[Congressional Record Volume 154, Number 113 (Thursday, July 10, 2008)]
[Senate]
[Pages S6572-S6581]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. DODD (for himself, Mr. Levin, Mr. Menendez, Mr. Reed, Mr. 
        Tester, Mrs. McCaskill, Mr. Akaka, Mr. Casey, Mr. Obama, Mr. 
        Kerry, Mrs. Clinton, Mr. Sanders, and Mr. Whitehouse):
  S. 3252. 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, my friend and colleague from Michigan is 
here, as well, who has been deeply involved in the issue of credit 
cards and the problems that are occurring.
  I rise with my colleague Senator Levin to introduce legislation that 
would reform and prohibit credit card practices that harm rather than 
help American consumers and their families. The legislation is called 
the Credit Card Accountability, Responsibility and Disclosure Act, or 
the Credit CARD Act. It will, in my view, help bring an end to industry 
practices that candidly cost American families billions of dollars each 
and every year.
  I cannot think of a better time to introduce this much needed 
legislation. This Chamber will, in very short order this evening, or as 
late as tomorrow, pass legislation to address the most important issue 
confronting our Nation's economy and the financial stability of our 
citizens--the collapse of the subprime housing market and the credit 
crisis it has brought about.
  Unfortunately, far too many American families who are already being 
squeezed by the rising cost of food, oil, and gas, now find themselves 
forced to rely on short-term, high-interest credit card debt to finance 
life's daily necessities--including their mortgage payments--because of 
the ongoing credit crisis and a weak economy.
  That growing reliance was highlighted in a report released last week 
by the Federal Reserve. The Fed's study reported that in May, revolving 
consumer debt, which is primarily credit card debt, reached an all-time 
record high of slightly over $961 billion. That is a 7-percent increase 
in the last month alone, which is on top of a 7-percent increase last 
year, and a 6-percent increase in 2006. At this rate, revolving 
consumer debt in our country, which is again primarily credit card 
debt, will

[[Page S6573]]

reach $1 trillion by the Christmas season of this year.
  When I assumed the gavel of the Senate Banking Committee last 
January, one of the very first hearings I held was on the issue of 
credit card practices. At that hearing, I challenged card issuers, 
banks, and associations to stop engaging in practices that they were 
not prepared to defend before the committee.
  It was my hope that the hearing and that warning would encourage the 
credit card industry to go through a period of intense self-
examination. I had hoped the industry would scrutinize its practices 
and policies to ensure that credit was extended in the fairest and most 
transparent of terms to credit card customers. To be fair, some in the 
industry heeded that call. I applaud them and thank them for their 
efforts. Over the past year, a few credit card companies have 
voluntarily made changes to the way they do business, and many 
Americans have benefitted from those improvements.
  Regrettably, however, far too few embraced this call. Even more 
regrettably, some that have made voluntary changes are reconsidering 
those steps in the face of mounting pressure to find new streams of 
revenue and capital, and to compete in a market where other industry 
participants are not engaging in these reforms, as their subprime 
mortgage market-related losses continue to rise. The temptation to go 
back to older practices to increase revenue streams is there. 
Unfortunately, the use of confusing, misleading, and very predatory 
practices, in some cases, appears likely to remain the standard 
operating procedure for many in the credit card industry for the 
foreseeable future if we fail to act. The list of these troubling 
practices is lengthy: Charging predatory rates and fees; engaging in 
deceptive marketing to young people; practices such as universal 
default; double-cycle billing; retroactive interest rate increases; 
``any time, any reason'' repricing; and billings shenanigans--like 
shortening the period consumers have to pay their bills, or charging 
fees for payment by telephone--are just a few of the practices that 
could merit induction into a fairly crowded industry ``hall of shame.''
  Even the financial regulators, whom I have been openly critical of 
for lack of appropriate oversight and response throughout the subprime 
mortgage market crisis, have recognized the harm these sinister 
practices pose not only to credit card customers but to our economy as 
well. In May of this year, the Federal Reserve, the Office of Thrift 
Supervision, and the National Credit Union Administration proposed 
rules aimed at curbing some of the very practices I have identified. In 
my view, this joint rulemaking is an important step in providing needed 
consumer protections in some areas, including a ban on retroactive 
interest rates and rules on payment allocation. But the proposed rules 
fall far short in other important areas--failing to address issues 
including universal default, ``any time, any reason'' repricing, 
multiple over-limit fees, and youth marketing.
  These shortcomings underscore the need for the legislation Senator 
Levin and I will be talking about this evening.
  I want to make it very clear--and I know my colleague feels the same 
way--that we are not opposed to credit cards. They are very valuable, 
very useful tools for consumers. So this bill is not designed in any 
way to deprive consumers of the use of credit cards. That is not the 
issue. When provided on fair terms, and used wisely and responsibly, 
credit cards are a valuable financial tool for millions of our fellow 
citizens. They can help an individual to build his or her credit 
history and to better pursue his or her financial goal.
  But like many credit products, credit cards pose the potential to 
harm consumers as well as help consumers. Card companies have been far 
too apt to exploit the needs of consumers who are increasingly becoming 
``hooked on plastic.'' That potential to harm consumers has grown in 
recent years as credit card usage has risen. Let me share some numbers 
with you to give you some idea of what has happened in this explosion 
of credit card usage by Americans.
  Today, nearly 75 percent of American households have a credit card or 
a debit card, and 700 million credit cards are used to purchase in 
excess of $2.4 trillion in goods and services from over 7 million 
locations in the United States annually. In 1970, only about 16 percent 
of U.S. households used credit cards, and fewer than a million 
businesses accepted them.
  As Americans have become increasingly reliant on credit cards, credit 
card companies have become more and more innovative in finding ways to 
access their customers. Over $17 billion in credit card penalty fees 
have been charged to the American people--new fees--in the last 2 
years, since 2006. That is a tenfold increase from what was charged 10 
years ago. That is $17 billion in new penalties and fees since 2006. 
Credit card companies are turning to innovative ways to profit--
including at the gasoline pump. They are laying on fees to gas station 
owners for each credit card transaction made at the pump. At the very 
time they are watching the price of gasoline skyrocket, the credit card 
companies are gouging the people struggling to meet those fees. Again, 
card companies are laying on fees to gas station owners for each credit 
card transaction made at the pump--a charge that those owners 
immediately pass on to customers, increasing the cost of gas for 
drivers. In some places, these fees can add an average of 3 percent for 
each gasoline transaction.
  The combination of the growing needs for revolving debt and hidden 
fees charged by card companies is contributing to the avalanche of debt 
under which American consumers increasingly find themselves buried. 
Listen to this number, because this is the one that is stunning. To 
give you an idea of what has happened to the average family in this 
country with credit card balances, today the average household that 
carries a credit card balance owes close to $10,000 in revolving debt 
on their credit cards. The average family has a balance of $10,000 in 
revolving debt on their credit cards.
  That is a millstone around the neck of the average American and their 
families--families that are already struggling to make ends meet and 
are under pressure from rising gas prices, food prices, skyrocketing 
health care costs, and a mortgage crisis that has robbed many families 
of their home equity or, worse yet, their homes.
  That is why we are introducing the Credit CARD Act. This bill will 
help reform credit card practices that drag so many American families 
further and further into debt. It strengthens regulation and oversight 
of the credit card industry and prohibits the unfair and deceptive 
practices that in far too many instances work to harm, not help, a 
consumer's efforts to move up the economic ladder.
  Specifically, the CARD Act would prohibit the worst of the industry's 
practices, including imposition of excessive fees; retroactive rate 
increases; universal default; ``any time, any reason'' changes to 
credit card agreements; and unfair payment allocation.
  The bill also, importantly, contains a number of provisions aimed at 
protecting young consumers.
  This legislation builds on legislation I have introduced in previous 
Congresses. It also incorporates several key concepts included in the 
legislative proposals put forth by some of my colleagues, notably my 
colleague from Michigan, Senator Levin, and Senators Menendez, 
McCaskill, and Obama. Each is an important cosponsor of this 
legislation, as are Senators Reed of Rhode Island, Akaka, Tester, 
Clinton, Kerry, Sanders, Whitehouse, and Casey.
  This bill also has the support of a wide array of consumer advocates 
and labor organizations, including the Consumer Federation of America, 
Consumers Union, National Consumer Law Center, the National Council of 
La Raza, Service Employees International Union, the Center for 
Responsible Lending, U.S. PRIG, Consumer Action, Demos, Connecticut 
PRIG, and the National Association of Consumer Advocates.
  As policymakers, we should expect consumers will act responsibly when 
it comes to using credit cards, and that should be an important point 
to make. But we also expect no less when it comes to companies that 
issue these cards. They need to act responsibly, and they are not, in 
my view. The Credit CARD Act will help strike the

