[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[S. 900 Introduced in Senate (IS)]

111th CONGRESS
  1st Session
                                 S. 900

To require the establishment of a credit card safety star rating system 
         for the benefit of consumers, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             April 27, 2009

   Mr. Wyden introduced the following bill; which was read twice and 
    referred to the Committee on Banking, Housing, and Urban Affairs

_______________________________________________________________________

                                 A BILL


 
To require the establishment of a credit card safety star rating system 
         for the benefit of 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.

    This Act may be cited as the ``Credit Card Safety Star Act of 
2009''.

SEC. 2. FINDINGS.

    Congress finds that--
            (1) competition in the credit card market is severely 
        hindered by a lack of transparency, which results in 
        inefficient consumer choices;
            (2) such lack of transparency is largely due to confusing 
        terms and overwhelming information for consumers;
            (3) the marketplace has not increased competition based on 
        the merits of credit cards;
            (4) a Government rating system that would use market forces 
        by encouraging better transparency would increase such 
        competition and assist consumers in making better credit card 
        choices; and
            (5) such a rating system would not preclude additional 
        regulation or legislation that may eliminate certain practices 
        considered unfair or abusive.

SEC. 3. TRUTH IN LENDING ACT AMENDMENTS.

    The Truth in Lending Act (15 U.S.C. 1601 et seq.) is amended by 
inserting after section 127A the following new section:

``SEC. 127B. CREDIT CARD SAFETY STAR RATING SYSTEM.

