[House Report 111-88]
[From the U.S. Government Publishing Office]
111th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 111-88
======================================================================
CREDIT CARDHOLDERS' BILL OF RIGHTS ACT OF 2009
_______
April 27, 2009.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Frank of Massachusetts, from the Committee on Financial Services,
submitted the following
R E P O R T
together with
DISSENTING VIEWS
[To accompany H.R. 627]
[Including cost estimate of the Congressional Budget Office]
The Committee on Financial Services, to whom was referred
the bill (H.R. 627) 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, having considered the same, report
favorably thereon with an amendment and recommend that the bill
as amended do pass.
CONTENTS
Page
Amendment........................................................ 2
Purpose and Summary.............................................. 9
Background and Need for Legislation.............................. 10
Hearings......................................................... 13
Committee Consideration.......................................... 13
Committee Votes.................................................. 13
Committee Oversight Findings..................................... 21
Performance Goals and Objectives................................. 21
New Budget Authority, Entitlement Authority, and Tax Expenditures 21
Committee Cost Estimate.......................................... 21
Congressional Budget Office Estimate............................. 21
Federal Mandates Statement....................................... 25
Advisory Committee Statement..................................... 25
Constitutional Authority Statement............................... 25
Applicability to Legislative Branch.............................. 25
Earmark Identification........................................... 25
Section-by-Section Analysis of the Legislation................... 25
Changes in Existing Law Made by the Bill, as Reported............ 30
Dissenting Views................................................. 40
Amendment
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SEC. 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 consumer 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 consumer 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 consumer 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 1 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 consumer 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
consumer 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 of promotional rate.--The increase
is due solely to the expiration of a promotional rate.
``(C) Failure to comply with workout plan.--The
increase is due solely to the fact the consumer failed
to comply with a negotiated workout plan with the
creditor.
``(D) Payment not received during 30-day grace period
after due date.--The increase is due solely to the fact
that any 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 failure to comply with
workout plan.--Notwithstanding paragraph (1)(C), the annual
percentage rate in effect with respect to each category of
transactions for a credit card account under an open end
consumer credit plan after the increase permitted under such
subsection due to the failure of a consumer to comply with a
workout plan may not exceed the annual percentage applicable to
such category of transactions on the day before the effective
date of the workout plan.
``(3) Standards required.--The Board shall prescribe, by
regulation, standards--
``(A) for entering into any workout plan applicable
to any credit card account under an open end consumer
credit plan; and
``(B) governing any such workout plan.''.
(c) Advance Notice of Rate Increases and Significant Contract
Changes.--Section 127B of the Truth in Lending Act is amended by
inserting after subsection (b) (as added by subsection (b)) the
following new subsections:
``(c) Advance Notice of Rate Increases.--
``(1) In general.--In the case of any credit card account
under an open end consumer credit plan, no increase in any
annual percentage rate of interest (other than an increase
described in subsection (b)(1)(A)) 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.
``(2) Limitation on rate increase notices within first
year.--Except in the case of an increase described in
subparagraph (B), (C), or (D) of subsection (b)(1), no written
notice under paragraph (1) of an increase in any annual
percentage rate of interest on any credit card account under an
open end consumer credit plan (for which notice is required
under such paragraph) shall be effective before the end of the
1-year period beginning when the account is opened.
``(d) Advance Notice of Significant Contract Changes.--In the case
of any credit card account under an open end consumer credit plan, no
significant change to the contract (such as any fee) may take effect
unless the creditor provides a written notice of at least 45 days
before the change takes effect which fully describes the changes in the
contract, in a complete and conspicuous manner.''.
(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 consumer 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 (d) (as added by
section 2(c)) the following new subsection:
``(e) 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 consumer credit plan that is based on
balances for days in billing cycles preceding the most recent
billing cycle as a result of the loss of any grace period.
``(2) Exceptions.--Paragraph (1) shall not apply so as to
prohibit a creditor from--
``(A) adjusting finance charges following the return
of a payment for insufficient funds; or
``(B) adjusting finance charges following resolution
of a billing error dispute.
``(3) Grace period.--For purposes of this subsection, the
term `grace period' means, with respect to any credit card
account under an open end consumer credit plan, the time
period, if any, provided by the creditor within which any
credit extended under such credit plan for purchases of goods
or services may be repaid by the consumer without incurring a
finance charge.''.