[[Page S6574]]

correct balance of responsibility between credit card users and the 
card issuers. And by striking that balance, it will help provide 
American consumers with a fair chance to secure economic security for 
them and their families.
  I thank Senator Levin and others--especially Senator Levin who 
already held hearings on this issue. We have talked about this at 
length over the years. We tried in other Congresses with very modest 
proposals to deal with some of these problems. We have always lost 
those battles. But I think the American consumers, regardless of their 
income, regardless of their social or economic status, feel very angry 
about what is happening to them. As a result, I think there is a 
growing opportunity for us to get something done on this issue.
  So while our focus today has been on foreclosure issues, the credit 
card problem in this country that so many Americans are facing is one 
that I think is ripe for congressional action. Our hope and intention 
is to bring a bill to the floor of this Chamber before we adjourn for 
the year to give our colleagues a chance to express themselves on this 
issue.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the text of the bill was ordered to be 
placed in the Record, as follows:

                                S. 3252

       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.

       (a) Short Title.--This Act may be cited as the ``Credit 
     Card Accountability Responsibility and Disclosure Act of 
     2008'' or the ``Credit CARD Act of 2008''.
       (b) Table of Contents.--The table of contents for this Act 
     is as follows:

Sec. 1. Short title; table of contents.
Sec. 2. Regulatory authority.

                      TITLE I--CONSUMER PROTECTION

Sec. 101. Prior notice of rate increases required.
Sec. 102. Freeze on interest rate terms and fees on canceled cards.
Sec. 103. Limits on fees and interest charges.
Sec. 104. Consumer right to reject card before notice is provided of 
              open account.
Sec. 105. Use of terms clarified.
Sec. 106. Application of card payments.
Sec. 107. Length of billing period.
Sec. 108. Prohibition on universal default and unilateral changes to 
              cardholder agreements.
Sec. 109. Enhanced penalties.
Sec. 110. Enhanced oversight.
Sec. 111. Clerical amendments.

                TITLE II--ENHANCED CONSUMER DISCLOSURES

Sec. 201. Payoff timing disclosures.
Sec. 202. Requirements relating to late payment deadlines and 
              penalties.
Sec. 203. Renewal disclosures.

                TITLE III--PROTECTION OF YOUNG CONSUMERS

Sec. 301. Extensions of credit to underage consumers.
Sec. 302. Restrictions on certain affinity cards.
Sec. 303. Protection of young consumers from prescreened credit offers.

                 TITLE IV--FEDERAL AGENCY COORDINATION

Sec. 401. Inclusion of all Federal banking agencies.

                   TITLE V--MISCELLANEOUS PROVISIONS

Sec. 501. Study and report.
Sec. 502. Credit Card Safety Rating System Commission.

     SEC. 2. REGULATORY AUTHORITY.

       The Board of Governors of the Federal Reserve System (in 
     this Act referred to as the ``Board'') may issue such rules 
     and publish such model forms as it considers necessary to 
     carry out this Act and the amendments made by this Act.

                      TITLE I--CONSUMER PROTECTION

     SEC. 101. 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:
       ``(i) 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 (other than an increase due to the 
     expiration of any introductory percentage rate, 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 earlier than 45 days after the date on 
     which the obligor receives notice of such increase; or
       ``(B) may apply to any outstanding balance of credit under 
     such plan, as of the effective date of the increase required 
     under subparagraph (A).
       ``(2) Notice of right to cancel.--The notice referred to in 
     paragraph (1) 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. 102. 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) In general.--If an obligor under an open end consumer 
     credit plan closes or cancels a credit card account, the 
     repayment of the outstanding balance after the cancellation 
     shall be subject to all terms and conditions in effect for 
     the obligor immediately before the card was closed or 
     cancelled, including the annual percentage rate and the 
     minimum payment terms in effect immediately prior to such 
     closure or cancellation.
       ``(2) Rule of construction.--Closure or cancellation of an 
     account by the obligor shall not constitute a default under 
     an existing cardholder agreement, and shall not trigger an 
     obligation to immediately repay the obligation in full.''.

     SEC. 103. LIMITS ON FEES AND INTEREST CHARGES.

       Section 127 of the Truth in Lending Act (15 U.S.C. 1637) is 
     amended by adding at the end the following:
       ``(k) Prohibition on Penalties for On-Time Payments.--If an 
     open end consumer credit plan provides a time period within 
     which an obligor may repay any portion of the credit extended 
     without incurring an interest charge, and the obligor repays 
     all or a portion of such credit within the specified time 
     period, the creditor may not impose or collect an interest 
     charge on the portion of the credit that was repaid within 
     the specified time period.
       ``(l) Opt-Out of Creditor Authorization of Over-the-Limit 
     Transactions if Fees Are Imposed.--
       ``(1) In general.--In the case of any credit card account 
     under an open end consumer credit plan under which an over-
     the-limit-fee may be imposed by the creditor for any 
     extension of credit in excess of the amount of credit 
     authorized to be extended under such account, the consumer 
     may elect to prohibit the creditor from completing any over-
     the-limit transaction that will result in a fee or constitute 
     a default under the credit agreement, by notifying the 
     creditor of such election in accordance with paragraph (2).
       ``(2) Notification by consumer.--A consumer shall notify a 
     creditor under paragraph (1)--
       ``(A) through the notification system maintained by the 
     creditor under paragraph (4); or
       ``(B) by submitting to the creditor a signed notice of 
     election, by mail or electronic communication, on a form 
     issued by the creditor for purposes of this subparagraph.
       ``(3) Effectiveness of election.--An election by a consumer 
     under paragraph (1) shall be effective beginning 3 business 
     days after the date on which the consumer notifies the 
     creditor in accordance with paragraph (2), and shall remain 
     effective until the consumer revokes the election.
       ``(4) Notification system.--Each creditor that maintains 
     credit card accounts under an open end consumer credit plan 
     shall establish and maintain a notification system, including 
     a toll-free telephone number, Internet address, and Worldwide 
     Web site, which permits any consumer whose credit card 
     account is maintained by the creditor to notify the creditor 
     of an election under this subsection, in accordance with 
     paragraph (2).
       ``(5) Annual notice to consumers of availability of 
     election.--In the case of any credit card account under an 
     open end consumer credit plan, the creditor shall include a 
     notice, in clear and conspicuous language, of the 
     availability of an election by the consumer under this 
     paragraph as a means of avoiding over-the-limit fees and a 
     higher amount of indebtedness, and the method for providing 
     such election--
       ``(A) in the periodic statement required under subsection 
     (b) with respect to such account at least once each calendar 
     year; and
       ``(B) in any such periodic statement which includes a 
     notice of the imposition of an over-the-limit fee during the 
     period covered by the statement.
       ``(6) No fees if consumer has made an election.--If a 
     consumer has made an election under paragraph (1), no over-
     the-limit fee may be imposed on the account for any reason 
     that has caused the outstanding balance in the account to 
     exceed the credit limit.
       ``(m) Over-the-Limit Fee Restrictions.--With respect to a 
     credit card account under an open end consumer credit plan, 
     an over-the-limit fee, as described in subsection 
     (c)(1)(B)(iii)--
       ``(1) may be imposed on the account only when an extension 
     of credit obtained by the obligor causes the credit limit on 
     such account to be exceeded, and may not be imposed when such 
     credit limit is exceeded due to a fee or interest charge; and
       ``(2) may be imposed only once during a billing cycle if, 
     on the last day of such billing cycle, the credit limit on 
     the account is exceeded, and may not be imposed in a 
     subsequent billing cycle with respect to such excess credit, 
     unless the obligor has obtained an additional extension of 
     credit in excess of such credit limit during such subsequent 
     cycle.