    ``(a) Definitions.--In this section--
            ``(1) the term `agreement' means the terms and conditions 
        applicable to an open end credit plan offered by an issuer of 
        credit;
            ``(2) references to a reading grade level shall be as 
        determined by the Board, using available measurements for 
        assessing such reading levels, including those used by the 
        Department of Education;
            ``(3) the term `Safety Star System' means the credit card 
        safety star rating system established under this section; and
            ``(4) the term `junk mail' means a form of disclosure that 
        does not inform the consumer in a meaningful and significant 
        way about changes in the contract, including small type, using 
        separate pieces of paper for separate disclosures, and mixing 
        disclosure materials with product advertisements.
    ``(b) Rulemaking.--
            ``(1) In general.--Not later than 12 months after the date 
        of enactment of this section, the Board shall issue final rules 
        to implement the Safety Star System established under this 
        section, to allow consumers to quickly and easily compare the 
        levels of safety associated with various open end credit plan 
        agreements.
            ``(2) Consultation.--The Board shall consult with the 
        Comptroller of the Currency, the Office of Thrift Supervision, 
        and the Federal Deposit Insurance Corporation in issuing rules 
        to implement the Safety Star System.
    ``(c) Elements of Safety Star System.--The Safety Star System shall 
consist of a 5-star system for rating the terms and conditions of each 
open end credit plan agreement between a card issuer and a cardholder, 
in accordance with this section.
    ``(d) Safety Star Ratings.--
            ``(1) One-star rating.--The lowest level of safety for an 
        open end credit plan shall be indicated by a 1-star rating.
            ``(2) Five-star rating.--The highest level of safety in an 
        open end credit plan shall be indicated by a 5-star rating.
    ``(e) Point Structure for Safety Star System.--
            ``(1) Values.--Each variation of a term in an agreement 
        shall be worth 1 point or -1 point, as applicable.
            ``(2) Star system.--For purposes of the Safety Star 
        System--
                    ``(A) 5-star credit cards are those with points 
                totaling 7 points or greater;
                    ``(B) 4-star credit cards are those with between 3 
                points and 6 points;
                    ``(C) 3-star credit cards are those with between -1 
                point and 2 points;
                    ``(D) 2-star credit cards are those with between -6 
                points and -2 points; and
                    ``(E) 1-star credit cards are those with -7 points 
                or fewer.
    ``(f) Point Awards.--One point shall be awarded for each of the 
terms in an agreement under which--
            ``(1) no binding or nonbinding arbitration clause applies;
            ``(2) at least 90 days notice is provided to the cardholder 
        if the card issuer wants to change the terms of the agreement, 
        with the option for the consumer to opt out of the changes, 
        while paying off their previous balance according to the 
        original terms;
            ``(3) changes are disclosed in a manner that highlights the 
        differences between the current terms and the proposed terms;
            ``(4) the original card agreement and all original 
        supplementary materials are in 1 document at 1 time, and, when 
        the card issuer discloses changes to the card agreement--
                    ``(A) those materials are not in junk mail form; 
                and
                    ``(B) the changes are disclosed conspicuously, 
                together with the next billing cycle statement, before 
                the changes becomes effective;
            ``(5) no over-the-limit fees are imposed for the 
        transactions approved at the time of transaction by the card 
        issuer;
            ``(6) no fees are imposed to pay credit card bills using 
        any method, including over the phone;
            ``(7) payments are applied to the highest interest rate 
        principal first;
            ``(8) interest is not accrued on new purchases between the 
        end of the billing cycle and the due date when a balance is 
        outstanding;
            ``(9) security deposits and fees for credit availability 
        (such as account opening fees or membership fees)--
                    ``(A) are limited to 10 percent of the initial 
                credit limit during the first 12 months; and
                    ``(B) at account opening, are limited to 5 percent 
                of the initial credit limit, and requires any 
                additional amounts (up to 10 percent) to be spread 
                evenly over at least the next 5 billing cycles;
            ``(10) the terms of the agreement are disclosed in a form 
        that requires at or below an 8th grade reading level;
            ``(11) any secondary disclosure materials meant to 
        supplement the terms of the agreement are disclosed in a form 
        that requires at or below an 8th grade reading level;
            ``(12) no late fee may be imposed when a payment is 
        received, whether processed by the issuer or not, within 2 days 
        of the payment due date;
            ``(13) a copy of the agreement and all supplementary 
        materials are easily available to the cardholder online; or
            ``(14) a substantial positive financial benefit would be 
        provided to the consumer, as determined by the Board in 
        accordance with subsection (h).
    ``(g) Negative Points.--One point shall be subtracted for each of 
the terms in an agreement under which--
            ``(1) binding or nonbinding arbitration is required to 
        resolve disputes;
