[Congressional Record (Bound Edition), Volume 153 (2007), Part 4]
[Extensions of Remarks]
[Pages 6045-6046]
[From the U.S. Government Publishing Office, www.gpo.gov]




    INTRODUCTION OF CREDIT CARD ACCOUNTABILITY, RESPONSIBILITY, AND 
         DISCLOSURE ACT OF 2007 OR ``CREDIT CARD ACT OF 2007''

                                 ______
                                 

                            HON. MARK UDALL

                              of colorado

                    in the house of representatives

                         Friday, March 9, 2007

  Mr. UDALL of Colorado. Madam Speaker, today I am again introducing 
legislation to add some common-sense rules to the laws governing 
issuance of credit cards. The bill is cosponsored by the gentleman from 
Missouri, Mr. Cleaver. I am grateful for his assistance and support.
  Americans benefit from the widespread availability of consumer 
credit, and their use of that credit has been important to our economy. 
But there are some warning signs that signal a need for some additional 
legislation.
  Overall, during the last decade, total credit-card debt rose by about 
70 per cent, and this clearly has an effect on consumers. Some polls 
have reported that about 70 percent of surveyed families said the 
quality of their lives is adversely affected by the extent of their 
debts, and young people are more worried about going deeply into debt 
than about a terrorist attack.
  For many Americans, consumer credit is more than a convenience. It is 
something that many people need to use to pay for their everyday needs. 
For them, it is a necessity. And, of course, another word for credit is 
debt.
  In a recent report on family finances, the Federal Reserve said that 
from the third quarter of 2001 to the same period in 2004, inflation-
adjusted household debt increased by more than 26 percent. During the 
same period, when incomes remained about the same, more families 
carried a credit-card balance and the average balance owed on a card 
rose nearly 16 percent, to $5,100.
  Some have argued that much of this debt was caused by recklessness 
and an erosion of financial responsibility. That was one of the main 
arguments advanced in support of the recently-passed legislation to 
revise the bankruptcy laws. But while there was something to that 
argument, it was not the whole story and it put too much emphasis on 
borrowers alone.
  Instead of just focusing on borrowers, Congress should also do more 
to promote responsibility by those who provide the credit--and one 
place to start is with credit card companies.
  For example, let's talk about interest rates. Credit is not free, and 
it should not be. But consumers should be treated fairly.
  We have all seen print ads and commercials that advertise very low 
interest rates, but don't make clear that these rates can change, 
sometimes without warning, and that higher rates can apply even if a 
consumer gets a warning and then acts to cancel a card.
  The bill would address that by requiring that a credit card company 
provide advance notice of any increase (unless the increase results 
from the expiration of an introductory rate for new accounts or a 
change in another rate to which the credit-card rate is indexed) and 
notice of the right to avoid paying the higher rate by canceling the 
card before the new rate takes effect. And it says that if the consumer 
does cancel the card in time, any remaining amounts owed on that card 
will be subject to the terms and conditions that applied at the time of 
cancellation.
  Similarly, the bill would require that card holders be more fully 
informed about the relationship between the monthly minimum payments 
and the full amounts owing on their cards and what monthly payment 
would be required to eliminate the outstanding balance in 36 months if 
they do not their cards to make additional purchases.
  Further, the bill would require that card holders be given clear 
notice of any fees, other charges, or increases in interest rates that 
would result from their making late payments.
  For payments made by mail, card holders would have to be given a 
reasonable time for their payments to be received and would have be to 
told the date on which a mailed payment must be postmarked in order to 
avoid fees, charges, or increased interest rates.
  And if a card issuer accepts payments made in person, a payment made 
at least one day before the due date would mean that no late-payment 
penalties would be in order.
  The bill also would bar charging fees or other penalties because a 
card holder pays

