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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
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