S 235

S 235 IS

To amend the Truth in Lending Act to establish fair and transparent practices relating to the extension of credit under an open end consumer credit plan, and for other purposes.

January 14, 2009

Mr. SCHUMER (for himself and Mr. UDALL of Colorado) introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs

To amend the Truth in Lending Act to establish fair and transparent practices relating to the extension of credit under an open end consumer credit plan, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the ‘Credit Cardholders’ Bill of Rights Act of 2009’.

SEC. 2. CREDIT CARDS ON TERMS CONSUMERS CAN REPAY.

(a) Retroactive Rate Increases and Universal Default Limited- Chapter 2 of the Truth in Lending Act (15 U.S.C. 1631 et seq.) is amended by inserting after section 127A the following new section:

‘Sec. 127B. Additional requirements for credit card accounts under an open end credit plan

‘(a) Retroactive Rate Increases and Universal Default Limited-

‘(1) IN GENERAL- Except as provided in subsection (b), no creditor may increase any annual percentage rate of interest applicable to the existing balance on a credit card account of the consumer under an open end credit plan.

‘(2) EXISTING BALANCE DEFINED- For purposes of this subsection and subsections (b) and (c), the term ‘existing balance’ means the amount owed on a consumer credit card account as of the end of the 14th day after the creditor provides notice of an increase in the annual percentage rate in accordance with subsection (c).

‘(3) TREATMENT OF EXISTING BALANCES FOLLOWING RATE INCREASE- If a creditor increases any annual percentage rate of interest applicable to the credit card account of a consumer under an open end credit plan and there is an existing balance in the account to which such increase may not apply, the creditor shall allow the consumer to repay the existing balance using a method provided by the creditor which is at least as beneficial to the consumer as one of the following methods:

‘(A) An amortization period for the existing balance of at least 5 years starting from the date on which the increased annual percentage rate went into effect.

‘(B) The percentage of the existing balance that was included in the required minimum periodic payment before the rate increase cannot be more than doubled.

‘(4) LIMITATION ON CERTAIN FEES- If--

‘(A) a creditor increases any annual percentage rate of interest applicable on a credit card account of the consumer under an open end credit plan; and

‘(B) the creditor is prohibited by this section from applying the increased rate to an existing balance,

the creditor may not assess any fee or charge based solely on the existing balance.’.

(b) Exceptions to the Amendment Made by Subsection (a)- Section 127B of the Truth in Lending Act is amended by inserting after subsection (a) (as added by subsection (a)) the following new subsection:

‘(b) Exceptions-

‘(1) IN GENERAL- A creditor may increase any annual percentage rate of interest applicable to the existing balance on a credit card account of the consumer under an open end credit plan only under the following circumstances:

‘(A) CHANGE IN INDEX- The increase is due solely to the operation of an index that is not under the creditor’s control and is available to the general public.

‘(B) EXPIRATION OR LOSS OF PROMOTIONAL RATE- The increase is due solely to--

‘(i) the expiration of a promotional rate; or

‘(ii) the loss of a promotional rate for a reason specified in the account agreement (e.g., late payment).

‘(C) PAYMENT NOT RECEIVED DURING 30-DAY GRACE PERIOD AFTER DUE DATE- The increase is due solely to the fact that the consumer’s minimum payment has not been received within 30 days after the due date for such minimum payment.

‘(2) LIMITATION ON INCREASES DUE TO LOSS OF PROMOTIONAL RATE- Notwithstanding paragraph (1)(B)(ii), the annual percentage rate in effect after the increase permitted under such subsection due to the loss of a promotional rate may not exceed the annual percentage rate that would have applied under the terms of the agreement after the expiration of the promotional rate.’.

(c) Advance Notice of Rate Increases- Section 127B of the Truth in Lending Act is amended by inserting after subsection (b) (as added by subsection (b)) the following new subsection:

‘(c) Advance Notice of Rate Increases- In the case of any credit card account under an open end credit plan, no increase in any annual percentage rate of interest may take effect unless the creditor provides a written notice to the consumer at least 45 days before the increase takes effect which fully describes the changes in the annual percentage rate, in a complete and conspicuous manner, and the extent to which such increase would apply to an existing balance.’.

(d) Clerical Amendment- The table of sections for chapter 2 of the Truth in Lending Act (15 U.S.C. 1631 et seq.) is amended by inserting after the item relating to section 127A the following new item:

‘127B. Additional requirements for credit card accounts under an open end credit plan.’.

SEC. 3. ADDITIONAL PROVISIONS REGARDING ACCOUNT FEATURES, TERMS, AND PRICING.

(a) Double Cycle Billing Prohibited- Section 127B of the Truth in Lending Act is amended by inserting after subsection (c) (as added by section 2(c)) the following new subsection:

‘(d) Double Cycle Billing-

‘(1) IN GENERAL- No finance charge may be imposed by a creditor with respect to any balance on a credit card account under an open end credit plan that is based on balances for days in billing cycles preceding the most recent billing cycle.

‘(2) EXCEPTIONS- Paragraph (1) shall not apply so as to prohibit a creditor from--

‘(A) charging a consumer for deferred interest even though that interest may have accrued over multiple billing cycles; or

‘(B) adjusting finance charges following resolution of a billing error dispute.’.

(b) Limitations Relating to Account Balances Attributable Only to Accrued Interest- Section 127B is amended by inserting after subsection (d) (as added by subsection (a)) the following new subsection:

‘(e) Limitations Relating to Account Balances Attributable Only to Accrued Interest-

‘(1) IN GENERAL- If the outstanding balance on a credit card account under an open end credit plan at the end of a billing period represents an amount attributable only to interest accrued during the preceding billing period on an outstanding balance that was fully repaid during the preceding billing period--

‘(A) no fee may be imposed or collected in connection with such balance attributable only to interest before such end of the billing period; and

‘(B) any failure to make timely repayments of the balance attributable only to interest before such end of the billing period shall not constitute a default on the account.