            ``(2) fewer than 30 days notice before the billing 
        statement for which changes in terms take effect are provided 
        to the cardholder when the card issuer wants to change the 
        terms of the card agreement (which shall be assumed if notice 
        of such changes is undisclosed in the agreement materials);
            ``(3) junk mailer disclosures are used to inform 
        cardholders of changes in their agreements;
            ``(4) over-the-limit fees are imposed more than once based 
        on the same transaction;
            ``(5) fees are imposed to pay bills by check, over the 
        Internet, or by an automated phone system;
            ``(6) interest is accrued on new purchases between the end 
        of the billing cycle and the due date when a balance is 
        outstanding;
            ``(7) the terms of the agreement are disclosed in a form 
        that requires a reading level that is above a 12th grade 
        reading level;
            ``(8) any secondary disclosure materials meant to 
        supplement the terms of the agreement are written in a form 
        that requires a reading level above the 12th grade reading 
        level;
            ``(9) a late fee may be imposed within 2 days of the 
        payment due date;
            ``(10) the issuer may unilaterally change the terms in the 
        agreement without written consent from the consumer, or the 
        issuer may unilaterally make adverse changes to the terms in 
        the agreement without written consent from the consumer and 
        written notice to the consumer of the precise behavior that 
        provoked the adverse change;
            ``(11) the issuer charges interest on transaction fees, 
        including late fees; or
            ``(12) there would be a negative financial impact on the 
        interests of the consumer, as determined by the Board in 
        accordance with subsection (h).
    ``(h) Board Considerations.--For purposes of subsections (f)(15) 
and (g)(16), the Board may consider--
            ``(1) the level of difficulty in understanding terms of the 
        subject agreement by an average consumer;
            ``(2) how such terms will affect consumers who are close to 
        the edge of their credit limits;
            ``(3) how such terms will affect consumers who do not have 
        a good credit score, history, or rating, using commonly 
        employed credit measurement methods (if it creates greater 
        access to credit by reducing safety, or by other means);
            ``(4) whether such terms create what would appear to a 
        reasonable consumer to be an arbitrary deadline or limit that 
        may frustrate consumers and result in excess fees or worse 
        financial outcomes for the consumer;
            ``(5) whether such terms, or the severity of such terms, is 
        not based on the credit risks created by a particular consumer 
        behavior, but rather is designed to solely increase revenue 
        through lack of transparency;
            ``(6) whether any State has sought to limit such terms or 
        terms that are similar thereto;
            ``(7) whether provisions of State law relating to unfair 
        and deceptive practices would prohibit any such terms, but for 
        the national bank exclusion from non-home State banking laws;
            ``(8) whether such terms have an anticompetitive or 
        procompetitive effect on the marketplace; and
            ``(9) such additional terms or concepts that are not 
        specified in paragraphs (1) through (8) that the Board deems 
        difficult for an average consumer to manage, such as terms that 
        are confusing to the typical consumer or that create a greater 
        risk of negative financial outcomes for the typical consumer, 
        and terms that promote transparency or competition.
    ``(i) Limitations.--For purposes of subsection (h), the Board may 
not consider, with respect to the terms of an open end credit plan 
agreement, the profitability or impact on the success of any particular 
business model of such terms.
    ``(j) Automatic Rating.--Notwithstanding any other provision of 
this section, or any other provision of State or Federal law, any open 
end credit plan that allows the card issuer or a designee thereof to 
modify the terms of the agreement at any time or periodically for 
unspecified or unstated reasons, shall automatically give rise to a 1-
star rating for such open end credit plan.
    ``(k) No Points if Terms Are Required by Law.--If a particular term 
in an agreement becomes required by law or regulation, no points may be 
awarded under the Safety Star System for that term.
    ``(l) Procedures for Ratings.--
            ``(1) Certification to the board.--Each issuer of credit 
        under an open end credit plan shall certify in writing to the 
        Board, the number of stars to be awarded, separately for each 
        of the card issuer's agreements. Each such certification shall 
        specify which terms in each agreement are subject to the Safety 
        Star System, and how the issuer arrived at the star rating for 
        each agreement based on the Safety Star System in accordance 
        with paragraph (2).
            ``(2) Submissions to the board.--Each agreement that is 
        subject to a Safety Star System rating shall be submitted 
        electronically to the Board, together with a written 
        explanation of whether the agreement has or does not have each 
        of the terms specified in subsections (f) and (g), before 
        issuing or marketing a credit card under that agreement.
            ``(3) Board verification.--
                    ``(A) In general.--The Board shall verify that the 
                terms in the submitted agreement and supporting 
                materials (such as examples of future disclosures or 
                examples of websites with cardholder agreements) comply 
                with the certification submitted to the Board by the 