[[Page S6575]]

       ``(n) No Interest Charges on Fees.--With respect to a 
     credit card account under an open end consumer credit plan, 
     if the creditor imposes a transaction fee on the obligor, 
     including a cash advance fee, late fee, over-the-limit fee, 
     or balance transfer fee, the creditor may not impose or 
     collect interest with respect to such fee amount.
       ``(o) Limits on Certain Fees.--
       ``(1) No fee to pay a billing statement.--With respect to a 
     credit card account under an open end consumer credit plan, 
     the creditor may not impose a separate fee to allow the 
     obligor to repay an extension of credit or finance charge, 
     whether such repayment is made by mail, electronic transfer, 
     telephone authorization, or other means.
       ``(2) Reasonable fees for violations.--The amount of any 
     fee or charge that a card issuer may impose in connection 
     with any omission with respect to, 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, shall be reasonably 
     related to the cost to the card issuer of such omission or 
     violation.
       ``(3) Reasonable currency exchange fee.--With respect to a 
     credit card account under an open end consumer credit plan, 
     the creditor may impose a fee for exchanging United States 
     currency with foreign currency in an account transaction, 
     only if--
       ``(A) such fee reasonably reflects the costs incurred by 
     the creditor to perform such currency exchange;
       ``(B) the creditor discloses publicly its method for 
     calculating such fee; and
       ``(C) the primary Federal regulator of such creditor 
     determines that the method for calculating such fee complies 
     with this paragraph.''.

     SEC. 104. CONSUMER RIGHT TO REJECT CARD BEFORE NOTICE IS 
                   PROVIDED OF OPEN ACCOUNT.

       Section 127 of the Truth in Lending Act (15 U.S.C. 1637) is 
     amended by adding at the end the following:
       ``(p) Consumer Right To Reject Card Before Notice of New 
     Account Is Provided to Consumer Reporting Agency.--A creditor 
     may not furnish any information to a consumer reporting 
     agency (as defined in section 603) concerning a newly opened 
     credit card account under an open end consumer credit plan 
     until the credit card has been used or activated by the 
     consumer.''.

     SEC. 105. USE OF TERMS CLARIFIED.

       Section 127 of the Truth in Lending Act (15 U.S.C. 1637) is 
     amended by adding at the end the following:
       ``(q) Use of Terms.--The following requirements shall apply 
     with respect to the terms of any credit card account under 
     any open end consumer credit plan:
       ``(1) Fixed rate.--The term `fixed', when appearing in 
     conjunction with a reference to the annual percentage rate or 
     interest rate applicable with respect to such account, may 
     only be used to refer to an annual percentage rate or 
     interest rate that will not change or vary for any reason 
     over the period specified clearly and conspicuously in the 
     terms of the account.
       ``(2) Prime rate.--The term `prime rate', when appearing in 
     any agreement or contract for any such account, may only be 
     used to refer to the bank prime rate published in the Federal 
     Reserve Statistical Release on selected interest rates (daily 
     or weekly), and commonly referred to as the `H.15 release' 
     (or any successor publication).''.

     SEC. 106. APPLICATION OF CARD PAYMENTS.

       Section 164 of the Truth in Lending Act (15 U.S.C. 1666c) 
     is amended--
       (1) by striking the section heading and all that follows 
     through ``Payments'' and inserting the following:

     ``Sec. 164. Prompt and fair crediting of payments

       ``(a) In General.--Payments'';
       (2) by inserting ``, by 5:00 p.m. on the date on which such 
     payment is due,'' after ``in readily identifiable form'';
       (3) by striking ``manner, location, and time'' and 
     inserting ``manner, and location''; and
       (4) by adding at the end the following:
       ``(b) Application of Payments.--Upon receipt of a payment 
     from a cardholder, the card issuer shall--
       ``(1) apply the payment first to the card balance bearing 
     the highest rate of interest, and then to each successive 
     balance bearing the next highest rate of interest, until the 
     payment is exhausted; and
       ``(2) after complying with paragraph (1), apply the payment 
     in a way that minimizes the amount of any finance charge to 
     the account.
       ``(c) Changes by Card Issuer.--If a card issuer makes a 
     material change in the mailing address, office, or procedures 
     for handling cardholder payments, and such change causes a 
     material delay in the crediting of a cardholder payment made 
     during the 60-day period following the date on which such 
     change took effect, the card issuer may not impose any late 
     fee or finance charge for a late payment on the credit card 
     account to which such payment was credited.
       ``(d) Presumption of Timely Payment.--Any evidence provided 
     by a consumer in the form of a receipt from the United States 
     Postal Service or other common carrier indicating that a 
     payment on a credit card account was sent to the card issuer 
     not less than 7 days before the due date contained in the 
     periodic statement for such payment shall create a 
     presumption that such payment was made by the due date, which 
     may be rebutted by the creditor for fraud or dishonesty on 
     the part of the consumer with respect to the mailing date.''.

     SEC. 107. LENGTH OF BILLING PERIOD.

       Section 163(a) of the Truth in Lending Act (15 U.S.C. 
     1668(a)) is amended by striking ``mailed at least fourteen 
     days prior'' and inserting ``mailed at least 21 days prior''.

     SEC. 108. PROHIBITION ON UNIVERSAL DEFAULT AND UNILATERAL 
                   CHANGES TO CARDHOLDER 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 173; and
       (2) by inserting after section 170 the following:

     ``SEC. 171. LIMITS ON INTEREST RATE INCREASES.

       ``(a) In General.--No card issuer may increase any annual 
     percentage rate, fee, or finance charge applicable to a 
     credit card account under an open end consumer credit plan, 
     or terminate early a lower introductory rate, fee, or charge, 
     except as permitted under this section.
       ``(b) Exceptions.--The limitation under subsection (a) 
     shall not apply to--
       ``(1) an increase due to the scheduled expiration of an 
     introductory term;
       ``(2) an increase in a variable annual percentage rate, 
     fee, or finance charge in accordance with a credit card 
     agreement that provides for changes according to an index or 
     formula;
       ``(3) an increase due to a specific, material action or 
     omission of a consumer in violation of an agreement that is 
     directly related to such account and that is specified in the 
     contract or agreement as grounds for an increase, except 
     that--
       ``(A) the creditor may not take into account information 
     not directly related to the account, including adverse 
     information concerning the consumer, information in any 
     consumer report, or changes in the credit score of the 
     consumer; and
       ``(B) an increase described in this paragraph shall 
     terminate not later than 6 months after the date on which it 
     is imposed, if the consumer commits no further violations; or
       ``(4) a change that takes effect upon renewal of the card 
     in accordance with section 172.
       ``(c) Map to Lower Rate.--
       ``(1) In general.--A card issuer that increases an annual 
     percentage rate, fee, or finance charge pursuant to 
     subsection (b)(3) shall include, together with the notice of 
     such increase under section 127(i), a statement, provided in 
     a clear and conspicuous manner--
       ``(A) of the discrete, specific action or omission of the 
     consumer on which the increase was based; and
       ``(B) that the increase will terminate in 6 months if the 
     consumer does not commit further violations.
       ``(2) Board authority.--The Board may, by rule, provide for 
     exceptions to the requirements of subsection (b)(3)(B), if 
     the Board determines that there are other appropriate factors 
     that creditors may consider in determining the appropriate 
     annual percentage rate for particular consumers.