(b) Limitations Relating to Account Balances Attributable Only to
Accrued Interest.--Section 127B is amended by inserting after
subsection (e) (as added by subsection (a)) the following new
subsection:
``(f) 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 consumer 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
consumer 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 (f) (as
added by subsection (b)) the following new subsection:
``(g) Payoff Balance Information.--
``(1) In general.--Each periodic statement provided by a
creditor to a consumer with respect to a credit card account
under an open end consumer credit plan shall contain the toll-
free telephone number, Internet address, and website at which
the consumer may request the payoff balance on the account.
``(2) Small issuers.--Notwithstanding paragraph (1), in the
case of any credit card issuer which issues fewer than 50,000
credit cards in conjunction with credit card accounts under
open end consumer credit plans, each periodic statement
provided by such a creditor to a consumer with respect to any
such credit card account shall contain the toll-free telephone
number, Internet address, or 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:
``(h) 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 consumer 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 consumer 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 (h) (as added by
subsection (d)) the following new subsection:
``(i) 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
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) Payment Allocations.--Section 127B of the Truth in Lending Act
is amended by inserting after subsection (i) (as added by subsection
(e)) the following new subsection:
``(j) Payment Allocations.--
``(1) In general.--If 2 or more different annual percentage
rates apply to different portions of an outstanding balance on
a credit card account under an open end consumer credit plan,
the amount of any periodic payment in excess of the required
minimum payment shall be applied using 1 of the following
methods:
``(A) High-to-low method.--The excess amount is
allocated first to the balance with the highest annual
percentage rate and any remaining portion is allocated
to any other balance in descending order, based on the
applicable annual percentage rate each portion of such
balance bears, from the highest such rate to the
lowest.
``(B) Pro rata method.--The excess amount is
allocated among each of the portions of such balance
which bear different rates of interest in the same
proportion as each such portion of the outstanding
balance bears to the total outstanding balance.
``(2) Clarification relating to certain deferred interest
arrangements.--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.
``(3) Prohibition on restricted grace periods under certain
circumstances.--If, with respect to any credit card account
under an open end consumer credit plan, 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 (j) (as
added by subsection (f)) the following new subsection:
``(k) Timely Provision of Periodic Statements.--Each periodic
statement with respect to a credit card account under an open end
consumer credit plan shall be sent by the creditor to the consumer not
less than 21 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 `21' for `fourteen'.''.
(h) Due Dates.--Section 127B of the Truth in Lending Act is amended
by inserting after subsection (k) (as added by subsection (g)) the
following new subsection:
``(l) Due Dates.--If the date established by a creditor as the date
on which a periodic payment on a credit card account under an open end
consumer credit plan is due is a day on which mail is either not
delivered to such creditor or is not accepted by the creditor for
processing on such day, the creditor may not treat the receipt by the
creditor of any such periodic payment by mail as of the next business
day of the creditor as late for any purpose.''.
SEC. 4. CONSUMER CHOICE WITH RESPECT TO OVER-THE-LIMIT TRANSACTIONS.
Section 127B of the Truth in Lending Act is amended by inserting
after subsection (l) (as added by section 3(h)) the following new
subsections:
``(m) 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, with respect to such account, from completing any
transaction involving the extension of credit, with respect to
such account, in excess of the amount of credit authorized 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 creditor receives notice from the consumer in
accordance with paragraph (2) and shall remain effective until
the consumer revokes the election.
``(4) Notification system.--
``(A) In general.--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 website, 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).
``(B) Small issuers.--Notwithstanding subparagraph
(A), any credit card issuer which issues fewer than
50,000 credit cards in conjunction with credit card
accounts under open end consumer credit plans shall
establish and maintain a notification system, which
shall include a toll-free telephone number, Internet
address, or website, 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 notice--
``(A) on the periodic statement required under
section 127(b) with respect to such account at least
once each calendar year; and
``(B) on 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.
``(7) Regulations.--
``(A) In general.--The Board shall issue regulations
allowing for the completion of over-the-limit
transactions that for operational reasons exceed the
credit limit by a de minimis amount, even where the
cardholder has made an election under paragraph (1).
``(B) Subject to no fee limitation.--The regulations
prescribed under subparagraph (A) shall not allow for
the imposition of any fee or any rate increase based on
the permitted over-the-limit transactions.
