II 

109TH CONGRESS 

1ST SESSION S. 499

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 

MARCH 2, 2005

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 2005’’ or the 

6 ‘‘Credit CARD Act of 2005’’. 

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 outstanding balance in the account 

9 at the beginning of the statement period, as re10 quired by paragraph (1) of this subsection; 

11 ‘‘(ii) the required minimum monthly pay12 ment on that balance, represented as both a 

13 dollar figure and as a percentage of that bal14 ance; 

15 ‘‘(iii) the due date, within which, payment 

16 must be made to avoid addition charges, as re17 quired by paragraph (9) of this subsection; 

18 ‘‘(iv) the number of months (rounded to 

19 the nearest month) that it would take to pay 

20 the entire amount of that balance, if the con21 sumer pays only the required minimum monthly 

22 payments and if no further advances are made; 

23 ‘‘(v) the total cost to the consumer, includ24 ing interest and principal payments, of paying 

25 that balance in full, if the consumer pays only 
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1 the required minimum monthly payments and if 

2 no further advances are made; and 

3 ‘‘(vi) the monthly payments amount that 

4 would be required for the consumer to eliminate 

5 the outstanding balance in 36 months if no fur6 ther advances are made.

7 ‘‘(B)(i) Subject to clause (ii), in making the dis8 closures under subparagraph (A) the creditor shall 

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

10 the disclosure is made until the date on which the 

11 balance would be paid in full. 

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

13 which the disclosure is made is a temporary rate 

14 that will change under a contractual provision apply15 ing an index or formula for subsequent interest rate 

16 adjustment, the creditor shall apply the interest rate 

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

18 for as long as that interest rate will apply under 

19 that contractual provision, and then apply an inter20 est rate based on the index or formula in effect on 

21 the applicable billing date. 

22 ‘‘(C) FORM OF DISCLOSURE.—

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

24 described in subparagraph (A) shall—
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1 ‘‘(I) be disclosed in the form and 

2 manner which the Board shall prescribe by 

3 regulations; and 

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

5 prominent location on the billing statement 

6 in typeface that is at least as large as the 

7 largest type on the statement, but in no in8 stance less than 12-point in size. 

9 ‘‘(D) TABULAR FORMAT.—

10 ‘‘(i) FORM OF TABLE TO BE PRE11 SCRIBED.—In the regulations prescribed under 

12 subparagraph (C), the Board shall require that 

13 the disclosure of such information shall be in 

14 the form of a table that—

15 ‘‘(I) contains clear and concise head16 ings for each item of such information; and 

17 ‘‘(II) provides a clear and concise 

18 form stating each item of information re19 quired to be disclosed under each such 

20 heading. 

21 ‘‘(E) REQUIREMENTS REGARDING LOCATION

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

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

24 require that—
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1 ‘‘(i) all of the information in the table, and 

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

3 the billing statement, as required by this sub4 paragraph; and 

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

6 the table shall be listed in the order in which 

7 such items are set forth in subparagraph (A). 

8 ‘‘(F) BOARD DISCRETION IN PRESCRIBING

9 ORDER AND WORDING OF TABLE.—In prescribing 

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

11 Board shall—

12 ‘‘(i) employ terminology which is different 

13 than the terminology which is employed in sub14 paragraph (A), if such terminology is easily un15 derstood and conveys substantially the same 

16 meaning.’’. 

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

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

19 undesignated paragraph following paragraph (4), by strik20 ing the second sentence and inserting the following: ‘‘In 

21 connection with the disclosures referred to in subsections 

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

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

24 with the requirements of section 125, 127(a), or para25 graph (4), (5), (6), (7), (8), (9), (10), or (11) of section 
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1 127(b), or for failing to comply with disclosure require2 ments under State law for any term or item that the 

3 Board has determined to be substantially the same in 

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

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

6 (6), (7), (8), (9), (10), or (11) of section 127(b). 

7 SEC. 213. REQUIREMENTS RELATING TO LATE PAYMENT 

8 DEADLINES AND PENALTIES. 

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

10 1637), as amended by this Act, is amended by adding at 

11 the end the following: 

12 ‘‘(l) REQUIREMENTS RELATING TO LATE PAYMENT

13 DEADLINES AND PENALTIES.—

14 ‘‘(1) LATE PAYMENT DEADLINE AND POSTMARK

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

16 a credit card account under an open end consumer 

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

18 imposed due to the failure of the obligor to make 

19 payment on or before the due date for such pay20 ment, the periodic statement required under sub21 section (b) with respect to the account shall include, 

22 in a conspicuous location on the billing statement—

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

24 or, if different, the date on which a late pay25 ment fee will be charged, together with the 
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1 amount of the fee or charge to be imposed if 

2 payment is made after that date; 

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

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

5 avoid the imposition of a late payment fee with 

6 respect to the payment; and 

7 ‘‘(C) a statement that no late fee may be 

8 imposed in connection with a payment made by 

9 mail which was postmarked on or before the 

10 postmark date. 

11 ‘‘(2) DISCLOSURE OF INCREASE IN INTEREST

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

13 payments under an open end consumer credit plan 

14 may result in an increase in the annual percentage 

15 rate the account, the statement required under sub16 section (b) with respect to the account shall include 

17 conspicuous notice of such fact, together with the 

18 applicable penalty annual percentage rate, in close 

19 proximity to the disclosure required in paragraph (1) 

20 of the date on which payment is due under the 

21 terms of the account. 

