Short title; table of contents

This Act may be cited as the

Credit Card Reform Act of 2008

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.

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:

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— (1)in paragraph (1)— (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.

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:

163.

Billing period and finance charges

(a)

Billing period

(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.

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). (3)

Cap on fees

(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).

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.

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.

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.