``(n) Over-the-Limit Fee Restrictions.--With respect to a credit
card account under an open end consumer credit plan, an over-the-limit
fee 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
an over-the-limit fee, with respect to such excess credit, may be
imposed only once in each of the 2 subsequent billing cycles, unless
the consumer has obtained an additional extension of credit in excess
of such credit limit during any such subsequent cycle or the consumer
reduces the outstanding balance below the credit limit as of the end of
such billing cycle.
``(o) Over-the-Limit Fees Prohibited in Conjunction With Certain
Credit Holds.--Notwithstanding subsection (n), an over-the-limit fee
may not be imposed if the credit limit was exceeded due to a hold
unless the actual amount of the transaction for which the hold was
placed would have resulted in the consumer exceeding the credit
limit.''.
SEC. 5. STRENGTHEN 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 ``Collection required.--The Board
shall'' and inserting ``Collection required.--
``(A) In general.--The Board shall''.
(B) by adding at the end the following new
subparagraph:
``(B) Information to be included.--The information
under subparagraph (A) shall include, for the relevant
semiannual period, the following information with
respect each creditor in connection with any consumer
credit card account:
``(i) A list of each type of transaction or
event during the semiannual period for which 1
or more creditors has imposed a separate
interest rate upon a consumer credit card
accountholder, 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
consumer credit card accountholder
during the semiannual period; and
``(II) the number of cardholders to
whom each such interest rate was
applied during the last calendar month
of the semiannual period, and the total
amount of interest charged to such
accountholders at each such rate during
such month.
``(iii) A list of each type of fee that 1 or
more of the creditors has imposed upon a
consumer credit card accountholder during the
semiannual period, 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 accountholders upon
whom the fee was imposed during each calendar
month of the semiannual period, and the total
amount of fees imposed upon cardholders during
such month.
``(v) The total number of consumer credit
card accountholders that incurred any finance
charge or any other fee during the semiannual
period.
``(vi) The total number of consumer credit
card accounts maintained by each creditor as of
the end of the semiannual period.
``(vii) The total number and value of cash
advances made during the semiannual period
under a consumer credit card account.
``(viii) The total number and value of
purchases involving or constituting consumer
credit card transactions during the semiannual
period.
``(ix) The total number and amount of
repayments on outstanding balances on consumer
credit card accounts in each month of the
semiannual period.
``(x) The percentage of all consumer credit
card accountholders (with respect to any
creditor) who--
``(I) incurred a finance charge in
each month of the semiannual period on
any portion of an outstanding balance
on which a finance charge had not
previously been incurred; and
``(II) incurred any such finance
charge at any time during the
semiannual period.
``(xi) The total number and amount of
balances accruing finance charges during the
semiannual period.
``(xii) The total number and amount of the
outstanding balances on consumer credit card
accounts as of the end of such semiannual
period.
``(xiii) Total credit limits in effect on
consumer credit card accounts as of the end of
such semiannual period and the amount by which
such credit limits exceed the credit limits in
effect as of the beginning of such period.
``(xiv) 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 new paragraph:
``(5) Report to congress.--The Board shall, on an annual
basis, transmit to Congress and make public a report containing
estimates by the Board of the approximate, relative percentage
of income derived by the credit card operations of depository
institutions 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. 6. STANDARDS APPLICABLE TO INITIAL ISSUANCE OF SUBPRIME OR ``FEE
HARVESTER'' CARDS.
Section 127B of the Truth in Lending Act is amended by inserting
after subsection (o) (as added by section 4) the following new
subsection:
``(p) Standards Applicable to Initial Issuance of Subprime or `Fee
Harvester' Cards.--
``(1) In general.--In the case of any credit card account
under an open end consumer credit plan the terms of which
require the payment of any fee (other than any late fee, any
over-the-limit fee, or any fee for a payment returned for
insufficient funds) by the consumer in the first year the
account is opened in an amount in excess of 25 percent of the
total amount of credit authorized under the account when the
account is opened, no payment of any fee (other than any late
fee, any over-the-limit fee, or any fee for a payment returned
for insufficient funds) may be made from the credit made
available by the card.
``(2) Rule of construction.--No provision of this subsection
may be construed as authorizing any imposition or payment of
advance fees otherwise prohibited by any provision of law.''.
