[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[S. 787 Introduced in Senate (IS)]







106th CONGRESS
  1st Session
                                 S. 787

   To amend the Truth in Lending Act to enhance consumer disclosures 
regarding credit card terms and charges, to restrict issuance of credit 
cards to students, to expand protections in connection with unsolicited 
  credit cards and third-party checks, and to protect consumers from 
unreasonable practices that result in unnecessary credit costs or loss 
                   of credit, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             April 13, 1999

Mr. Schumer (for himself and Mr. Durbin) introduced the following bill; 
which was read twice and referred to the Committee on Banking, Housing, 
                           and Urban Affairs

_______________________________________________________________________

                                 A BILL


 
   To amend the Truth in Lending Act to enhance consumer disclosures 
regarding credit card terms and charges, to restrict issuance of credit 
cards to students, to expand protections in connection with unsolicited 
  credit cards and third-party checks, and to protect consumers from 
unreasonable practices that result in unnecessary credit costs or loss 
                   of credit, 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.

    This Act may be cited as the ``Consumer Credit Card Protection 
Amendments of 1999''.

SEC. 2. DISCLOSURES REGARDING MINIMUM MONTHLY PAYMENTS.

    (a) In General.--Section 127(a)(3) of the Truth in Lending Act (15 
U.S.C. 1637(a)(3)) is amended by inserting before the period ``, or the 
method of determining the required minimum payment amount, if a minimum 
payment is required that is different from the amount of any finance 
charge, and the charges or penalties, if any, that may be imposed for 
failure by the obligor to pay the required finance charge or minimum 
payment amount''.
    (b) Repayment Information.--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) In a clear and conspicuous manner, repayment 
        information that would apply to the outstanding balance of the 
        obligor under the credit plan, including--
                    ``(A) the required minimum monthly payment on that 
                balance, represented as both a dollar figure and as a 
                percentage of that balance;
                    ``(B) the number of months (rounded to the nearest 
                month) that it would take to pay the entire amount of 
                that current balance if the obligor pays only the 
                required minimum monthly payments, and if no further 
                advances are made;
                    ``(C) the total cost to the obligor, including 
                interest and principal payments, of paying that balance 
                in full if the obligor pays only the required minimum 
                monthly payments, and if no further advances are made; 
                and
                    ``(D) the following statement: `If your current 
                rate of interest is a temporary introductory rate, your 
                total costs may be higher.'''.
    (c) Minimum Payment Amount.--Section 127(c)(1)(A) of the Truth in 
Lending Act (15 U.S.C. 1637(c)(1)(A)) is amended by adding at the end 
the following:
                            ``(v) Minimum payment amount.--The method 
                        for determining the required minimum payment 
                        amount to be paid for each billing cycle, and 
                        the charge or penalty, if any, to be imposed 
                        for any failure by the obligor to pay the 
                        required minimum payment amount.''.

SEC. 3. DISCLOSURE OF LATE PAYMENT DEADLINES AND PENALTIES.

    Section 127(b) of the Truth in Lending Act (15 U.S.C. 1637(b)) is 
amended by adding at the end the following:
            ``(12) If a charge is to be imposed due to the failure of 
        the obligor to make payment on or before a required payment due 
        date, the date that payment is due or, if different, the date 
        on which a late payment fee will be charged, shall be stated 
        prominently in a conspicuous location on the billing statement, 
        together with the amount of the charge to be imposed if payment 
        is made after such date.''.

SEC. 4. WORLDWIDE WEB-BASED CREDIT CARD SOLICITATIONS.

    Section 127(c) of the Truth in Lending Act (15 U.S.C. 1637(c)) is 
amended--
            (1) by redesignating paragraphs (3), (4), and (5) as 
        paragraphs (4), (5), and (8), respectively; and
            (2) by inserting after paragraph (2) the following:
            ``(3) Internet based applications and solicitations.--
                    ``(A) In general.--In any solicitation to open a 
                credit card account for any person under an open end 
                consumer credit plan using the Internet or an 
interactive computer service, the person making the solicitation shall 
clearly and conspicuously disclose--
                            ``(i) the information described in 
                        subparagraphs (A) and (B) of paragraph (1); and
                            ``(ii) the disclosures described in 
                        paragraph (6).
                    ``(B) Form of disclosure.--The disclosures required 
                by subparagraph (A) shall be--
                            ``(i) readily accessible to consumers in 
                        close proximity to the solicitation to open a 
                        credit card account; and
                            ``(ii) updated regularly to reflect the 
                        current policies, terms, and fee amounts 
                        applicable to the credit card account.
                    ``(C) Definitions.--For purposes of this 
                paragraph--
                            ``(i) the term `Internet' means the 
                        international computer network of both Federal 
                        and non-Federal interoperable packet switched 
                        data networks; and
                            ``(ii) the term `interactive computer 
                        service' means any information service, system, 
                        or access software provider that provides or 
                        enables computer access by multiple users to a 
                        computer server, including specifically a 
                        service or system that provides access to the 
                        Internet and such systems operated or services 
                        offered by libraries or educational 
                        institutions.''.

