S 2753
110th CONGRESS
2d Session
S. 2753
To protect consumers, and especially young consumers, from skyrocketing
credit card debt, unfair credit card practices, and deceptive credit offers.
IN THE SENATE OF THE UNITED STATES
March 12, 2008
Mr. MENENDEZ introduced the following bill; which was read twice and
referred to the Committee on Banking, Housing, and Urban Affairs
A BILL
To protect consumers, and especially young consumers, from skyrocketing
credit card debt, unfair credit card practices, and deceptive credit offers.
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 Reform Act of 2008'.
SEC. 2. PROTECTION OF YOUNG CONSUMERS FROM PRESCREENED CREDIT OFFERS.
(a) In General- Section 604(c)(1)(B) of the Fair Credit Reporting Act
(15 U.S.C. 1681b(c)(1)(B)) is amended--
(1) in clause (ii), by striking `and' at the end; and
(2) in clause (iii), by striking the period at the end and inserting
`; and'; and
(3) by adding at the end the following:
`(vi) the consumer report indicates that the consumer is age 21 or
older, except that a consumer who is at least 18 years of age may
elect, in accordance with subsection (e)(7), to authorize the consumer
reporting agency to include the name and address of the consumer in
any list of names provided by the agency pursuant to this paragraph.'.
(b) Opt-in for Young Consumers- Section 604(e) of the Fair Credit Reporting
Act (15 U.S.C. 1681b(e)) is amended--
(1) by striking the subsection heading and inserting the following:
`(e) Election of Consumers Regarding Lists- '; and
(2) by adding at the end the following:
`(7) OPT-IN FOR UNDERAGE CONSUMERS-
`(A) IN GENERAL- A consumer who is at least 18 years of age, but has
not attained his or her 21st birthday may elect to have the name and
address of the consumer included in any list provided by a consumer
reporting agency under subsection (c)(1)(B) in connection with a credit
or insurance transaction that is not initiated by the consumer by
notifying the agency in accordance with subparagraph (B) that the
consumer consents to the use of a consumer report relating to the
consumer in connection with any credit or insurance transaction that
is not initiated by the consumer.
`(B) MANNER OF NOTIFICATION- An election by a consumer described in
subparagraph (A) shall be in writing, using a signed notice of election
form issued or made available electronically by the agency at the
request of the consumer for purposes of this paragraph.
`(C) EFFECTIVENESS OF ELECTION- An election by a consumer under subparagraph
(A) to be included in a list provided by a consumer reporting agency
shall be effective--
`(i) until the earlier of--
`(I) the 21st birthday of the consumer; or
`(II) the date on which the consumer notifies the agency, through
the notification system established by the agency under paragraph
(5), that the election is no longer effective; and
`(ii) with respect to each affiliate of the agency.
`(D) RULE OF CONSTRUCTION- An election by a consumer under subparagraph
(A) to be included in a list provided by a consumer reporting agency
may not be construed to limit the applicability of this subsection
to any person age 21 or older, and such person may elect to be excluded
from any such list after the attainment of his or her 21st birthday
in the manner otherwise provided under this subsection.'.
SEC. 3. PROHIBITION ON UNILATERAL CHANGES IN CREDIT CARD AGREEMENTS.
(a) In General- Chapter 4 of the Truth in Lending Act (15 U.S.C. 1666
et seq.) is amended--
(1) by redesignating section 171 as section 172; and
(2) by inserting after section 170 the following:
`Sec. 171. Prohibition on unilateral changes in credit card agreements
`(a) In General- Except as permitted under section 163(b), a credit card
issuer may not amend or change the terms of a credit card contract or
agreement under an open end consumer credit plan--
`(1) prior to the scheduled--
`(A) expiration of such contract or agreement; or
`(B) renewal date of such contract or agreement; and
`(2) until such time as the issuer has disclosed all the amendments
and changes to the terms of such contract or agreement to the cardholder
in any disclosure or statement required under section 127(d).
`(b) Authority to Payoff Balances- A cardholder shall have the right to
repay all existing balances on a credit card account that is terminated
or expires under the terms of such account in effect prior to such termination
or expiration.
`(c) Construction- Termination of an account due refusal to renew the
account or to failure to agree to a change in terms shall not constitute
a default under an existing credit card contract or agreement under an
open end consumer credit plan, and shall not trigger an obligation of
the cardholder to immediately repay the obligation in full.'.