SEC. 7. 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 new paragraph:
``(8) Extensions of credit to underage consumers.--
``(A) In general.--No credit card may be knowingly
issued to, or open end credit plan established on
behalf of, a consumer who has not attained the age of
18, unless the consumer is emancipated under applicable
State law.
``(B) Rule of construction.--For the purposes of
determining the age of an applicant, the submission of
a signed application by a consumer stating that the
consumer is over 18 shall be considered sufficient
proof of age.''.
SEC. 8. PROHIBIT FEES FOR PAYMENT ON CREDIT CARD ACCOUNTS BY ELECTRONIC
FUND TRANSFERS.
(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 new subsection:
``(i) Payments by EFT.--In the case of a credit card account under
an open end consumer credit plan, a creditor may not impose a fee based
on the manner in which payment on the account is made, including a fee
for making any such payment by electronic fund transfer (as defined in
section 903).''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to all payments made after the date of the enactment of this Act
and any fee imposed after such date in contravention of the amendment
shall be promptly credited to the consumer's account.
SEC. 9. REPORT TO CONGRESS ON REDUCTIONS OF CONSUMER CREDIT CARD LIMITS
BASED ON CERTAIN INFORMATION AS TO EXPERIENCE OR
TRANSACTIONS OF THE CONSUMER.
(a) Report on Creditor Practices Required.--Before the end of the
6-month period beginning on the date of the enactment of this Act, the
Board of Governors of the Federal Reserve System, in consultation with
the Comptroller of the Currency, the Director of the Office of Thrift
Supervision, the Federal Deposit Insurance Corporation, the National
Credit Union Administration Board, and the Federal Trade Commission,
shall report to the Committee on Financial Services of the House of
Representatives and the Committee on Banking, Housing, and Urban
Affairs of the Senate on the extent to which, during the 3-year period
ending on such date of enactment, creditors have reduced credit limits
or raised interest rates applicable to credit card accounts under open
end consumer credit plans based on--
(1) the geographical location where a credit transaction with
the consumer takes place or the identity of the merchant
involved in the transaction;
(2) the consumer's credit transactions, including the type of
credit transaction, the type of items purchased in such
transaction, the price of items purchased in such transaction,
any change in the type or price of items purchased in such
transactions, and other data pertaining to the consumer's use
of such credit card account; and
(3) the identity of the mortgage creditor which extended or
holds the mortgage loan secured by the consumer's primary
residence.
(b) Other Information.--The report required under subsection (a)
shall also include--
(1) the number and identity of creditors that have engaged in
the practices described in subsection (a);
(2) the extent to which the practices described in subsection
(a) have an adverse impact on minority or low-income consumers;
(3) any other relevant information regarding such practices;
and
(4) recommendations to the Congress on regulatory or
statutory changes that may be needed to restrict or prevent
such practices.
SEC. 10. EFFECTIVE DATE.
(a) In General.--Except as provided in subsection (c) for the
period described in such subsection, the amendments made by this Act
shall apply to all credit card accounts under open end consumer credit
plans after the earlier of--
(1) the end of the 12-month period beginning on the date of
the enactment of this Act; or
(2) June 30, 2010.
(b) Regulations.--Except as provided in subsection (c) for the
period described in such subsection, the Board of Governors of the
Federal Reserve System, in consultation with the Comptroller of the
Currency, the Director of the Office of Thrift Supervision, the Federal
Deposit Insurance Corporation, the National Credit Union Administration
Board, and the Federal Trade Commission, shall prescribe regulations,
in final form, implementing the amendments made by this Act before the
earlier of--
(1) the end of the 5-month period beginning on the date of
the enactment of this Act; or
(2) June 1, 2010.
(c) Interim Effective Period for Advance Notices of Rate
Increases.--
(1) In general.--During the period beginning 90 days after
the date of the enactment of this Act and ending on the
effective date of all the amendments under this Act as
determined pursuant to subsection (a), no increase in any
annual percentage rate of interest on any credit card account
under an open end consumer credit plan (as such terms are
defined in the Truth in Lending Act) may take effect unless the
creditor provides a written notice to the consumer at least 45
days before the increase would otherwise take 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.
(2) Exceptions.--A notice shall not be required under
paragraph (1) for an increase in an annual percentage rate
described in subparagraph (A), (B), or (C) of section
127B(b)(1) (as added by section 2).