22 ‘‘(3) REQUIREMENTS RELATING TO POSTMARK

23 DATE.—

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

25 a periodic statement pursuant to paragraph 
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1 (1)(B) with regard to the postmark on a pay2 ment shall allow, in accordance with regulations

3 prescribed by the Board under subparagraph 

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

5 make the payment and a reasonable time for 

6 the delivery of the payment by the due date. 

7 ‘‘(B) BOARD REGULATIONS.—The Board 

8 shall prescribe guidelines for determining a rea9 sonable period of time for making a payment 

10 and delivery of a payment for purposes of sub11 paragraph (A), after consultation with the Post12 master General and representatives of consumer 

13 and trade organizations. 

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

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

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

17 maintains branches or offices at which payments on 

18 any such account are accepted from the obliger in 

19 person, the date on which the obliger makes a pay20 ment on the account at such branch or office shall 

21 be considered as the date on which the payment is 

22 made for purposes of determining whether a late fee 

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

24 obligor to make payment on or before the due date 

25 for such payment, to the extent that such payment
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1 is made before the close of business of the branch 

2 or office on the business day immediately preceding 

3 the due date for such payment.’’. 

4 TITLE III—RESPONSIBILITIES IN 

5 BANKRUPTCY 

6 SEC. 311. AMENDMENTS TO THE BANKRUPTCY CODE. 

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

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

9 this subparagraph shall not apply for any portion of debt 

10 incurred under an open end credit plan, as defined in sec11 tion 103 of the Truth in Lending Act, if the annual rate 

12 of interest charged with respect to the account was more 

13 than 20 percentage points above the Federal prime lend14 ing rate on the last day of the month during which the 

15 interest was charged.’’. 

16 TITLE IV—PROTECTION OF 

17 YOUNG CONSUMERS 

18 SEC. 411. EXTENSIONS OF CREDIT TO UNDERAGE CON19 SUMERS. 

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

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

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

23 ‘‘(6) APPLICATIONS FROM UNDERAGE CON24 SUMERS.—
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1 ‘‘(A) PROHIBITION ON ISSUANCE.—No 

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

3 plan established on behalf of, a consumer who 

4 has not attained the age of 21, unless the con5 sumer has submitted a written application to 

6 the card issuer that meets the requirements of 

7 subparagraph (B). 

8 ‘‘(B) APPLICATION REQUIREMENTS.—An 

9 application to open a credit card account by an 

10 individual who has not attained the age of 21 

11 as of the date of submission of the application 

12 shall require—

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

14 guardian, or spouse of the consumer, or 

15 any other individual having a means to 

16 repay debts incurred by the consumer in 

17 connection with the account, indicating 

18 joint liability for debts incurred by the con19 sumer in connection with the account be20 fore the consumer has attained the age of 

21 21; 

22 ‘‘(ii) submission by the consumer of 

23 financial information indicating an inde24 pendent means of repaying any obligation 
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1 arising from the proposed extension of 

2 credit in connection with the account; or 

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

4 consumer has completed a credit coun5 seling course of instruction by a nonprofit 

6 budget and credit counseling agency ap7 proved by the Board for such purpose. 

8 ‘‘(C) MINIMUM REQUIREMENTS FOR COUN9 SELING AGENCIES.—To be approved by the 

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

11 counseling agency shall, at a minimum—

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

13 counseling agency, the majority of the 

14 board of directors of which— 

15 ‘‘(I) is not employed by the agen16 cy; and

17 ‘‘(II) will not directly or indi18 rectly benefit financially from the out19 come of a credit counseling session; 

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

21 services, charge a reasonable fee, and pro22 vide services without regard to ability to 

23 pay the fee; and 

24 ‘‘(iii) provide trained counselors who 

25 receive no commissions or bonuses based 
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1 on referrals, and demonstrate adequate ex2 perience and background in providing cred3 it counseling.’’. 

4 SEC. 412. ENHANCED PENALTIES. 

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

6 (15 U.S.C. 1640 (a)(2)(A)(iii)) is amended by striking ‘‘or 

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

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

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

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

11 finance charge in connection with the transaction, 

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

13 or such higher amount as may be appropriate in the 

14 case of an established pattern or practice of such 

15 failures; or 

16 ‘‘(iv) in the’’. 

17 SEC. 413. RESTRICTIONS ON CERTAIN AFFINITY CARDS. 

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

19 1637), as amended by this Act, is amended by adding at 

20 the end the following: 

21 ‘‘(m) RESTRICTIONS ON ISSUANCE OF AFFINITY

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

23 open end credit plan may be established by an individual 

24 who has not attained the age of 21 as of the date of sub25 mission of the application pursuant to any agreement re-
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1 lating to affinity cards, as defined by the Board, between 

2 the creditor and an institution of higher education, as de3 fined in section 101(a) of the Higher Education Act of 

4 1965 (20 U.S.C. 1001(a)), unless the requirements of sec5 tion 127(c)(6) are met with respect to the obliger.’’.

Æ