(b) Conforming Change in Disclosures Prior to Renewal- Section 127(d)
of the Truth in Lending Act (15 U.S.C. 1637(d)) is amended--
(A) by inserting `, or that has made any change in the terms of the
consumer's credit or charge card contract or agreement since the previous
scheduled renewal date,' after `or (c)(4)(A)(i)';
(B) in subparagraph (B), by striking `; and' and inserting a semicolon;
(C) in subparagraph (C), by striking the period and inserting `; and';
and
(D) by adding at the end the following:
`(D) any changes or amendments in the terms of the consumer's credit
or charge card contract or agreement since the previous scheduled
renewal date.'; and
(2) in paragraph (2)(A), by striking `The disclosures required' and
inserting `If no changes have been made to the contract or agreement
since the previously scheduled renewal date, the disclosures required'.
(c) Clerical Amendment- The table of sections for chapter 4 of the Truth
in Lending Act (15 U.S.C. 1666 et seq.) is amended by inserting after
the item relating to section 170 the following new item:
`171. Prohibition on unilateral changes in credit card agreements.'.
SEC. 4. STOPPING UNFAIR INTEREST RATES AND FEES.
Section 163 of the Truth in Lending Act (15 U.S.C. 1666b) is amended--
(1) by striking the section title and all that follows through `If an
open' and inserting the following:
`Sec. 163. Billing period and finance charges
`(1) FOURTEEN-DAY MINIMUM- If an open';
(2) by striking `(b) Excusable Cause- Subsection (a)' and inserting
the following:
`(2) EXCUSABLE CAUSE- Subsection (a)'; and
(3) by adding at the end the following:
`(b) Limits on Interest Rate Increases-
`(1) IN GENERAL- With respect to a credit card account under an open
end consumer credit plan, the creditor shall not increase any annual
percentage rate, fee, or finance charge prior to the scheduled renewal
date of the plan, unless--
`(A) such increase is pursuant to the expiration of an introductory
rate, fee, or finance charge which was disclosed under section 127(c)(6);
`(B) such increase is pursuant to the application of a variable rate
which was disclosed under section 127(c)(1)(A)(i)(II); or
`(C) such increase is pursuant to the application of a penalty rate
which was disclosed under subsections (a)(4) and (c)(1)(A)(i) of section
127.
`(2) REASONS FOR PENALTY INTEREST RATE INCREASE- A creditor may impose
an increase in the annual percentage rate as a penalty only for specific,
material actions or omissions of a consumer in violation of the credit
card account contract or agreement that are directly related to such
account and that are specified in the contract or agreement as grounds
for an increase. Information not directly related to the credit card
account of the consumer, including adverse information concerning the
consumer, information in any consumer report (as that term is defined
in section 603 of the Fair Credit Reporting Act), or changes in the
credit score of the consumer do not for purposes of this paragraph constitute
a specific, material reason.
`(3) LIMIT ON PENALTY INTEREST RATE- A creditor may not apply as a penalty,
in accordance with the provisions of paragraph (2), an increase in the
annual percentage rate in excess of 7 percentage points above the interest
rate that was in effect with respect to a consumer's credit card account
on the date immediately preceding the first such penalty increase for
such account.
`(c) Ban on Retroactive Rate Increases- With respect to a credit card
account under an open end consumer credit plan, if the creditor increases
the periodic interest rate applicable to an extension of credit under
the account, other than the expiration of an introductory rate or an increase
in a variable rate, such increased rate shall apply only to extensions
of credit made on and after the date of such increase under the account,
and any extension of credit under such account made before the date of
such increase shall continue to incur interest at the rate that was in
effect on the date prior to the date of the increase.'.
SEC. 5. CAP ON FEES CHARGED BY CREDITORS.
(a) In General- Section 164 of the Truth in Lending Act (15 U.S.C. 1666c)
is amended--
(1) by striking `Payments received' and inserting `(a) In General- Payments
received'; and
(2) by adding at the end the following:
`(b) Limitations on Late Payment Fees and Other Adverse Consequences-
`(1) IN GENERAL- If a late payment fee is to be imposed with respect
to a credit card account under an open end consumer credit plan due
to the failure of the consumer to make payment on or before a required
payment due date, the credit card issuer shall state clearly and conspicuously
on the billing statement--
`(A) the date on which the payment must be postmarked, if paid by
mail, or the date on which a consumer must initiate a payment using
an electronic fund transfer (as defined under section 903 of the Electronic
Fund Transfers Act), in order to avoid the imposition of a late fee
with respect to the payment; and
`(B) the amount of the late payment fee to be imposed if payment is
late.