(3) Regulations.--The Board of Governors of the Federal
Reserve System shall prescribe regulations implementing the
amendment referred to in paragraph (1), for purposes of this
subsection, before the end of the 60-day period beginning on
the date of the enactment of this Act.
Purpose and Summary
H.R. 627, the ``Credit Cardholders' Bill of Rights Act of
2009,'' prohibits certain unfair and deceptive credit card
practices and provides consumers with tools to manage their
credit card debt responsibly. The bill prohibits retroactive
rate increases on existing balances except under limited
circumstances, including where the consumer is over 30 days
late in making payment, and requires creditors to provide
consumers with a reasonable time to pay off the balance. It
requires creditors to provide a written notice of any rate
increase at least 45 days before the increase takes effect, and
to send periodic statements to consumers no less than 21 days
before the due date. The bill prohibits double cycle billing
and requires creditors to allocate payments in excess of the
minimum to either the highest rate balance first or in a
proportional manner. The bill limits overlimit fees and bans
fees on interest-only balances. The bill requires creditors to
offer cardholders the ability to prevent any overlimit
transactions on their card. It prohibits creditors from
knowingly issuing a credit card to a minor who is not
emancipated. The bill prohibits creditors from reporting the
issuance of any credit card to a credit bureau until the
cardholder uses or activates the card. For credit cards on
which fees in the first year exceed 25 percent of the initial
credit limit, the bill requires that such fees (except late,
overlimit, and insufficient fund fees) be paid from a source
other than the card. The bill also provides for additional data
collection to enable better oversight and regulation.
Background and Need for Legislation
According to the Federal Reserve, more than 75 percent of
all U.S. families have a credit card and 44 percent of families
carry a balance. Credit card debt has increased by 25 percent
in the last 10 years and reached $963 billion in January 2009.
The accumulation of large amounts of credit card debt can have
profound implications on individual consumers and the economy
more generally. According to the Federal Financial Institutions
Examination Council, the number of accounts more than 30 days
late has increased from 3.9 percent in the fourth quarter of
2006, to 5.6 percent in the fourth quarter of 2008. Similarly,
the American Bankers Association's ``Consumer Credit
Delinquency Bulletin,'' consumer credit delinquencies in the
fourth quarter of 2008 reached their highest level ever at 4.52
percent. Additionally, bankruptcy filings were up 31 percent in
calendar year 2008 (following a 40 percent increase in 2007), a
jump that many analysts attribute to high consumer debt levels.
Prior to 1990, credit cards had more or less standardized
rates of around 20 percent, few fees, and they were generally
offered to persons with high credit standing. In the early
1990s, credit card issuers began to adopt ``risk-based''
pricing, which was intended to employ a variety of factors to
insure that cardholders were charged rates that reflected the
default and other risks they pose to creditors. In addition,
credit card issuers began to charge increased penalty fees for,
among other things, late payment and over-the-limit
transactions. Card issuers contend that the new pricing models
enable them to offer cards to more individuals and charge lower
interest rates to better credit risks. In contrast, consumer
advocates allege that weakened underwriting standards are not
necessarily in the best interest of cardholders, that many
cards have ``teaser'' rates which are unrealistically low and
soon increase to a much higher maximum rate, and that fee
income has grown significantly.
The increased complexity and the variety of factors used in
risk-based pricing has drawn growing scrutiny of the conditions
under which issuers may change a cardholder's interest rate
under the standardized agreement. Most, if not all, agreements
allow the issuer to change the interest rate or other terms at
any time for any reason. Also, many agreements set up a number
of conditions that are considered ``default'' on the terms of
the agreement and thus allow significant change to the interest
rate. These provisions allow the card issuer, after a consumer
has agreed to the terms of a credit card account and used the
card to make purchases or obtain cash advances, to rewrite the
agreement or demand a higher rate of interest, even on funds
previously advanced. A study by the Pew Charitable Trusts that
was released in March 2009 found that in the one-year period
(between 2007 and 2008), credit card issuers used these powers
to raise interest rates on nearly one quarter of cardholder
accounts, or approximately 70 million accounts. These practices
skew the marketplace because the added charges are not
reflected in the advertised interest rate, which, according to
Pew, is the key price point consumers look to when selecting
credit cards. Not only do these practices lead to a lack of
transparency in the market, the ability to rewrite agreements
has also allowed issuers to rapidly expand their businesses and
bill cardholders tens of billions of dollars more per year.