     ``SEC. 172. UNILATERAL CHANGES IN CREDIT CARD AGREEMENT 
                   PROHIBITED.

       ``A card issuer may not amend or change the terms of a 
     credit card contract or agreement under an open end consumer 
     credit plan, until after the date on which the credit card 
     will expire if not renewed.''.
       (b) Clerical Amendment.--The table of sections for chapter 
     4 of the Truth in Lending Act is amended by striking the item 
     relating to section 171 and inserting the following:

``171. Universal defaults prohibited.
``172. Unilateral changes in credit card agreement prohibited.
``173. Applicability of State laws.''.

     SEC. 109. ENHANCED PENALTIES.

       Section 130(a)(2)(A) of the Truth in Lending Act (15 U.S.C. 
     1640(a)(2)(A)) 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 consumer 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. 110. ENHANCED OVERSIGHT.

       (a) In General.--Section 127 of the Truth in Lending Act 
     (15 U.S.C. 1637) is amended by adding at the end the 
     following:
       ``(s) Evaluation of Credit Card Policies and Procedures.--
       ``(1) In general.--In connection with its examination of a 
     credit card issuer under its supervision, each agency 
     referred to in paragraphs (1), (2), and (3) of section 108(a) 
     shall conduct, as appropriate, an evaluation of the credit 
     card policies and procedures used by such card issuer to 
     ensure compliance with this section and sections 163, 164, 
     171, and 172. Such agency shall promptly require the card 
     issuer to take any corrective action needed to address any 
     violations of any such section.
       ``(2) Annual reports to congress.--Each year, each agency 
     referred to in subsections (a) and (c) of section 108 shall 
     submit a report to Congress concerning the administration of 
     its functions under this section, including such 
     recommendations as the agency deems necessary or appropriate. 
     Each such

[[Page S6576]]

     report shall include an assessment of the extent to which 
     compliance with the requirements of this section is being 
     achieved and a summary of the enforcement actions taken by 
     the agency assigned administrative enforcement 
     responsibilities under subsections (a) and (c) of section 
     108.''.
       (b) Strengthened Credit Card Information Collection.--
     Section 136(b) of the Truth in Lending Act (15 U.S.C. 
     1646(b)) is amended--
       (1) in paragraph (1)--
       (A) by striking ``The Board shall'' and inserting the 
     following:
       ``(A) In general.--The Board shall''; and
       (B) by adding at the end the following:
       ``(B) Information to be included.--The information under 
     subparagraph (A) shall include, as of a date designated by 
     the Board--
       ``(i) a list of each type of transaction or event for which 
     one or more of the card issuers has imposed a separate 
     interest rate upon a cardholder, including purchases, cash 
     advances, and balance transfers;
       ``(ii) for each type of transaction or event identified 
     under clause (i)--

       ``(I) each distinct interest rate charged by the card 
     issuer to a cardholder, as of the designated date;
       ``(II) the number of cardholders to whom each such interest 
     rate was applied during the calendar month immediately 
     preceding the designated date, and the total amount of 
     interest charged to such cardholders at each such rate during 
     such month;
       ``(III) the number of cardholders who are paying the stated 
     default annual percentage rate applicable in cases in which 
     the account is past due or the account holder is otherwise in 
     violation of the terms of the account agreement; and
       ``(IV) the number of cardholders who are paying above such 
     stated default annual percentage rate;

       ``(iii) a list of each type of fee that one or more of the 
     card issuers has imposed upon a cardholder as of the 
     designated date, including any fee imposed for obtaining a 
     cash advance, making a late payment, exceeding the credit 
     limit on an account, making a balance transfer, or exchanging 
     United States dollars for foreign currency;
       ``(iv) for each type of fee identified under clause (iii), 
     the number of cardholders upon whom the fee was imposed 
     during the calendar month immediately preceding the 
     designated date, and the total amount of fees imposed upon 
     cardholders during such month;
       ``(v) the total number of cardholders that incurred any 
     interest charge or any fee during the calendar month 
     immediately preceding the designated date; and
       ``(vi) any other information related to interest rates, 
     fees, or other charges that the Board deems of interest.''; 
     and
       (2) by adding at the end the following:
       ``(5) Report to congress.--The Board shall, on an annual 
     basis, transmit to Congress and make public a report 
     containing an assessment by the Board of the profitability of 
     credit card operations of depository institutions. Such 
     report shall include estimates by the Board of the 
     approximate, relative percentage of income derived by such 
     operations from--
       ``(A) the imposition of interest rates on cardholders, 
     including separate estimates for--
       ``(i) interest with an annual percentage rate of less than 
     25 percent; and
       ``(ii) interest with an annual percentage rate equal to or 
     greater than 25 percent;
       ``(B) the imposition of fees on cardholders;
       ``(C) the imposition of fees on merchants; and
       ``(D) any other material source of income, while specifying 
     the nature of that income.''.

     SEC. 111. CLERICAL AMENDMENTS.

       Section 103(i) of the Truth in Lending Act (15 U.S.C. 
     1602(i)) is amended--
       (1) by striking ``term'' and all that follows through 
     ``means'' and inserting the following: ``terms `open end 
     credit plan' and `open end consumer credit plan' mean''; and
       (2) in the second sentence, by inserting ``or open end 
     consumer credit plan'' after ``credit plan'' each place that 
     term appears.

                TITLE II--ENHANCED CONSUMER DISCLOSURES

     SEC. 201. PAYOFF TIMING DISCLOSURES.

       (a) In General.--Section 127(b)(11) of the Truth in Lending 
     Act (15 U.S.C. 1637(b)(11)) is amended to read as follows:
       ``(11)(A) A written statement in the following form: 
     `Minimum Payment Warning: Making only the minimum payment 
     will increase the interest rate you pay and the time it takes 
     to repay your balance.'.
       ``(B) Repayment information that would apply to the 
     outstanding balance of the consumer under the credit plan, 
     including--
       ``(i) 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;
       ``(ii) 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
       ``(iii) the monthly payment amount that would be required 
     for the consumer to eliminate the outstanding balance in 36 
     months, if no further advances are made, and the total cost 
     to the consumer, including interest and principal payments, 
     of paying that balance in full if the consumer pays the 
     balance over 36 months.
       ``(C)(i) Subject to clause (ii), in making the disclosures 
     under subparagraph (B), the creditor shall apply the interest 
     rate or rates 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.
       ``(D) All of the information described in subparagraph (B) 
     shall--
       ``(i) be disclosed in the form and manner which the Board 
     shall prescribe, by regulation, and in a manner that avoids 
     duplication; 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.
       ``(E) In the regulations prescribed under subparagraph (D), 
     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.
       ``(F) In prescribing the form of the table under 
     subparagraph (E), 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 paragraph; 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 (B).
       ``(G) In prescribing the form of the table under 
     subparagraph (D), the Board shall employ terminology which is 
     different than the terminology which is employed in 
     subparagraph (B), if such terminology is more 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 any of 
     paragraphs (4) through (13) 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 
     any of paragraphs (4) through (13) of section 127(b).''.