SEC. 5. DISCLOSURES RELATED TO ``TEASER RATES''.

    Section 127(c) (15 U.S.C. 1637(c)) is amended by inserting after 
paragraph (5) (as so redesignated by section 4 of this Act) the 
following:
            ``(6) 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 disclosure 
                contained in subparagraph (B) or (C), as appropriate, 
                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 that will apply after the end 
                        of the introductory period; or
                            ``(ii) in the case of an annual percentage 
                        rate that varies in accordance with an index, 
                        is less than the current annual percentage rate 
                        under the index that will apply after the end 
                        of such period.
                    ``(B) Fixed annual percentage rate.--If the annual 
                percentage rate that 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 that will apply after the end of 
                the introductory period. The permanent 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 that 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 that 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 that 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 that 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 disclosure of--
                            ``(i) the conditions that the obligor must 
                        meet 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 disclosure.--The disclosures required 
                under this paragraph shall be made in a clear and 
                conspicuous manner, in a form at least as prominent as 
the disclosure of the annual percentage rate of interest that will 
apply during the introductory period.''.

SEC. 6. LIMIT ON INACTIVITY FEES.

    Section 127 of the Truth in Lending Act (15 U.S.C. 1637) is amended 
by adding at the end the following:
    ``(h) Limit on Inactivity Fees.--In the case of any credit card 
account under an open end consumer credit plan, a creditor may not 
impose a fee based on inactivity for the account during any period 
during which no advances have been made, if the obligor maintains any 
outstanding balance and is charged a finance charge applicable to such 
balance.''.

SEC. 7. ISSUANCE OF CREDIT CARDS TO UNDERAGE CONSUMERS.

    Section 127(c) of the Truth in Lending Act (15 U.S.C. 1637(c)) is 
amended by inserting after paragraph (6) (as added by section 5 of this 
Act) the following:
            ``(7) Applications from underage obligors.--
                    ``(A) Prohibition on issuance.--No credit card may 
                be issued to, or open end credit plan established on 
                behalf of, any obligor who has not attained the age of 
                21, except in response to a written request or 
                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 
                reached the age of 21 as of the date of submission of 
                the application shall require--
                            ``(i) the signature of the parent or 
                        guardian of that individual indicating joint 
                        liability for debts incurred by the consumer in 
                        connection with the account before the consumer 
                        has reached the age of 21; or
                            ``(ii) submission by that individual of 
                        financial information indicating an independent 
                        means of repaying any obligation arising from 
                        the proposed extension of credit in connection 
                        with the account.''.

SEC. 8. PENALTIES FOR ON-TIME PAYMENT PROHIBITED.

    Section 127 of the Truth in Lending Act (15 U.S.C. 1637) is amended 
by adding at the end the following:
    ``(i) Penalties for On-Time Payment Prohibited.--
            ``(1) In general.--In the case of any credit card account 
        under an open end consumer credit plan, no creditor may cancel 
        an account, impose a minimum finance charge for any period 
        (including any annual period), impose any fee in lieu of a 
        minimum finance charge, or impose any other charge or penalty 
        with regard to such account or credit extended under such 
        account solely on the basis that any credit extended has been 
        repaid in full before the end of any grace period applicable 
        with respect to the extension of credit.
            ``(2) Payment due dates.--For purposes of paragraph (1), a 
        creditor shall be deemed to have imposed a prohibited charge or 
        penalty on an account under an open end consumer credit plan if 
        the creditor regularly transmits to the obligor of such plan a 
        statement for a billing cycle in which credit has been extended 
        under such plan that includes a payment due date, as required 
        by subsection (b)(9), that--
                    ``(A) is different from and in advance of--
                            ``(i) the date by which payment would have 
                        to be made for any credit extended under such 
                        credit plan to avoid incurring a finance change 
                        that was disclosed to such obligor pursuant to 
                        subsection (c)(1)(A)(iii); or
                            ``(ii) the actual date by which payment 
                        would otherwise have to be made to avoid 
                        incurring a finance charge if calculated on the 
                        same basis as the date by which or the period 
                        within which any payment would have to be made 
                        to avoid incurring a finance charge that was 
                        disclosed to such obligor pursuant to 
                        subsection (c)(1)(A)(iii); and
                    ``(B) has the purpose or effect of inducing the 
                obligor of such plan to transmit payment to the 
                creditor earlier than otherwise would be required to 
                avoid incurring a finance charge.
            ``(3) Scope of application.--Paragraph (1) may not be 
        construed as--
                    ``(A) prohibiting the imposition of any flat annual 
                fee which may be imposed on the consumer in advance of 
                any annual period to cover the cost of maintaining a 
                credit card account during such annual period without 
                regard to whether any credit is actually extended under 
                such account during such period; or
                    ``(B) otherwise affecting the imposition of the 
                actual finance charge applicable with respect to any 
                credit extended under such account during such annual 
period at the annual percentage rate disclosed to the consumer in 
accordance with this title for the period of time during which any such 
credit is outstanding.''.