According to the Pew study, cardholders were assessed at least
$10 billion in additional interest charges on top of standard
fees and rates in the one year period reviewed.
While credit card issuers describe these increases as
``risk-based'' pricing, consumer advocates argue that the
increases are disproportionate to the risk represented. For
example, cardholders who pay one day late can incur the same
rate raises as cardholders who are months late. A late
payment--even by one day--is a factor that can raise a
cardholder's interest rate, often over 30 percent, according to
consumer studies. Even when the consumer poses an additional
risk (i.e. frequent late payments), consumer advocates assert
that accounts should only be ``re-priced'' prospectively.
Although more than 6,000 companies issue credit cards, the 12
largest credit card companies control nearly 90 percent of the
market and all of the major issuers engage in risk-based
pricing practices developed over the last twenty years; the
same twenty-year period over which the consumer debt load has
dramatically increased.
Card issuers maintain that ``risk-based'' pricing allows
more consumer choice and keeps interest rates lower. But a 2005
report by the Government Accountability Office and a 2006
report by the Board of Governors of the Federal Reserve both
concluded that there was no empirical support for the
proposition that ``risk- based'' pricing had led to lower
rates. In addition, consumer advocates contend that some fees
and penalty pricing are disproportionate to the risk posed by
the consumer and are mainly intended to increase fee income.
According to Cardtrak.com, the average late fee rose to $35 in
2007, up from less than $13 in 1994. Similarly, average fees
charged for exceeding a credit limit also rose to $35 a month.
Retroactive Rate Increases on Pre-existing Balances. One of
the most controversial common practices is the retroactive
application of increased interest rates to consumers' pre-
existing balances. According to a 2008 survey by Consumer
Action, most card issuers (77 percent) reserve the right to
increase a consumer's interest rate on outstanding and
prospective balances under ``any time, any reason'' clauses.
Issuers contend that these clauses are necessary to insure they
are able to price for risk. In contrast, consumer advocates
argue that retroactive application is unfair and unjustified.
Moreover, these advocates dispute whether this practice is
truly risk-based, in light of the fact that individuals can be
re-priced through no fault of their own. For instance, many
consumers who are in good standing with their particular card
issuer nonetheless can see their interest rates increase if
there is a change in market conditions. Even when the consumer
poses an additional risk (i.e. frequent late payments),
consumer advocates assert that accounts should only be ``re-
priced'' prospectively. Some economists argue that retroactive
re-pricing on existing balances has an anticompetitive effect
on the market since consumers can't select cards on this basis
or avoid the increases.
A number of other practices can have negative impacts on
consumers, including, but not limited to:
Double-Cycle Billing. This practice occurs when a
cardholder with no previous balance fails to pay the entire
balance of new purchases by the payment due date, then--on the
next periodic billing statement--the issuer computes interest
on the original balance that had been subject to an interest-
free period. For example if you make a $1000 purchase and pay
off $900 in the first month, you would be charged interest
calculating your average daily balance over two billing cycles,
increasing the amount of interest charged to your account.
Payment Allocation. When a consumer's account consists of
balances with two or more interest rates, typically all of the
payments made to the account are applied first to the balance
with the lowest interest rate, allowing the higher rate balance
to grow more rapidly. This practice is viewed as unfair because
it does not provide consumers with the full benefit of lower
promotional interest rates.
Late Payment. Consumer advocates allege that many issuers
fail to promptly credit consumer payments, arbitrarily change
due dates, provide unreasonably short times for bill payment,
and otherwise make timely payments by cardholders difficult.
They argue that this practice is harmful to consumers given the
often severe consequences for late payments (in the form of
retroactive interest rate increases, penalty interest rates,
finance charges, and late fees).
REGULATORY DEVELOPMENTS
In December 2008, the Board of Governors of the Federal
Reserve System, the Office of Thrift Supervision, and the
National Credit Union Administration approved a joint final
rule prohibiting unfair or deceptive acts or practices relating
to credit cards. The Board took the lead in drafting the rule,
which is designed to protect consumers from unexpected interest
charges, including increases in the rate during the first year
after account opening and increases in the rate charged on pre-
existing credit card balances. These rules become effective on
July 1, 2010. Among other provisions, the rules include five
key protections for consumers:
(1) Banks will be prohibited from increasing the rate on
preexisting credit card balances during the first year after an
account opens and only in certain circumstances after the first
year.