Such balance remains a legally binding debt obligation.

‘(2) RULE OF CONSTRUCTION- Paragraph (1) shall not be construed as affecting--

‘(A) the consumer’s obligation to pay any accrued interest on a credit card account under an open end credit plan; or

‘(B) the accrual of interest on the outstanding balance on any such account in accordance with the terms of the account and this title.’.

(c) Access to Payoff Balance Information- Section 127B of the Truth in Lending Act is amended by inserting after subsection (e) (as added by subsection (b)) the following new subsection:

‘(f) Payoff Balance Information- Each periodic statement provided by a creditor to a consumer with respect to a credit card account under an open end credit plan shall contain the telephone number, Internet address, and worldwide website at which the consumer may request the payoff balance on the account.’.

(d) Consumer Right To Reject Card Before Notice Is Provided of Open Account- Section 127B of the Truth in Lending Act is amended by inserting after subsection (g) (as added by subsection (c)) the following new subsection:

‘(g) Consumer Right To Reject Card Before Notice of New Account Is Provided to Consumer Reporting Agency-

‘(1) IN GENERAL- A creditor may not furnish any information to a consumer reporting agency (as defined in section 603) concerning the establishment of a newly opened credit card account under an open end credit plan until the credit card has been used or activated by the consumer.

‘(2) RULE OF CONSTRUCTION- Paragraph (1) shall not be construed as prohibiting a creditor from furnishing information about any application for a credit card account under an open end credit plan or any inquiry about any such account to a consumer reporting agency (as so defined).’.

(e) Use of Terms Clarified- Section 127B of the Truth in Lending Act is amended by inserting after subsection (g) (as added by subsection (d)) the following new subsection:

‘(h) Use of Terms- The following requirements shall apply with respect to the terms of any credit card account under any open end 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 clearly and conspicuously specified 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).

‘(3) DUE DATE-

‘(A) IN GENERAL- Each periodic statement for any such account shall contain a date by which the next periodic payment on the account must be made to avoid a late fee or be considered a late payment, and any payment received by 5 p.m., local time at the location specified by the creditor for the receipt of payment, on such date shall be treated as a timely payment for all purposes.

‘(B) CERTAIN ELECTRONIC FUND TRANSFERS- Any payment with respect to any such account made by a consumer online to the website of the credit card issuer or by telephone directly to the credit card issuer before 5 p.m., local time at the location specified by the creditor for the receipt of payment, on any business day shall be credited to the consumer’s account that business day.

‘(C) 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 issuer not less than 7 days before the due date contained in the periodic statement under subparagraph (A) 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.’.

(f) Pro Rata Payment Allocations- Section 127B of the Truth in Lending Act is amended by inserting after subsection (h) (as added by subsection (e)) the following new subsection:

‘(i) Pro Rata Payment Allocations-

‘(1) IN GENERAL- Except as permitted under paragraph (2), if the outstanding balance on a credit card account under an open end credit plan accrues interest at two or more different annual percentage rates, the total amount of each periodic payment made on such account shall be allocated by the creditor between or among the outstanding balances at each such annual percentage rate in the same proportion as each such balance bears to the total outstanding balance on the account.

‘(2) ALLOCATION TO HIGHER RATE- Notwithstanding paragraph (1), a creditor may elect, in any case described in such paragraph, to allocate more than a pro rata share of any payment to a portion of the outstanding balance that bears a higher annual percentage rate than another portion of such outstanding balance.

‘(3) SPECIAL RULES FOR ACCOUNTS WITH PROMOTIONAL RATE BALANCES OR DEFERRED INTEREST BALANCES-

‘(A) IN GENERAL- Notwithstanding paragraph (1) or (2), in the case of a credit card account under an open end credit plan the current terms of which allow the consumer to receive the benefit of a promotional rate or deferred interest plan, amounts paid in excess of the required minimum payment shall be allocated to the promotional rate balance or the deferred interest balance only if other balances have been fully paid.

‘(B) EXCEPTION FOR DEFERRED INTEREST BALANCES- Notwithstanding subparagraph (A), a creditor may allocate the entire amount paid by the consumer in excess of the required minimum periodic payment to a balance on which interest is deferred during the 2 billing cycles immediately preceding the expiration of the period during which interest is deferred.

‘(4) PROHIBITION ON RESTRICTED GRACE PERIODS UNDER CERTAIN CIRCUMSTANCES- If, with respect to any credit card account under an open end credit, a creditor offers a time period in which to repay credit extended without incurring finance charges to cardholders who pay the balance in full, the creditor may not deny a consumer who takes advantage of a promotional rate balance or deferred interest rate balance offer with respect to such an account any such time period for repaying credit without incurring finance charges.’.

(g) Timely Provision of Periodic Statements- Section 127B of the Truth in Lending Act is amended by inserting after subsection (i) (as added by subsection (f)) the following new subsection:

‘(j) Timely Provision of Periodic Statements- Each periodic statement with respect to a credit card account under an open end credit plan shall be sent by the creditor to the consumer not less than 25 calendar days before the due date identified in such statement for the next payment on the outstanding balance on such account, and section 163(a) shall be applied with respect to any such account by substituting ‘25’ for ‘fourteen’.’.

SEC. 4. CONSUMER CHOICE WITH RESPECT TO OVER-THE-LIMIT TRANSACTIONS.