LOCATION

16 AND ORDER OF TABLE.—In prescribing the form of 

17 the table under subparagraph (D), the Board shall 

18 require that—

19 ‘‘(i) all of the information in the table, and 

20 not just a reference to the table, be placed on 

21 the billing statement, as required by this sub22 paragraph; and 

23 ‘‘(ii) the items required to be included in 

24 the table shall be listed in the order in which 

25 such items are set forth in subparagraph (A). 
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1 ‘‘(F) BOARD DISCRETION IN PRESCRIBING

2 ORDER AND WORDING OF TABLE.—In prescribing 

3 the form of the table under subparagraph (C), the 

4 Board shall—

5 ‘‘(i) employ terminology which is different 

6 than the terminology which is employed in sub7 paragraph (A), if such terminology is easily un8 derstood and conveys substantially the same 

9 meaning.’’. 

10 (b) CIVIL LIABILITY.—Section 130(a) of the Truth 

11 in Lending Act (15 U.S.C. 1640(a)) is amended, in the 

12 undesignated paragraph following paragraph (4), by strik13 ing the second sentence and inserting the following: ‘‘In 

14 connection with the disclosures referred to in subsections 

15 (a) and (b) of section 127, a creditor shall have a liability 

16 determined under paragraph (2) only for failing to comply 

17 with the requirements of section 125, 127(a), or para18 graph (4), (5), (6), (7), (8), (9), (10), or (11) of section 

19 127(b), or for failing to comply with disclosure require20 ments under State law for any term or item that the 

21 Board has determined to be substantially the same in 

22 meaning under section 111(a)(2) as any of the terms or 

23 items referred to in section 127(a), or paragraph (4), (5), 

24 (6), (7), (8), (9), (10), or (11) of section 127(b). 
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1 SEC. 213. REQUIREMENTS RELATING TO LATE PAYMENT 

2 DEADLINES AND PENALTIES. 

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

4 1637), as amended by this Act, is amended by adding at 

5 the end the following: 

6 ‘‘(l) REQUIREMENTS RELATING TO LATE PAYMENT

7 DEADLINES AND PENALTIES.—

8 ‘‘(1) LATE PAYMENT DEADLINE AND POSTMARK

9 DATE REQUIRED TO BE DISCLOSED.—In the case of 

10 a credit card account under an open end consumer 

11 credit plan under which a late fee or charge may be 

12 imposed due to the failure of the obligor to make 

13 payment on or before the due date for such pay14 ment, the periodic statement required under sub15 section (b) with respect to the account shall include, 

16 in a conspicuous location on the billing statement—

17 ‘‘(A) the date on which the payment is due 

18 or, if different, the date on which a late pay19 ment fee will be charged, together with the 

20 amount of the fee or charge to be imposed if 

21 payment is made after that date; 

22 ‘‘(B) the date by which the payment must 

23 be postmarked, if paid by mail, in order to 

24 avoid the imposition of a late payment fee with 

25 respect to the payment; and 
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1 ‘‘(C) a statement that no late fee may be 

2 imposed in connection with a payment made by 

3 mail which was postmarked on or before the 

4 postmark date. 

5 ‘‘(2) DISCLOSURE OF INCREASE IN INTEREST

6 RATES FOR LATE PAYMENTS.—If 1 or more late 

7 payments under an open end consumer credit plan 

8 may result in an increase in the annual percentage 

9 rate the account, the statement required under sub10 section (b) with respect to the account shall include 

11 conspicuous notice of such fact, together with the 

12 applicable penalty annual percentage rate, in close 

13 proximity to the disclosure required in paragraph (1) 

14 of the date on which payment is due under the 

15 terms of the account. 

16 ‘‘(3) REQUIREMENTS RELATING TO POSTMARK

17 DATE.—

18 ‘‘(A) IN GENERAL.—The date included in 

19 a periodic statement pursuant to paragraph 

20 (1)(B) with regard to the postmark on a pay21 ment shall allow, in accordance with regulations

22 prescribed by the Board under subparagraph 

23 (B), a reasonable time for the consumer to 

24 make the payment and a reasonable time for 

25 the delivery of the payment by the due date. 
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1 ‘‘(B) BOARD REGULATIONS.—The Board 

2 shall prescribe guidelines for determining a rea3 sonable period of time for making a payment 

4 and delivery of a payment for purposes of sub5 paragraph (A), after consultation with the Post6 master General and representatives of consumer 

7 and trade organizations. 