(2) Banks will be prohibited from imposing interest charges
using the ``two-cycle'' billing method, which computes interest
on balances on days in billing cycles preceding the most recent
cycle.
(3) Banks will be prohibited from treating a payment as
late unless they provide a consumer with a reasonable amount of
time to make payment.
(4) Banks will be required to give consumers the benefit of
discounted promotional rates on credit cards by applying
payments in excess of the minimum either to the outstanding
balance with the highest APR, or pro rata among the balances.
(5) Banks will be required to provide 45 days' advance
notice for changes to significant contract terms, such as fees
or interest rate increases.
Simultaneously, the Board adopted final rules to revise the
disclosures consumers receive in connection with credit card
accounts and other revolving credit plans to ensure that
information is provided in a timely manner and in a form that
is readily understandable. These rules amend Regulation Z
(Truth in Lending) and conclude a comprehensive review of the
open-end credit rules. The final rules under Regulation Z
require changes to the format, timing, and content requirements
for credit card applications and solicitations and for the
disclosures that consumers receive throughout the life of an
open-end account. The effective date for the final rules
adopted under Regulation Z is also July 1, 2010.
Hearings
The Subcommittee on Financial Institutions and Consumer
Credit held a hearing on March 19, 2009 entitled, ``H.R. 627,
the Credit Cardholders' Bill of Rights of 2009; and H.R. 1456,
the Consumer Overdraft Protection Fair Practices Act of 2009.''
The following witnesses testified:
Ms. Sandra F. Braunstein, Director, Division of
Consumer and Community Affairs, Board of Governors of the
Federal Reserve System
Ms. Montrice Yakimov, Managing Director,
Compliance and Consumer Protection, Office of Thrift
Supervision
Ms. Sheila Albin, Associate General Counsel,
National Credit Union Administration
Mr. Kenneth J. Clayton, Senior Vice President/
General Counsel, American Bankers Association Card Policy
Council
Ms. Linda Echard, President and CEO ICBA Bancard,
on behalf of the Independent Community Bankers of America
Mr. Douglas Fecher, President and CEO, Wright-Patt
Credit Union, Inc., on behalf of the Credit Union National
Association
Mr. Oliver I. Ireland, Partner, Morrison &
Foerster, LLP, Washington, DC
Mr. Todd McCracken, President, National Small
Business Association
Mr. Ed Mierzwinski, Senior Fellow, Consumer
Program, U.S. PIRG
Mr. Travis Plunkett, Legislative Director,
Consumer Federation of America
Committee and Subcommittee Consideration
The Committee on Financial Services met in open session on
April 22, 2009, and ordered H.R. 627, the Credit Cardholders'
Bill of Rights Act of 2009, as amended, favorably reported to
the House by a record vote of 48 yeas and 19 nays. Previously,
the Subcommittee on Financial Institutions and Consumer Credit
met in open session on April 1, 2009, to consider H. R. 627 and
on April 2, 2009, ordered the bill, as amended, forwarded to
the Full Committee with a favorable recommendation by a voice
vote.
Committee Votes
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee to list the record votes
on the motion to report legislation and amendments thereto. A
motion by Mr. Frank to report the bill, as amended, to the
House with a favorable recommendation was agreed to by a record
vote of 48 yeas and 19 nays (Record vote no. FC-16). The names
of Members voting for and against follow.
RECORD VOTE NO. FC-16
----------------------------------------------------------------------------------------------------------------
Representative Aye Nay Present Representative Aye Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Frank...................... X ........ ......... Mr. Bachus....... ........ X .........
Mr. Kanjorski.................. X ........ ......... Mr. Castle....... ........ X .........
Ms. Waters..................... X ........ ......... Mr. King (NY).... ........ X .........
Mrs. Maloney................... X ........ ......... Mr. Royce........ ........ X .........
Mr. Gutierrez.................. X ........ ......... Mr. Lucas........ ........ X .........
Ms. Velazquez.................. ........ ........ ......... Mr. Paul......... ........ X .........
Mr. Watt....................... X ........ ......... Mr. Manzullo..... ........ X .........
Mr. Ackerman................... X ........ ......... Mr. Jones........ X ........ .........