`(2) LIMITATION- No card issuer may, with respect to a credit card account
under an open end consumer credit plan, impose a late payment fee, raise
the annual percentage rate on the credit card account for late payment,
or impose other adverse consequences for late payment if the cardholder's
payment is postmarked, received, or initiated electronically, on or
before the required date stated in accordance with paragraph (1)(A).
`(A) IN GENERAL- The amount of any fee or charge that a credit card
issuer may impose in connection with any default, omission, or violation
of the cardholder agreement, including any late payment fee, over
the limit fee, increase in the applicable annual percentage rate,
or any similar fee or charge, may not exceed an amount that is reasonably
related to the cost to the card issuer of such default, omission,
violation, or similar event.
`(B) RULEMAKING- The Board shall promulgate regulations to carry out
the limitation described in subparagraph (A).'.
(b) Conforming Amendment- Section 127(b) of the Truth in Lending Act (15
U.S.C. 1637(b)) is amended by striking paragraph (12).
SEC. 6. VERIFICATION OF ABILITY TO PAY CREDIT OBLIGATIONS.
Section 127 of the Truth in Lending Act (15 U.S.C. 1637) is amended by
adding at the end the following:
`(i) Verification of Ability To Pay-
`(1) IN GENERAL- A credit card issuer may not open any credit card account
for any person under an open end consumer credit plan, or increase any
credit limit applicable to such an account, unless the credit card issuer
has determined, at the time at which the account is opened or the credit
limit increased, that the consumer will be able to make the scheduled
payments under the terms of the transaction, based on a consideration
of their current and expected income, current obligations, and employment
status.
`(2) REGULATIONS- The Board shall prescribe, by regulation, the appropriate
formula for determining the ability of a consumer to pay and the criteria
to be considered in making any such determination for purposes of this
subsection.
`(3) PROHIBITIONS- The Board, by regulation or order, shall prohibit
acts or practices in connection with any credit card account under an
open end consumer credit plan--
`(A) that the Board finds to be unfair, deceptive, or designed to
evade the provisions of this title; and
`(B) that the Board finds to be associated with abusive lending practices,
or that are otherwise not in the interest of the consumer.'.
SEC. 7. CURBING DECEPTIVE CREDIT CARD OFFERS.
Section 603(l) of the Fair Credit Reporting Act (15 U.S.C. 1681a(l)) is
amended to read as follows:
`(l) Firm Offer of Credit or Insurance-
`(1) IN GENERAL- The term `firm offer of credit or insurance' means
any offer of credit or insurance to a consumer that specifies all material
terms and will be honored if the consumer is determined, based on information
in a consumer report on the consumer, to meet the specific criteria
used to select the consumer for the offer.
`(2) REQUIRED DISCLOSURES IN OFFERS OF CREDIT- In the case of a firm
offer of credit, the offer shall set forth the specific annual percentage
rate, fees, and amount of credit or credit limit applicable to the offer.
`(3) ACCEPTABLE CONDITIONS- A firm offer of credit or insurance to a
consumer may be further conditioned on 1 or more of the following:
`(A) Verification that the consumer continues to meet the specific
criteria used to select the consumer for the offer, by using information
in a consumer report on the consumer, information in the consumer's
application for the credit or insurance, or other information bearing
on the credit worthiness or insurability of the consumer.
`(B) The consumer furnishing any collateral that is a requirement
for the extension of the credit or insurance that was--
`(i) established before selection of the consumer for the offer
of credit or insurance; and
`(ii) disclosed to the consumer in the offer of credit or insurance.'.
SEC. 8. EFFECTIVE DATES.
The amendments made by sections 3, 4, 5, 6, and 7 of this Act shall take
effect 6 months after the date of enactment of this Act, except that the
Board of Governors for the Federal Reserve System shall begin to propose
such regulations as may be appropriate to implement such amendments on
or after the date of enactment of this Act.
END