                issuer under this subsection, not later than 30 days 
                after the date of submission.
                    ``(B) Avoiding duplicative verifications.--A card 
                issuer may certify to the Board, in writing, that all 
                agreements that it markets include a particular term, 
                or that the issuer will use certain practices (with 
                supporting documents, including showing how future 
                disclosures will be made) so that the Board is required 
                to determine only once, with respect to that term or 
                practice, how that term or practice affects the star 
                ratings of the credit card agreements of the issuer.
            ``(4) Misrepresentations as violations.--Any certification 
        to the Board under this section that the issuer knew, or should 
        have known, was false or misrepresented to the Board or to a 
        consumer the terms or conditions of a card agreement or of a 
        Safety Star System rating under this section shall be treated 
        as a violation of this title, and shall be subject to 
        enforcement in accordance with section 108.
            ``(5) Modifications by card issuers.--
                    ``(A) In general.--After the first annual review by 
                the Board, mentioned in subsection (o), before 
                implementing any new term or concept, or new way of 
                approaching a term or concept, with respect to an open 
                end credit plan, the card issuer shall submit the new 
                term or concept and any supporting materials to the 
                Board, other than with respect to an adjustment to the 
                applicable rate of interest in an existing agreement 
                that clearly specifies that such rate would be 
                adjustable and under what conditions such adjustments 
                could occur.
                    ``(B) Determination of the board.--Not later than 
                30 days after the date of a submission under 
                subparagraph (A), the Board shall complete a review of 
                the effects on safety of the subject new concept or 
                term, and shall issue a decision on whether it affects 
                the Safety Star System rating for the open end credit 
                plan that will include the term or concept.
    ``(m) Display of and Access to Ratings.--
            ``(1) Display of rating required.--The Safety Star System 
        rating for each credit card shall be clearly displayed on all 
        marketing material, applications, billing statements, and 
        agreements associated with that credit card, as well as on the 
        back of each such credit card, including a brief explanation of 
        the system displayed below each rating (other than on the back 
        of the credit card).
            ``(2) New cards required for lower ratings.--In any case in 
        which the Safety Star System rating for a credit card is 
        lowered for any reason, the card issuer shall provide new cards 
        to account holders displaying the new rating in accordance with 
        paragraph (1).
            ``(3) Graphic display.--The Safety Star System rating for a 
        credit card shall be represented by a graphic that demonstrates 
        not only the number of stars that the credit card has received, 
        but also the number of stars that the card did not receive.
            ``(4) Development of graphic by the board.--The Board shall 
        determine the graphic and description of the Safety Star System 
        for display on materials and the back of cards for purposes of 
        this section.
    ``(n) Consumer Access to Ratings.--
            ``(1) In general.--The Board shall engage in an extensive 
        campaign to educate consumers about the Safety Star System 
        ratings for credit cards, using commonly used and accessible 
        communications media.
            ``(2) Website.--Not later than 12 months after the date of 
        enactment of this section, the Board shall establish and shall 
        maintain a stand-alone website--
                    ``(A) to provide easily understandable, in-depth 
                information on the criteria used to assign the ratings, 
                as provided in subsections (f) and (g); and
                    ``(B) to include a listing of the Safety Star 
                System ratings for each open end consumer credit plan, 
                information on how the issuer arrived at that rating, 
                and the number of consumers that have that plan with 
                the issuer.
    ``(o) Annual Review by the Board.--
            ``(1) In general.--The Board shall conduct a thorough 
        annual review (of not longer than 6 months in duration) of the 
        Safety Star System, to determine whether the point system is 
        effectively aiding consumers, and shall promptly implement any 
        regulatory changes as are necessary to ensure that the System 
        protects consumers and encourages transparent competition and 
        fairness to consumers, including implementing a system in which 
        terms are weighted to distinguish between different levels of 
        safety, in accordance with the purposes of this section.
            ``(2) Availability of results.--Results of the review 
        conducted under this subsection shall be submitted to Congress, 
        and shall be made available to the public.
    ``(p) Periodic Review of Standards.--Once every 2 years, the Board 
shall determine whether the requirements to satisfy 2-star standards 
and above should be raised on the grounds that card issuers have 
abandoned the most unfair practices. In making such determination, the 
Board may not consider the profitability of business models, but may 
consider whether competition in the credit industry will improve 
consumer protection, and how the change in standards will affect such 
competition.''.