     SEC. 202. REQUIREMENTS RELATING TO LATE PAYMENT DEADLINES AND 
                   PENALTIES.

       Section 127(b)(12) of the Truth in Lending Act (15 U.S.C. 
     1637(b)(12)) is amended to read as follows:
       ``(12) Requirements relating to late payment deadlines and 
     penalties.--
       ``(A) 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--
       ``(i) 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; and
       ``(ii) 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 a statement to 
     that effect.
       ``(B) 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 applicable to 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 under subparagraph (A) 
     of the date on which payment is due under the terms of the 
     account.
       ``(C) Requirements relating to postmark date.--
       ``(i) In general.--The date included in a periodic 
     statement pursuant to subparagraph (A)(ii) with regard to the 
     postmark on a payment shall allow, in accordance with 
     regulations prescribed by the Board under clause (ii), a 
     reasonable time for the consumer to make the payment and a 
     reasonable time for the delivery of the payment by the due 
     date.
       ``(ii) 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

[[Page S6577]]

     clause (i), after consultation with the Postmaster General of 
     the United States and representatives of consumer and trade 
     organizations.
       ``(D) Payments at local branches.--If the creditor, in the 
     case of a credit card account referred to in subparagraph 
     (A), is a financial institution which maintains branches or 
     offices at which payments on any such account are accepted 
     from the obligor in person, the date on which the obligor 
     makes a payment on the account at such branch or office shall 
     be considered to be 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.''.

     SEC. 203. RENEWAL DISCLOSURES.

       Section 127(d) of the Truth in Lending Act (15 U.S.C. 
     1637(d)) is amended--
       (1) by striking paragraph (2);
       (2) by redesignating paragraph (3) as paragraph (2); and
       (3) in paragraph (1), by striking ``Except as provided in 
     paragraph (2), a card issuer'' and inserting the following: 
     ``A card issuer that has changed or amended any term of the 
     account since the last renewal or''.

                TITLE III--PROTECTION OF YOUNG CONSUMERS

     SEC. 301. EXTENSIONS OF CREDIT TO UNDERAGE CONSUMERS.

       Section 127(c) of the Truth in Lending Act (15 U.S.C. 
     1637(c)) is amended by adding at the end the following:
       ``(8) Applications from underage consumers.--
       ``(A) Prohibition on issuance.--No credit card may be 
     issued to, or open end consumer credit plan established by or 
     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 any 
     other individual over the age of 21 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) completion of a certified financial literacy or 
     financial education course designed for young consumers.
       ``(C) Certified financial literacy or education courses for 
     young consumers.--
       ``(i) In general.--The Secretary of the Treasury, acting 
     through the Office of Financial Literacy and Education (in 
     this subparagraph referred to as `OFE'), shall make and 
     publish a list of all courses and programs that have been 
     certified for financial literacy or financial education 
     purposes appropriate for young consumers. When developing the 
     certification criteria the OFE shall take into account the 
     course or program's--

       ``(I) proven track record in producing changed consumer 
     behavior; and
       ``(II) use of practices or curricula that have been shown 
     to change consumer behavior.

       ``(ii) Explicit eligibility.--Courses taken that are 
     offered or required by colleges, universities, and high 
     schools may be certified by the OFE for purposes of this 
     subparagraph, as well as other programs and courses. The OFE 
     shall make an effort to provide certification to all types of 
     programs and courses, including those that are conducted by 
     nonprofit, faith-based, or for-profit institutions and State 
     and local governments.
       ``(iii) Select programs.--From among those courses or 
     programs that are certified by the OFE under this 
     subparagraph, the OFE may designate a select number of 
     programs or courses that produce results that are far better 
     than those produced by other certified programs as `highly 
     certified'.''.

     SEC. 302. 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:
       ``(t) Restrictions on Issuance of Affinity Cards to 
     Students.--No credit card account under an open end consumer 
     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 direct or indirect 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 subsection 
     (c)(8) are met with respect to the obligor.''.

     SEC. 303. 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 the following: ``; and
       ``(iv) 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 consumer reporting 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--
       ``(i) shall be effective 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) shall be effective 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 the consumer 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.''.

                 TITLE IV--FEDERAL AGENCY COORDINATION

     SEC. 401. INCLUSION OF ALL FEDERAL BANKING AGENCIES.

       (a) In General.--Section 18(f)(1) of the Federal Trade 
     Commission Act (15 U.S.C. 57a(f)(1)) is amended in the second 
     sentence--
       (1) by striking ``The Board of Governors of the Federal 
     Reserve System (with respect to banks) and the Federal Home 
     Loan Bank Board (with respect to savings and loan 
     institutions described in paragraph (3)) and the National 
     Credit Union Administration Board (with respect to Federal 
     credit unions described in paragraph (4))'' and inserting 
     ``Each appropriate Federal banking agency''; and
       (2) by inserting ``in consultation with the Commission'' 
     after ``shall prescribe regulations''.
       (b) FTC Concurrent Rulemaking.--Section 18(f)(1) of the 
     Federal Trade Commission Act (15 U.S.C. 57a(f)(1)) is amended 
     by inserting after the second sentence the following: 
     ``Notwithstanding any other provision of this section, 
     whenever such agencies commence such a rulemaking proceeding, 
     the Commission, with respect to the entities within its 
     jurisdiction under this Act, may commence a rulemaking 
     proceeding and prescribe regulations in accordance with 
     section 553 of title 5, United States Code. The Commission, 
     the Federal banking agencies, and the National Credit Union 
     Administration Board shall consult and coordinate with each 
     other so that the regulations prescribed by each such agency 
     are consistent with and comparable to the regulations 
     prescribed by each other such agency, to the extent 
     practicable.''.
       (c) Preservation of State Law.--Section 18(f)(6) of the 
     Federal Trade Commission Act (15 U.S.C. 57a(f)(6)) is amended 
     to read as follows:
       ``(6) Notwithstanding any other provision of this 
     subsection or any other provision of law, regulations 
     promulgated under this subsection shall be considered 
     supplemental to State laws governing unfair and deceptive 
     acts and practices, and may not be construed to preempt any 
     provision of State law that provides equal or greater 
     protections.''.
       (d) Gao Study and Report.--Not later than 18 months after 
     the date of enactment of this Act, the Comptroller General 
     shall transmit to Congress a report on the status of 
     regulations of the Federal banking agencies and the National 
     Credit Union Administration regarding unfair and deceptive 
     acts or practices by depository institutions and Federal 
     credit unions.
       (e) Technical and Conforming Amendments.--Section 18(f) of 
     the Federal Trade Commission Act (15 U.S.C. 57a(f)) is 
     amended--
       (1) in the subsection heading, by striking ``Board'' and 
     all that follows through ``Administration'' and inserting 
     ``Appropriate Federal Banking Agencies''
       (2) in paragraph (1), in the first sentence--
       (A) by striking ``banks or savings and loan institutions 
     described in paragraph (3), each

