[Congressional Record Volume 151, Number 22 (Wednesday, March 2, 2005)]
[Senate]
[Pages S1950-S1952]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. DODD:
  S. 499. A bill to amend the Consumer Credit Protection Act to ban 
abusive credit practices, enhance consumer disclosures, protect 
underage consumers, and for other purposes; to the Committee on 
Banking, Housing, and Urban Affairs.
  Mr. DODD. Mr. President, I rise today to introduce legislation, the 
Credit CARD Act of 2005 (the Credit Card Accountability Responsibility 
and Disclosure Act of 2005), designed to protect our Nation's consumers 
from the predatory practices of the credit card industry.
  The Credit CARD Act is substantially the same as legislation I 
previously introduced in the 108th Congress. As the Senate considers 
bankruptcy reform legislation, which I believe will adversely impact 
consumers and inappropriately reward the credit card industry, the 
Credit CARD Act is needed now more than ever before.
  I ask unanimous consent that the text of the legislation be printed 
in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 499

       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 2005'' or the ``Credit 
     CARD Act of 2005''.

     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:

[[Page S1951]]

       ``(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 outstanding balance in the account at the 
     beginning of the statement period, as required by paragraph 
     (1) of this subsection;
       ``(ii) the required minimum monthly payment on that 
     balance, represented as both a dollar figure and as a 
     percentage of that balance;
       ``(iii) the due date, within which, payment must be made to 
     avoid addition charges, as required by paragraph (9) of this 
     subsection;
       ``(iv) 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;
       ``(v) 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
       ``(vi) 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).

[[Page S1952]]

     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 
     periodic statement required under subsection (b) with respect 
     to the account shall include, in a conspicuous location on 
     the billing statement--
       ``(A) the date on which the payment is due or, if 
     different, the date on which a late payment fee will be 
     charged, together with the amount of the fee or charge to be 
     imposed if payment is made after that date;
       ``(B) the date by which the payment must be postmarked, if 
     paid by mail, in order to avoid the imposition of a late 
     payment fee with respect to the payment; and
       ``(C) a statement that no late fee may be imposed in 
     connection with a payment made by mail which was postmarked 
     on or before the postmark date.
       ``(2) Disclosure of increase in interest rates for late 
     payments.--If 1 or more late payments under an open end 
     consumer credit plan may result in an increase in the annual 
     percentage rate the account, the statement required under 
     subsection (b) with respect to the account shall include 
     conspicuous notice of such fact, together with the applicable 
     penalty annual percentage rate, in close proximity to the 
     disclosure required in paragraph (1) of the date on which 
     payment is due under the terms of the account.
       ``(3) Requirements relating to postmark date.--
       ``(A) In general.--The date included in a periodic 
     statement pursuant to paragraph (1)(B) with regard to the 
     postmark on a payment shall allow, in accordance with 
     regulations prescribed by the Board under subparagraph (B), a 
     reasonable time for the consumer to make the payment and a 
     reasonable time for the delivery of the payment by the due 
     date.
       ``(B) Board regulations.--The Board shall prescribe 
     guidelines for determining a reasonable period of time for 
     making a payment and delivery of a payment for purposes of 
     subparagraph (A), after consultation with the Postmaster 
     General and representatives of consumer and trade 
     organizations.
       ``(4) Payment at local branches.--If the creditor, in the 
     case of a credit card account referred to in paragraph (1), 
     is a financial institution which maintains branches or 
     offices at which payments on any such account are accepted 
     from the obliger in person, the date on which the obliger 
     makes a payment on the account at such branch or office shall 
     be considered as the date on which the payment is made for 
     purposes of determining whether 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, to the extent that 
     such payment is made before the close of business of the 
     branch or office on the business day immediately preceding 
     the due date for such payment.''.

               TITLE III--RESPONSIBILITIES IN BANKRUPTCY

     SEC. 311. AMENDMENTS TO THE BANKRUPTCY CODE.

       Section 523(a)(2)(C) of title 11, United States Code, is 
     amended by adding at the end the following: ``However, this 
     subparagraph shall not apply for any portion of debt incurred 
     under an open end credit plan, as defined in section 103 of 
     the Truth in Lending Act, if the annual rate of interest 
     charged with respect to the account was more than 20 
     percentage points above the Federal prime lending rate on the 
     last day of month during which the interest was charged.''.

                TITLE IV--PROTECTION OF YOUNG CONSUMERS

     SEC. 411. EXTENSIONS OF CREDIT TO UNDERAGE CONSUMERS.

       Section 127(c) of the Truth in Lending Act (15 U.S.C. 
     1637(c)) is amended by inserting after paragraph (5), as 
     added by this Act, the following:
       ``(6) Applications from underage consumers.--
       ``(A) Prohibition on issuance.--No credit card may be 
     issued to, or open end credit plan established on behalf of, 
     a consumer who has not attained the age of 21, unless the 
     consumer has submitted a written 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 attained the 
     age of 21 as of the date of submission of the application 
     shall require--
       ``(i) the signature of the parent, legal guardian, or 
     spouse of the consumer, or any other individual having a 
     means to repay debts incurred by the consumer in connection 
     with the account, indicating joint liability for debts 
     incurred by the consumer in connection with the account 
     before the consumer has attained the age of 21;
       ``(ii) submission by the consumer of financial information 
     indicating an independent means of repaying any obligation 
     arising from the proposed extension of credit in connection 
     with the account; or
       ``(iii) proof by the consumer that the consumer has 
     completed a credit counseling course of instruction by a 
     nonprofit budget and credit counseling agency approved by the 
     Board for such purpose.
       ``(C) Minimum requirements for counseling agencies.--To be 
     approved by the Board under subparagraph (B)(iii), a credit 
     counseling agency shall, at a minimum--
       ``(i) be a nonprofit budget and credit counseling agency, 
     the majority of the board of directors of which--

       ``(I) is not employed by the agency; and

       ``(II) will not directly or indirectly benefit financially 
     from the outcome of a credit counseling session;

       ``(ii) if a fee is charged for counseling services, charge 
     a reasonable fee, and provide services without regard to 
     ability to pay the fee; and
       ``(iii) provide trained counselors who receive no 
     commissions or bonuses based on referrals, and demonstrate 
     adequate experience and background in providing credit 
     counseling.''.

     SEC. 412. ENHANCED PENALTIES.

       Section 130(a)(2)(A) of the Truth in Lending Act (15 U.S.C. 
     1640 (a)(2)(A)(iii)) is amended by striking ``or (iii) in 
     the'' and inserting the following:
       ``(iii) in the case of an individual action relating to an 
     open end credit plan that is not secured by real property or 
     a dwelling, twice the amount of any finance charge in 
     connection with the transaction, with a minimum of $500 and a 
     maximum of $5,000 or such higher amount as may be appropriate 
     in the case of an established pattern or practice of such 
     failures; or
       ``(iv) in the''.

     SEC. 413. RESTRICTIONS ON CERTAIN AFFINITY 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:
       ``(m) Restrictions on Issuance of Affinity Cards to 
     Students.--No credit card account under an open end credit 
     plan may be established by an individual who has not attained 
     the age of 21 as of the date of submission of the application 
     pursuant to any agreement relating to affinity cards, as 
     defined by the Board, between the creditor and an institution 
     of higher education, as defined in section 101(a) of the 
     Higher Education Act of 1965 (20 U.S.C. 1001(a)), unless the 
     requirements of section 127(c)(6) are met with respect to the 
     obliger.''.

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