SEC. 4. SAFETY STAR ADVISORY COMMISSION.

    (a) Establishment.--There is established the Credit Card Safety 
Star Advisory Commission (in this section referred to as the 
``Commission'').
    (b) Duties.--
            (1) Review of the credit card safety star system and annual 
        reports.--The Commission shall--
                    (A) review the effectiveness of the credit card 
                Safety Star System under this section, including the 
                topics described in paragraph (2);
                    (B) make recommendations to Congress concerning 
                such system;
                    (C) study whether it would better protect consumers 
                to ban some practices by creditors rather than use a 
                rating system for those practices, including universal 
                default, unilateral changes without consumer consent, 
                allowing interest charges on fees, or allowing interest 
                rate increases to apply to past debt; and
                    (D) by not later than March 1 of each calendar year 
                following the date of enactment of this Act, submit a 
                report to Congress containing the results of such 
                reviews and its recommendations concerning such system.
            (2) Specific topics to be reviewed.--The Commission shall 
        review--
                    (A) with respect to all credit card users--
                            (i) the methodology for awarding stars to 
                        credit cards under the Safety Star System, and 
                        whether there may be a better way to award 
                        stars that takes into account unfair or unsafe 
                        practices that remain uncaptured in the Safety 
                        Star System;
                            (ii) the consumer awareness of the Safety 
                        Star System and what may make the system more 
                        useful to consumers; and
                            (iii) other major issues in implementation 
                        and further development of the Safety Star 
                        System;
                    (B) with respect to credit card users who are at or 
                close to their credit limits, whether such consumers 
                are being specifically targeted in credit card 
                agreements, and whether the Safety Star System should 
                incorporate more terms or be revised to encourage more 
                fair terms for such consumers; and
                    (C) the effects of the Safety Star System on the 
                availability and affordability of credit and the 
                implications of changes in credit availability and 
                affordability in the United States and in the general 
                market for credit services due to the Safety Star 
                System.
            (3) Comments on certain board reports.--
                    (A) Transmittal to commission.--If the Board 
                submits to Congress (or a committee of Congress) a 
                report that is required by law and that relates to the 
                Safety Star System, the Board shall transmit a copy of 
                the report to the Commission.
                    (B) Independent review.--The Commission shall 
                review any report received under subparagraph (A) and, 
                not later than 6 months after the date of submission of 
                the report to Congress, shall submit to the appropriate 
                committees of Congress written comments on such report. 
                Such comments may include such recommendations as the 
                Commission determines appropriate.
            (4) Agenda and additional reviews.--The Commission shall 
        consult periodically with the chairperson and ranking minority 
        members of the appropriate committees of Congress regarding the 
        agenda of the Commission and progress towards achieving the 
        agenda. The Commission may conduct additional reviews, and 
        submit additional reports to the appropriate committees of 
        Congress, from time to time on such topics relating to the 
        Safety Star System as may be requested by such chairpersons and 
        members, and as the Commission determines appropriate.
            (5) Availability of reports.--The Commission shall transmit 
        to the Board a copy of each report submitted under this 
        subsection, and shall make such reports available to the public 
        in an easily accessible format, including operating a website 
        containing the reports.
            (6) Appropriate committees of congress.--For purposes of 
        this subsection, the term ``appropriate committees of 
        Congress'' means the Committee on Banking, Housing, and Urban 
        Affairs of the Senate and the Committee on Financial Services 
        of the House of Representatives.
            (7) Voting and reporting requirements.--With respect to 
        each recommendation contained in a report submitted under 
        paragraph (1), each member of the Commission shall vote on the 
        recommendation, and the Commission shall include, by member, 
        the results of that vote in the report containing the 
        recommendation. The Commission may file a minority report.
            (8) Examination of budget consequences.--Before making any 
        recommendation that is likely to have a Federal budgetary 
        impact, the Commission shall examine the budget consequences of 
        such recommendation, directly or through consultation with 
        appropriate expert entities.
    (c) Membership.--
            (1) Number and appointment.--The Commission shall be 
        composed of 15 members appointed by the Comptroller General of 
        the United States, in accordance with this section.
            (2) Qualifications.--
                    (A) In general.--The membership of the Commission 
                shall include individuals--
                            (i) who have achieved national recognition 
                        for their expertise in credit cards, debt 
                        management, economics, credit availability, 
                        consumer protection, and other credit card-
                        related issues and fields; or
                            (ii) who provide a mix of different 
                        professions, a broad geographic representation, 
                        and a balance between urban and rural 
                        representatives.
                    (B) Makeup of commission.--The Commission shall be 
                made up of 15 members, of whom--
                            (i) 4 shall be representatives from 
                        consumer groups;