[[Page S6578]]

     agency specified in paragraph (2) or (3) of this subsection 
     shall establish'' and inserting ``depository institutions or 
     Federal credit unions, each appropriate Federal banking 
     agency shall establish''; and
       (B) by striking ``banks or savings and loan institutions 
     described in paragraph (3), subject to its jurisdiction'' and 
     inserting ``the depository institutions or Federal credit 
     unions subject to the jurisdiction of such appropriate 
     Federal banking agency'';
       (3) in paragraph (1), in the final sentence--
       (A) by striking ``each such Board'' and inserting ``each 
     such appropriate Federal banking agency'';
       (B) by striking ``banks or savings and loan institutions 
     described in paragraph (3), or Federal credit unions 
     described in paragraph (4), as the case may be,'' each place 
     that term appears and inserting ``depository institutions or 
     Federal credit unions subject to the jurisdiction of such 
     appropriate Federal banking agency'';
       (C) by striking ``(A) any such Board'' and inserting ``(A) 
     any such appropriate Federal banking agency''; and
       (D) by striking ``with respect to banks, savings and loan 
     institutions'' and inserting ``with respect to depository 
     institutions'';
       (4) in paragraph (2)(C), by inserting ``than'' after 
     ``(other'';
       (5) in paragraph (3), by inserting ``by the Director of the 
     Office of Thrift Supervision'' before the period at the end;
       (6) in paragraph (4), by inserting ``by the National Credit 
     Union Administration'' before the period at the end;
       (7) in paragraph (6), by striking ``the Board of Governors 
     of the Federal Reserve System'' and inserting ``any Federal 
     banking agency or the National Credit Union Administration 
     Board''; and
       (8) by adding at the end the following new paragraph:
       ``(8) For purposes of this subsection--
       ``(A) the term `appropriate Federal banking agency' has the 
     same meaning as in section 3 of the Federal Deposit Insurance 
     Act, and includes the National Credit Union Administration 
     Board with respect to Federal credit unions;
       ``(B) the terms `depository institution' and `Federal 
     banking agency' have the same meanings as in section 3 of the 
     Federal Deposit Insurance Act (12 U.S.C. 1813); and
       ``(C) the term `Federal credit union' has the same meaning 
     as in section 101 of the Federal Credit Union Act (12 U.S.C. 
     1752).''.

                   TITLE V--MISCELLANEOUS PROVISIONS

     SEC. 501. STUDY AND REPORT.

       (a) Study Required.--The Comptroller General (in this 
     section referred to as the ``Comptroller'') shall conduct a 
     study on interchange fees and their effects on consumers and 
     merchants. The Comptroller shall review--
       (1) the extent to which interchange fees are required to be 
     disclosed to consumers and merchants, and how such fees are 
     overseen by the Federal banking agencies or other regulators;
       (2) the ways in which the interchange system affects the 
     ability of merchants of varying size to negotiate pricing 
     with card associations and banks;
       (3) the costs and factors incorporated into interchange 
     fees, such as advertising, bonus miles, and rewards, how such 
     costs and factors vary among cards; and
       (4) the consequences of the undisclosed nature of 
     interchange fees on merchants and consumers with regard to 
     prices charged for goods and services.
       (b) Report Required.--Not later than 180 days after the 
     date of enactment of this Act, the Comptroller shall submit a 
     report to the Committee on Banking, Housing, and Urban 
     Affairs of the Senate and the Committee on Financial Services 
     of the House of Representatives containing a detailed summary 
     of the findings and conclusions of the study required by this 
     section, together with such recommendations for legislative 
     or administrative actions as may be appropriate.

     SEC. 502. CREDIT CARD SAFETY RATING SYSTEM COMMISSION STUDY.

       (a) Definition.--In this section, the term ``safety'' 
     refers to the amount of risk to cardholders that results from 
     credit card practices and terms in credit card agreements 
     that are either not well understood by consumers, or are not 
     easily understood, or could have an adverse financial effect 
     on consumers, other than interest rates, periodic fees, or 
     rewards.
       (b) Establishment of Safety Rating System.--The Comptroller 
     General of the United States (in this section referred to as 
     the ``Comptroller'') shall establish an entity to be known as 
     the ``Credit Card Safety Rating System Commission'' (in this 
     section referred to as the ``Commission'').
       (c) Duties.--The duties of the Commission shall be--
       (1) to determine if a rating system to allow cardholders to 
     quickly assess the level of safety of credit card agreements 
     would be beneficial to consumers;
       (2) to assess the impact on credit card transparency and 
     consumer safety of various rating system policy options, 
     including--
       (A) the use of a 5-star rating system to reflect the 
     relative safety of card terms, marketing and customer service 
     practices, and product features;
       (B) making the use of the system mandatory for all cards;
       (C) requiring a graphic display of rating 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;
       (D) requiring an annual review of the safety rating system, 
     to determine whether the point system is effectively aiding 
     consumers and encouraging transparent competition and 
     fairness to consumers; and
       (E) requiring consumer access to ratings through public 
     website and other outreach programs
       (3) if it is deemed beneficial, to make recommendations to 
     Congress concerning how such a system should be devised;
       (4) to study the effects of such 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 
     rating system; and
       (5) by not later than March 1 of the second year after the 
     date of enactment of this Act, to submit a report to Congress 
     containing detailed results and recommendations, including 
     how to create such system, if creating such system is 
     recommended.
       (d) Membership.--
       (1) Number and appointment.--The Commission shall be 
     composed of 15 members appointed by the Comptroller, in 
     accordance with this section.
       (2) Qualifications.--
       (A) In general.--The membership of the Commission, subject 
     to subparagraph (B), 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; and
       (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 
     comprised of--
       (i) 4 representatives from consumer groups;
       (ii) 4 representatives from credit card issuers or banks;
       (iii) 7 representatives from nonprofit research entities or 
     nonpartisan experts in banking and credit cards; and
       (iv) not fewer than 1 of the members described in clauses 
     (i) through (iii) who represents each of--

       (I) the elderly;
       (II) economically disadvantaged consumers;
       (III) racial or ethnic minorities; and
       (IV) students and minors.

       (C) Ethics disclosures.--The Comptroller 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 
     in the same manner 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) Chairperson; vice chairperson.--The Comptroller 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 may designate 
     another member for the remainder of the term of that member.
       (4) Terms.--Members of the Commission shall be appointed 
     for the life of the Commission. Any vacancies shall not 
     affect the power and duties of the Commission but shall be 
     filled in the same manner as the original appointment.
       (5) 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.
       (6) Meetings.--The Commission shall meet at the call of the 
     Chairperson.
       (e) Director and Staff; Experts and Consultants.--Subject 
     to such review as the Comptroller 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

[[Page S6579]]

       (6) prescribe such rules and regulations as it determines 
     necessary with respect to the internal organization and 
     operation of the Commission.
       (f) 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 information.--The Comptroller 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.
       (g) Administrative and Support Services.--The Comptroller 
     shall provide such administrative and support services to the 
     Commission as may be necessary to carry out this section.
       (h) Authorization of Appropriations.--There are authorized 
     to be appropriated to the Commission such sums as may be 
     necessary to carry out this section.