SEC. 9. FREEZE ON INTEREST RATE TERMS AND FEES ON CANCELED CARDS.

    Section 127 of the Truth in Lending Act (15 U.S.C. 1637) is amended 
by adding at the end the following:
    ``(j) Freeze on Interest Rate Terms and Fees on Canceled Cards.--
            ``(1) Advance notice of increase in interest rate 
        required.--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) applicable to any outstanding balance of credit under 
        such plan may take effect before the beginning of the billing 
        cycle that begins not less than 15 days after the date on which 
        the obligor receives notice of such increase.
            ``(2) Increase not effective for canceled accounts.--If an 
        obligor referred to in paragraph (1) cancels the credit card 
        account before the beginning of the billing cycle referred to 
        in paragraph (1)--
                    ``(A) 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 that balance 
                under the terms and conditions in effect before the 
                increase referred to in paragraph (1); and
                    ``(B) the repayment of the outstanding balance 
                after the cancellation shall be subject to all other 
                terms and conditions applicable with respect to the 
                account before the increase referred to in such 
                paragraph.
            ``(3) 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--
                    ``(A) to cancel the account before the effective 
                date of the increase; and
                    ``(B) after any such cancellation, to pay any 
                balance outstanding on the account at the time of 
                cancellation, in accordance with the terms and 
                conditions in effect before the cancellation.''.

SEC. 10. DISCLOSURE OF INTEREST RATES AND FEES ON CREDIT ADVANCES 
              THROUGH THIRD-PARTY CHECKS.

    Section 127 of the Truth in Lending Act (15 U.S.C. 1637) is amended 
by adding at the end the following:
    ``(k) Fees and Interest Rates on Credit Advances Through the Use of 
Third-Party Checks.--
            ``(1) In general.--In the case of any credit card account 
        under an open end consumer credit plan, a creditor may not 
        provide the obligor with any negotiable or transferable 
        instrument for use in making an extension of credit to the 
        obligor for the purpose of making a transfer to a third party, 
        unless the creditor has fully satisfied the notice requirements 
        of paragraph (2) with respect to such instrument.
            ``(2) Notice requirements.--A creditor satisfies the notice 
        requirements of this paragraph with respect to an instrument 
        referred to in paragraph (1) if the creditor provides to an 
        obligor, at the same time at which any such instrument is 
provided, a notice that prominently and specifically describes--
                    ``(A) the amount of any transaction fee that may be 
                imposed for making an extension of credit through the 
                use of such instrument, including the exact percentage 
                rate to be used in determining such amount if the 
                amount of the transaction fee is expressed as a 
                percentage of the amount of the credit extended; and
                    ``(B) any annual percentage rate of interest 
                applicable in determining the finance charge for any 
                such extension of credit, if different from the finance 
                charge applicable to other extensions of credit under 
                such account.''.

SEC. 11. PROHIBITION ON OVER-THE-LIMIT FEES FOR CREDITOR-APPROVED 
              TRANSACTIONS.

    Section 127 of the Truth in Lending Act (15 U.S.C. 1637) is amended 
by adding at the end the following:
    ``(l) 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 fee 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 that the creditor approves in 
advance or at the time of the transaction.''.

SEC. 12. UNSOLICITED DUAL-PURPOSE CARDS.

    Section 132 of the Truth in Lending Act (15 U.S.C. 1642) is 
amended--
            (1) by inserting ``(a) In General.--'' before ``No''; and
            (2) by adding at the end the following:
    ``(b) Certain Cards Included.--For purposes of this section, the 
term `credit card' includes any dual purpose or multifunction card, 
including a stored-value card, debit card, check card, check guarantee 
card, or purchase-price discount card, that is connected with an open 
end credit plan and can be used, either on issuance or upon later 
activation, to obtain credit directly or indirectly.''.

SEC. 13. 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)--
            (1) in the second sentence, by striking ``or (10)'' and 
        inserting ``(10), (11), or (12)''; and
            (2) by striking the third sentence.

SEC. 14. REGULATIONS.

    Not later than 6 months after the date of enactment of this Act, 
the Board of Governors of the Federal Reserve System (hereafter in this 
section referred to as the ``Board'') shall--
            (1) issue final regulations to implement the amendments 
        made by this Act; and
            (2) issue such staff commentary or publish such model 
        disclosure statements and forms as the Board considers 
        necessary--
                    (A) to carry out the intent of the amendments made 
                by this Act;
                    (B) to implement any initiative to prevent the 
                circumvention of any of the amendments made by this 
                Act; and
                    (C) to facilitate compliance with the requirements 
                in the amendments made by this Act.
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