                            (ii) 4 shall be representatives from credit 
                        card issuers or banks;
                            (iii) 7 shall be representatives from 
                        nonprofit research entities or nonpartisan 
                        experts in banking and credit cards; and
                            (iv) no fewer than 1 of the members 
                        described in clauses (i) through (iii) shall 
                        represent each of--
                                    (I) the elderly;
                                    (II) economically disadvantaged 
                                consumers;
                                    (III) racial or ethnic minorities; 
                                and
                                    (IV) students and minors.
                    (C) Ethics disclosures.--The Comptroller General 
                shall establish a system for public disclosure by 
                members of the Commission of financial and other 
                potential conflicts of interest relating to such 
                members. Members of the Commission shall be treated as 
                employees of Congress whose pay is disbursed by the 
                Secretary of the Senate for purposes of title I of the 
                Ethics in Government Act of 1978 (Public Law 95-521).
            (3) Terms.--
                    (A) In general.--The terms of members of the 
                Commission shall be for 5 years except that the 
                Comptroller General shall designate staggered terms for 
                the members first appointed.
                    (B) Vacancies.--Any member appointed to fill a 
                vacancy occurring before the expiration of the term for 
                which the member's predecessor was appointed shall be 
                appointed only for the remainder of that term. A member 
                may serve after the expiration of that member's term 
                until a successor has taken office. A vacancy in the 
                Commission shall be filled in the manner in which the 
                original appointment was made.
            (4) Compensation.--
                    (A) Members.--While serving on the business of the 
                Commission (including travel time), a member of the 
                Commission shall be entitled to compensation at the per 
                diem equivalent of the rate provided for level IV of 
                the Executive Schedule under section 5315 of title 5, 
                United States Code, and while so serving away from home 
                and the regular place of business of the member, the 
                member may be allowed travel expenses, as authorized by 
                the Chairperson.
                    (B) Other employees.--For purposes of pay (other 
                than pay of members of the Commission) and employment 
                benefits, rights, and privileges, all employees of the 
                Commission shall be treated as if they were employees 
                of the United States Senate.
            (5) Chairperson; vice chairperson.--The Comptroller General 
        shall designate a member of the Commission, at the time of 
        appointment of the member as Chairperson and a member as Vice 
        Chairperson for that term of appointment, except that in the 
        case of vacancy in the position of Chairperson or Vice 
        Chairperson of the Commission, the Comptroller General may 
        designate another member for the remainder of that member's 
        term.
            (6) Meetings.--The Commission shall meet at the call of the 
        Chairperson.
    (d) Director and Staff; Experts and Consultants.--Subject to such 
review as the Comptroller General determines necessary to assure the 
efficient administration of the Commission, the Commission may--
            (1) employ and fix the compensation of an Executive 
        Director (subject to the approval of the Comptroller General) 
        and such other personnel as may be necessary to carry out its 
        duties (without regard to the provisions of title 5, United 
        States Code, governing appointments in the competitive 
        service);
            (2) seek such assistance and support as may be required in 
        the performance of its duties from appropriate Federal 
        departments and agencies;
            (3) enter into contracts or make other arrangements, as may 
        be necessary for the conduct of the work of the Commission 
        (without regard to section 3709 of the Revised Statutes of the 
        United States (41 U.S.C. 5));
            (4) make advance, progress, and other payments which relate 
        to the work of the Commission;
            (5) provide transportation and subsistence for persons 
        serving without compensation; and
            (6) prescribe such rules and regulations as it determines 
        necessary with respect to the internal organization and 
        operation of the Commission.
    (e) Powers.--
            (1) Obtaining official data.--The Commission may secure 
        directly from any department or agency of the United States 
        information necessary to enable it to carry out this section. 
        Upon request of the Chairperson, the head of that department or 
        agency shall furnish that information to the Commission on an 
        agreed upon schedule.
            (2) Data collection.--In order to carry out its functions, 
        the Commission shall--
                    (A) utilize existing information, both published 
                and unpublished, where possible, collected and assessed 
                either by its own staff or under other arrangements 
                made in accordance with this section;
                    (B) carry out, or award grants or contracts for, 
                original research and experimentation, where existing 
                information is inadequate; and
                    (C) adopt procedures allowing any interested party 
                to submit information for the Commission's use in 
                making reports and recommendations.
            (3) Access of gao to information.--The Comptroller General 
        shall have unrestricted access to all deliberations, records, 
        and nonproprietary data of the Commission, immediately upon 
        request.
            (4) Periodic audit.--The Commission shall be subject to 
        periodic audit by the Comptroller General.
    (f) Administrative and Support Services.--The Comptroller General 
shall provide such administrative and support services to the 
Commission as may be necessary to carry out this section.
    (g) Authorization of Appropriations.--There are authorized to be 
appropriated to the Commission, not more than $10,000,000 for each 
fiscal year to carry out this section.
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