  Mr. LEVIN. Mr. President, I know the Senator from Connecticut has to 
leave, but before he does leave the floor, I congratulate and commend 
him on this bill. He has put a huge amount of effort into this issue 
over the years. This bill reflects that effort. His leadership in this 
matter will make a huge difference in getting this bill enacted. I 
thank him for that leadership and thank him for this bill.
  Mr. DODD. I thank my colleague.
  Mr. LEVIN. Mr. President, the legislation we are introducing today is 
going to combat credit card abuses that have been hurting American 
consumers for far too long. With all the economic hardship facing 
Americans today, from falling home prices to rising gasoline and food 
costs, it is more important than ever for Congress to act now to stop 
credit card abuses and protect American families from unfair credit 
card practices.
  Credit card companies regularly use a host of unfair practices. They 
hike the interest rates of cardholders who pay on time and comply with 
their credit card agreements. They impose interest rates as high as 32 
percent. They charge interest for debt that was paid on time. They 
apply higher interest rates retroactively to existing credit card debt. 
They pile on excessive fees and then have the gall to charge interest 
on those fees. They apply consumer payments first to the debt with the 
least expensive interest rate, saving the higher interest rate debt to 
be paid off last. And they engage in a number of other unfair practices 
that are burying American consumers in a mountain of debt. It is long 
past time to enact legislation to protect American consumers.
  The bill we are introducing today will not only help protect 
consumers, but it will also help ensure that credit card companies 
willing to do the right thing are not put at a competitive disadvantage 
by companies continuing unfair practices.
  Some argue that Congress does not need to ban unfair credit card 
practices. They contend that improved disclosure alone will empower 
consumers to seek out better deals. Sunlight can be a powerful 
disinfectant, but credit cards have become such complex financial 
products that even improved disclosure will not be enough to curb the 
abuses. Some practices are so confusing that consumers cannot easily 
understand them. Additionally, better disclosure does not always lead 
to greater market competition, especially when essentially an entire 
industry is using and benefiting from practices that unfairly hurt 
consumers.
  Credit card issuers like to say they are engaged in a risky business, 
lending unsecured debt to millions of consumers. But it is clear they 
have learned to price credit card products in ways that produce 
enormous profit. For the last decade, credit card issuers have 
maintained their position as the most profitable sector in the consumer 
lending field and reported consistently higher rates of return than 
commercial banks.
  In 2006, Americans used 700 million credit cards to buy about $2 
trillion in goods and services. The average American family now has 
five credit cards. Credit cards are being used to pay for groceries, 
mortgage payments, and even taxes, and they are saddling U.S. 
consumers, from college students to seniors, with a mountain of debt. 
The latest figures show that U.S. credit card debt is now approaching 
$1 trillion. These consumers are routinely being subjected to unfair 
practices that squeeze them for ever more money, sinking them further 
into debt.
  While the remaining legislative days in this Congress are dwindling, 
there is still time to enact strong credit card reform legislation. Too 
many American families are being hurt by too many unfair credit card 
practices to delay action any longer.
  I commend Senator Dodd for tackling credit card reform. I look 
forward to Congress taking the steps needed this session to ban unfair 
practices that are causing so much pain and financial damage to 
American families today.
  Credit card abuse is a topic, as Senator Dodd mentioned, with which I 
have been deeply involved over the past several years through a number 
of investigations in the Permanent Subcommittee on Investigations. We 
held two subcommittee hearings in 2007, and based on our investigative 
hearings, I introduced legislation called the Stop Unfair Practices in 
Credit Cards Act, S. 1395, to ban the outrageous credit card abuses 
that were documented in the hearings. I was pleased that Senators 
McCaskill, Leahy, Durbin, Bingaman, Cantwell, Whitehouse, Kohl, Brown, 
Stevens, and Sanders, our Presiding Officer, joined as cosponsors.
  This new bill, the Dodd-Levin bill introduced today, as Senator Dodd 
mentioned, incorporates almost all the provisions of S. 1395, and it 
adds other important protections as well. It is the strongest credit 
card bill yet in Congress.
  I would like to add to the record more detailing of the provisions of 
this bill, along with an overview of some of the most prevalent abuses 
that we uncovered and some of the stories that American consumers 
shared with us during the course of the inquiries carried out by my 
Permanent Subcommittee on Investigations.
  With regard to excessive fees, the first case history we examined 
illustrates the fact that major credit card issuers today impose a host 
of fees on their cardholders, including late fees and over-the-limit 
fees that are not only substantial in themselves but can contribute to 
years of debt for families unable to immediately pay them.
  Wesley Wannemacher of Lima, OH, testified at our March 2007 hearing. 
In 2001 and 2002, Mr. Wannemacher used a new credit card to pay for 
expenses mostly related to his wedding. He charged a total of about 
$3,200, which exceeded the card's credit limit by $200. He spent the 
next 6 years trying to pay off the debt, averaging payments of about 
$1,000 per year. As of February 2007, he had paid about $6,300 on his 
$3,200 debt, but his billing statement showed he still owed $4,400.
  How is it possible that a man pays $6,300 on a $3,200 credit card 
debt, but still owes $4,400? Here is how. On top of the $3,200 debt, 
Mr. Wannemacher was charged by the credit card issuer about $4,900 in 
interest, $1,100 in late fees, and $1,500 in over-the-limit fees. He 
was hit 47 times with over-limit fees, even though he went over the 
limit only three times and exceeded the limit by only $200. Altogether, 
these fees and the interest charges added up to $7,500, which, on top 
of the original $3,200 credit card debt, produced total charges to him 
of $10,700.
  In other words, the interest charges and fees more than tripled the 
original $3,200 credit card debt, despite payments by the cardholder 
averaging $1,000 per year. Unfair? Clearly, I think, but our 
investigation has shown that sky-high interest charges and fees are not 
uncommon in the credit card industry. While the Wannemacher account 
happened to be at Chase, penalty interest rates and fees are also 
employed by other major credit card issuers.
  The week before the March hearing, Chase decided to forgive the 
remaining

[[Page S6580]]