[[Page 6046]]

more than the monthly minimum or pays in full an existing account 
balance or because a card holder does not use the card during some 
particular period of time.
  It would bar imposing a fee for a charge that would mean a card 
holder has gone over the total credit authorized on a card if the card 
issuer has authorized that charge either in advance or at the time of a 
purchase.
  And the bill would prohibit the use of ``universal default'' 
clauses--provisions that allow card issuers to impose a new, higher 
interest rate on a credit card account if there has been any change for 
the worse in the cardholder's credit score--even if the change is 
unrelated to the credit card account. Under ``universal default,'' a 
card holder can be saddled with such an increased rate not only for 
being late on big-ticket items such as a car or a mortgage payment, but 
for something as relatively minor as being late (even once) on some 
other credit card, or a utility payment, carrying too much debt 
overall, having ``too much'' available credit and open trade lines, 
making ``too many'' credit inquiries, or getting a new mortgage or car 
loan.
  The bill also would limit issuance of credit cards to people under 
the age of 18. People under that age applying for a credit card will 
need one of three things--the signature of a parent or guardian willing 
to take responsibility for the applicant's debts; information 
indicating that the applicant has some other means of repaying any 
debt; or a certification that the applicant has completed a credit 
counseling course by a qualified nonprofit budget and credit counseling 
agency. These requirements would apply to issuance of both regular 
credit cards and college ``affinity cards.''
  And, finally, the bill increases the amounts people injured by 
violations of the rules can collect from card issuers.
  Madam Speaker, this bill is similar to one I introduced in the 109th 
Congress. It would take some simple, common-sense steps to stop abusive 
practices, educate cardholders, and stiffen the penalties for 
violations. I think it deserves to be enacted.
  For the benefit of our colleagues, I am attaching an outline of the 
bill's provisions.


                          outline of the bill

       Section One provides a short title and table of contents. 
     The short title is ``Credit Card Accountability, 
     Responsibility, and Disclosure Act of 2007 or `Credit CARD 
     Act of 2007'.''
       Section Two authorizes the Federal Reserve's Board of 
     Governors to issue rules or publish model forms to implement 
     the bill and the changes it makes in existing law.


                                Title I

       Title I amends the Truth in Lending Act regarding certain 
     credit-card rates and fees.
       Section 101 requires at least 15 days' notice of certain 
     increases in interest rates and requires card holders to be 
     told of their right to cancel an account before the increases 
     take effect.
       Section 102 imposes a freeze on interest-rate terms and 
     fees applicable to accounts closed or cancelled before a 
     scheduled rate increase.
       Section 103 bars charging penalty fees for--(1) on-time 
     payments; (2) either full payment of a balance owed or a 
     payment larger than the minimum required amount; or (3) non-
     use of a card for any particular period of time.
       Section 104 bars imposing fees for a purchase that exceeds 
     a credit card's limit if the lender approves the charge in 
     advance or at the time the card holder makes the purchase.
       Section 105 bars ``universal default,'' meaning the 
     practice of imposing a higher interest rate on a credit card 
     because of a change in a cardholder's credit score even if 
     that change is unrelated to the credit card account.


                                Title II

       Title II amends the Truth in Lending Act's provisions 
     regarding disclosures to card holders.
       Section 201 specifies information that must be provided 
     regarding outstanding balances, required monthly minimum 
     payments, grace periods for avoiding additional charges, and 
     the monthly payments needed to pay off the balance in 36 
     months.
       Section 202 requires that card holders be told the date by 
     which mailed payments must be postmarked to avoid late fees, 
     whether (and by how much) interest rates will be increased 
     because of one or more late payments, whether (and if so, 
     where) a payment can be made in person and when it must be 
     made to avoid late fees (which must be no sooner than one 
     business day before the payment is due).


                               Title III

       Title III adds provisions to the Truth in Lending Act 
     dealing with issuing credit cards to people under age 18 and 
     amends the Act's provisions regarding penalties.
       Section 301 requires that a credit card can be issued to 
     someone under 18 only if the application includes either (1) 
     the signature of a parent, legal guardian, spouse, or other 
     person willing and able to be jointly liable for amounts 
     charged on the card before the card holder becomes 18; or (2) 
     financial information showing the applicant has enough 
     independent means to be able to repay amounts charged on the 
     card; or (3) proof that the applicant has completed a credit-
     counseling course by a nonprofit budget and credit counseling 
     agency meeting certain specified requirements.
       Section 302 allows borrowers injured by violations of 
     credit-card rules to collect increased amounts from card 
     issuers. Current law says they can recover at least $200 but 
     no more than $2,000. This section would increase that to at 
     least $500 or twice the amount of an improper finance charge 
     (whichever is higher), with an overall limit of $5,000 for 
     isolated violations or appropriately higher amounts for 
     established patterns or practices of violations.
       Section 303 makes the rules specified in section 301 for 
     regular credit cards apply as well to college ``affinity 
     cards'' (a card with the logo or name of an institution of 
     higher education in addition to that of the lender) issued to 
     someone under age 18.

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