8 ‘‘(4) PAYMENT AT LOCAL BRANCHES.—If the 

9 creditor, in the case of a credit card account referred 

10 to in paragraph (1), is a financial institution which 

11 maintains branches or offices at which payments on 

12 any such account are accepted from the obliger in 

13 person, the date on which the obliger makes a pay14 ment on the account at such branch or office shall 

15 be considered as the date on which the payment is 

16 made for purposes of determining whether a late fee 

17 or charge may be imposed due to the failure of the 

18 obligor to make payment on or before the due date 

19 for such payment, to the extent that such payment 

20 is made before the close of business of the branch 

21 or office on the business day immediately preceding 

22 the due date for such payment.’’. 
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1 TITLE III—RESPONSIBILITIES IN 

2 BANKRUPTCY 

3 SEC. 311. AMENDMENTS TO THE BANKRUPTCY CODE. 

4 Section 523(a)(2)(C) of title 11, United States Code, 

5 is amended by adding at the end the following: ‘‘However, 

6 this subparagraph shall not apply for any portion of debt 

7 incurred under an open end credit plan, as defined in sec8 tion 103 of the Truth in Lending Act, if the annual rate 

9 of interest charged with respect to the account was more 

10 than 20 percentage points above the Federal prime lend11 ing rate on the last day of month during which the interest 

12 was charged.’’. 

13 TITLE IV—PROTECTION OF 

14 YOUNG CONSUMERS 

15 SEC. 411. EXTENSIONS OF CREDIT TO UNDERAGE CON16 SUMERS. 

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

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

19 (5), as added by this Act, the following: 

20 ‘‘(6) APPLICATIONS FROM UNDERAGE CON21 SUMERS.—

22 ‘‘(A) PROHIBITION ON ISSUANCE.—No 

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

24 plan established on behalf of, a consumer who 

25 has not attained the age of 21, unless the con-
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1 sumer has submitted a written application to 

2 the card issuer that meets the requirements of 

3 subparagraph (B). 

4 ‘‘(B) APPLICATION REQUIREMENTS.—An 

5 application to open a credit card account by an 

6 individual who has not attained the age of 21 

7 as of the date of submission of the application 

8 shall require—

9 ‘‘(i) the signature of the parent, legal 

10 guardian, or spouse of the consumer, or 

11 any other individual having a means to 

12 repay debts incurred by the consumer in 

13 connection with the account, indicating 

14 joint liability for debts incurred by the con15 sumer in connection with the account be16 fore the consumer has attained the age of 

17 21; 

18 ‘‘(ii) submission by the consumer of 

19 financial information indicating an inde20 pendent means of repaying any obligation 

21 arising from the proposed extension of 

22 credit in connection with the account; or 

23 ‘‘(iii) proof by the consumer that the 

24 consumer has completed a credit coun25 seling course of instruction by a nonprofit 
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1 budget and credit counseling agency ap2 proved by the Board for such purpose. 

3 ‘‘(C) MINIMUM REQUIREMENTS FOR COUN4 SELING AGENCIES.—To be approved by the 

5 Board under subparagraph (B)(iii), a credit 

6 counseling agency shall, at a minimum—

7 ‘‘(i) be a nonprofit budget and credit 

8 counseling agency, the majority of the 

9 board of directors of which— 

10 ‘‘(I) is not employed by the agen11 cy; and

12 ‘‘(II) will not directly or indi13 rectly benefit financially from the out14 come of a credit counseling session; 

15 ‘‘(ii) if a fee is charged for counseling 

16 services, charge a reasonable fee, and pro17 vide services without regard to ability to 

18 pay the fee; and 

19 ‘‘(iii) provide trained counselors who 

20 receive no commissions or bonuses based 

21 on referrals, and demonstrate adequate ex22 perience and background in providing cred23 it counseling.’’. 
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1 SEC. 412. ENHANCED PENALTIES. 

2 Section 130(a)(2)(A) of the Truth in Lending Act 

3 (15 U.S.C. 1640 (a)(2)(A)(iii)) is amended by striking ‘‘or 

4 (iii) in the’’ and inserting the following: 

5 ‘‘(iii) in the case of an individual action relating 

6 to an open end credit plan that is not secured by 

7 real property or a dwelling, twice the amount of any 

8 finance charge in connection with the transaction, 

9 with a minimum of $500 and a maximum of $5,000 

10 or such higher amount as may be appropriate in the 

11 case of an established pattern or practice of such 

12 failures; or 

13 ‘‘(iv) in the’’. 

14 SEC. 413. RESTRICTIONS ON CERTAIN AFFINITY CARDS. 

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

16 1637), as amended by this Act, is amended by adding at 

17 the end the following: 

18 ‘‘(m) RESTRICTIONS ON ISSUANCE OF AFFINITY

19 CARDS TO STUDENTS.—No credit card account under an 

20 open end credit plan may be established by an individual 

21 who has not attained the age of 21 as of the date of sub22 mission of the application pursuant to any agreement re23 lating to affinity cards, as defined by the Board, between 

24 the creditor and an institution of higher education, as de25 fined in section 101(a) of the Higher Education Act of 
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1 1965 (20 U.S.C. 1001(a)), unless the requirements of sec2 tion 127(c)(6) are met with respect to the obliger.’’.

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