debt on the Wannemacher account, and while that was great news for the 
Wannemacher family, that decision doesn't begin to resolve the problem 
of excessive credit card fees and sky-high interest rates that trap too 
many hard-working families in a downward spiral of debt.
  These high fees are made worse by the industry-wide practice of 
including all fees in a consumer's outstanding balance so that they 
incur interest charges. It is one thing for a bank to charge interest 
on funds lent to a consumer; charging interest on penalty fees goes too 
far.
  Another galling practice featured in our March hearing involves the 
fact that credit card debt that is paid on time routinely accrues 
interest charges, and credit card bills that are paid on time and in 
full are routinely inflated with what I call ``trailing interest.'' 
Every single credit card issuer contacted by the Subcommittee engaged 
in both of these unfair practices which squeeze additional interest 
charges from responsible cardholders.
  Here is how it works. Suppose a consumer who usually pays his account 
in full, and owes no money on December 1, makes a lot of purchases in 
December, and gets a January 1 credit card bill for $5,020. That bill 
is due January 15. Suppose the consumer pays that bill on time, but 
pays $5,000 instead of the full amount owed. What do you think the 
consumer owes on the next bill?
  If you thought the bill would be the $20 past due plus interest on 
the $20, you would be wrong. In fact, under industry practice today, 
the bill would likely be twice as much. That is because the consumer 
would have to pay interest, not just on the $20 that wasn't paid on 
time, but also on the $5,000 that was paid on time. In other words, the 
consumer would have to pay interest on the entire $5,020 from the first 
day of the new billing month, January 1, until the day the bill was 
paid on January 15, compounded daily. So much for a grace period. In 
addition, the consumer would have to pay the $20 past due, plus 
interest on the $20 from January 15 to January 31, again compounded 
daily. In this example, using an interest rate of 17.99 percent, which 
is the interest rate charged to Mr. Wannamacher, the $20 debt would, in 
one month, rack up $35 in interest charges and balloon into a debt of 
$55.21.
  You might ask--hold on--why does the consumer have to pay any 
interest at all on the $5,000 that was paid on time? Why does anyone 
have to pay interest on the portion of a debt that was paid by the date 
specified in the bill--in other words, on time? The answer is, because 
that is how the credit card industry has operated for years, and they 
have gotten away with it.
  There is more. One might think that once the consumer gets gouged in 
February, paying $55.21 on a $20 debt, and pays that bill on time and 
in full, without making any new purchases, that would be the end of it. 
But you would be wrong again. It's not over.
  Even though, on February 15, the consumer paid the February bill in 
full and on time--all $55.21--the next bill has an additional interest 
charge on it, for what we call ``trailing interest.'' In this case, the 
trailing interest is the interest that accumulated on the $55.21 from 
February 1 to 15, which is time period from the day when the bill was 
sent to the day when it was paid. The total is 38 cents. While some 
issuers will waive trailing interest if the next month's bill is less 
than $1, if a consumer makes a new purchase, a common industry practice 
is to fold the 38 cents into the end-of-month bill reflecting the new 
purchase.
  Now 38 cents isn't much in the big scheme of things. That may be why 
many consumers don't notice these types of extra interest charges or 
try to fight them. Even if someone had questions about the amount of 
interest on a bill, most consumers would be hard pressed to understand 
how the amount was calculated, much less whether it was incorrect. But 
by nickel and diming tens of millions of consumer accounts, credit card 
issuers reap large profits.
  I think it is indefensible to make consumers pay interest on debt 
which they pay on time. It is also just plain wrong to charge trailing 
interest when a bill is paid on time and in full.
  My subcommittee's second hearing focused on another set of unfair 
credit card practices involving unfair interest rate increases. 
Cardholders who had years-long records of paying their credit card 
bills on time, staying below their credit limits, and paying at least 
the minimum amount due, were nevertheless socked with substantial 
interest rate increases. Some saw their credit card interest rates 
double or even triple. At the hearing, three consumers described this 
experience.
  Janet Hard of Freeland, MI, had accrued over $8,000 in debt on her 
Discover card. Although she made payments on time and paid at least the 
minimum due for over 2 years, Discover increased her interest rate from 
18 percent to 24 percent in 2006. At the same time, Discover applied 
the 24 percent rate retroactively to her existing credit card debt, 
increasing her minimum payments and increasing the amount that went to 
finance charges instead of the principal debt. The result was that, 
despite making steady payments totaling $2,400 in 12 months and keeping 
her purchases to less than $100 during that same year, Janet Hard's 
credit card debt went down by only $350. Sky-high interest charges, 
inexplicably increased and unfairly applied, ate up most of her 
payments.
  Millard Glasshof of Milwaukee, WI, a retired senior citizen on a 
fixed income, incurred a debt of about $5,000 on his Chase credit card, 
closed the account, and faithfully paid down his debt with a regular 
monthly payment of $119 for years. In December 2006, Chase increased 
his interest rate from 15 percent to 17 percent, and in February 2007, 
hiked it again to 27 percent. Retroactive application of the 27 percent 
rate to Mr. Glasshof's existing debt meant that, out of his $119 
payment, about $114 went to pay finance charges and only $5 went to 
reducing his principal debt. Despite his making payments totaling 
$1,300 over 12 months, Mr. Glasshof found that, due to high interest 
rates and excessive fees, his credit card debt did not go down at all. 
Later, after the Subcommittee asked about his account, Chase suddenly 
lowered the interest rate to 6 percent. That meant, over a one year 
period, Chase had applied four different interest rates to his closed 
credit card account: 15 percent, 17 percent, 27 percent, and 6 percent, 
which shows how arbitrary those rates are.
  Then there is Bonnie Rushing of Naples, FL. For years, she had paid 
her Bank of America credit card on time, providing at least the minimum 
amount specified on her bills. Despite her record of on-time payments, 
in 2007, Bank of America nearly tripled her interest rate from 8 to 23 
percent. The bank said that it took this sudden action because Ms. 
Rushing's FICO credit score had dropped. When we looked into why it had 
dropped, it was apparently because she had opened Macy's and J.Jill 
credit cards to get discounts on purchases. Despite paying both bills 
on time, the automated FICO system had lowered her credit rating, and 
Bank of America had followed suit by raising her interest rate by a 
factor of three. Ms. Rushing closed her account and complained to the 
Florida attorney general, my subcommittee, and her card sponsor, the 
American Automobile Association. Bank of America eventually restored 
the 8 percent rate on her closed account.
  In addition to these three consumers who testified at the hearing, 
the subcommittee presented case histories for five other consumers who 
experienced substantial interest rate increases despite complying with 
their credit card agreements.
  I would also like to note that, in each of these cases, the credit 
card issuer told our subcommittee that the cardholder had been given a 
chance to opt out of the increased interest rate by closing their 
account and paying off their debt at the prior rate. But each of these 
cardholders denied receiving an opt-out notice, and when several tried 
to close their account and pay their debt at the prior rate, they were 
told they had missed the opt-out deadline and had no choice but to pay 
the higher rate. Our subcommittee examined copies of the opt-out 
notices and found that some were filled with legal jargon, were hard to 
understand, and contained procedures that were hard to follow. When we 
asked the major credit card issuers what percentage of persons offered 
an opt-out actually took it, they told the Subcommittee that 90 percent 
did not opt out of the higher interest

[[Page S6581]]

rate--a percentage that is contrary to all logic and strong evidence 
that current opt-out procedures do not work.
  The case histories presented at our hearings illustrate only a small 
portion of the abusive credit card practices going on today. Since 
early 2007, the subcommittee has received letters and e-mails from 
thousands of credit card cardholders describing unfair credit card 
practices and asking for help to stop them, more complaints than I have 
received in any investigation I have conducted in more than 25 years in 
Congress. The complaints stretch across all income levels, all ages, 
and all areas of the country.
  The bottom line is that these abuses have gone on for too long. In 
fact, these practices have been around for so many years that they 
have, in many cases, become the industry norm, and our investigation 
has shown that many of the practices are too entrenched, too 
profitable, and too immune to consumer pressure for the companies to 
change them on their own.
  Mr. President, in summary, this is what our bill contains:
  No interest on debt paid on time.
  The bill prohibits interest charges on any portion of credit card 
debt which the credit card holder paid on time during the grace period.
  The bill prohibits credit card issuers from increasing interest rates 
on cardholders who are in good standing for reasons unrelated to the 
cardholder's behavior with respect to that card.
  The bill requires increased interest rates to apply only to future 
debt and not to debt incurred prior to the increase.
  The bill prohibits the charging of interest on credit card 
transaction fees, such as late fees and over-the-limit fees.
  The bill prohibits the charging of repeated over-the-limit fees for a 
single instance of exceeding a credit card limit.
  The bill requires payments to be applied first to the credit card 
balance with the highest rate of interest and to minimize finance 
charges.
  The bill requires the credit card issuers must offer consumers the 
option of operating under a fixed credit card limit that cannot be 
exceeded.
  The bill prohibits charging a fee to allow a credit card holder to 
make a payment on credit card debt, whether that payment is by mail, 
telephone, electronic transfer, or otherwise. Believe it or not, many 
credit card companies actually charge you a fee to make your payment.
  The bill contains some of the following provisions as well:
  It requires issuers to lower penalty rates that have been imposed on 
a cardholder after 6 months if the cardholder commits no further 
violations.
  The bill gives each Federal banking agency the authority to prescribe 
regulations governing unfair or deceptive practices by banks and 
savings and loan institutions.
  The bill requires issuers to provide individual consumer account 
information and disclose the total period of time and interest it will 
take to pay off the credit card balance if only minimum monthly 
payments are made.
  And, as the Senator from Connecticut said, the bill contains a number 
of protections for young consumers from credit card solicitations.
  Again, I commend Senator Dodd for taking the leadership on this 
issue. As chairman of the Senate Banking Committee, his leadership will 
make a huge difference. It gives us a real chance of passing reform 
legislation relative to credit card abuses this session of the 
Congress.

                          ____________________