Mr. Sherman.................... X ........ ......... Mrs. Biggert..... X ........ .........
Mr. Meeks...................... X ........ ......... Mr. Miller (CA).. ........ X .........
Mr. Moore (KS)................. X ........ ......... Mrs. Capito...... X ........ .........
Mr. Capuano.................... X ........ ......... Mr. Hensarling... ........ X .........
Mr. Hinojosa................... ........ ........ ......... Mr. Garrett (NJ). ........ X .........
Mr. Clay....................... X ........ ......... Mr. Barrett (SC). ........ X .........
Mrs. McCarthy.................. X ........ ......... Mr. Gerlach...... X ........ .........
Mr. Baca....................... X ........ ......... Mr. Neugebauer... ........ X .........
Mr. Lynch...................... X ........ ......... Mr. Price (GA)... ........ X .........
Mr. Miller (NC)................ X ........ ......... Mr. McHenry...... ........ X .........
Mr. Scott...................... X ........ ......... Mr. Campbell..... ........ ........ .........
Mr. Green...................... X ........ ......... Mr. Putnam....... ........ X .........
Mr. Cleaver.................... X ........ ......... Mrs. Bachmann.... ........ X .........
Ms. Bean....................... X ........ ......... Mr. Marchant..... ........ X .........
Ms. Moore (WI)................. X ........ ......... Mr. McCotter..... X ........ .........
Mr. Hodes...................... X ........ ......... Mr. McCarthy..... ........ X .........
Mr. Ellison.................... X ........ ......... Mr. Posey........ X ........ .........
Mr. Klein...................... X ........ ......... Ms. Jenkins...... ........ X .........
Mr. Wilson..................... X ........ ......... Mr. Lee.......... X ........ .........
Mr. Perlmutter................. X ........ ......... Mr. Paulsen...... X ........ .........
Mr. Donnelly................... X ........ ......... Mr. Lance........ X ........ .........
Mr. Foster..................... X ........ .........
Mr. Carson..................... X ........ .........
Mr. Speier..................... X ........ .........
Mr. Childers................... X ........ .........
Mr. Minnick.................... X ........ .........
Mr. Adler...................... X ........ .........
Ms. Kilroy..................... X ........ .........
Mr. Driehaus................... X ........ .........
Ms. Kosmas..................... ........ ........ .........
Mr. Grayson.................... X ........ .........
Mr. Himes...................... X ........ .........
Mr. Peters..................... X ........ .........
Mr. Maffei..................... X ........ .........
----------------------------------------------------------------------------------------------------------------
During the consideration of the bill in the Full Committee,
the following amendments (to the Committee Print showing the
amendment recommended by the Subcommittee on Financial
Institutions) were disposed of by record votes. The names of
Members voting for and against follow:
An amendment by Mrs. Maloney (and Mr. Maffei), No. 1,
relating to an interim effective period for advance notices of
rate increases, was agreed to by a record vote of 40 yeas and
22 nays (Record vote no. FC-11):
RECORD VOTE NO. FC-11
----------------------------------------------------------------------------------------------------------------
Representative Aye Nay Present Representative Aye Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Frank...................... X ........ ......... Mr. Bachus....... ........ X .........
Mr. Kanjorski.................. X ........ ......... Mr. Castle....... ........ X .........
Ms. Waters..................... ........ ........ ......... Mr. King (NY).... ........ X .........
Mrs. Maloney................... X ........ ......... Mr. Royce........ ........ X .........
Mr. Gutierrez.................. X ........ ......... Mr. Lucas........ ........ X .........
Ms. Velazquez.................. ........ ........ ......... Mr. Paul......... ........ ........ .........
Mr. Watt....................... X ........ ......... Mr. Manzullo..... X ........ .........
Mr. Ackerman................... X ........ ......... Mr. Jones........ X ........ .........
Mr. Sherman.................... X ........ ......... Mrs. Biggert..... ........ X .........
Mr. Meeks...................... X ........ ......... Mr. Miller (CA).. ........ X .........
Mr. Moore (KS)................. X ........ ......... Mrs. Capito...... ........ X .........
Mr. Capuano.................... X ........ ......... Mr. Hensarling... ........ X .........
Mr. Hinojosa................... ........ ........ ......... Mr. Garrett (NJ). ........ X .........
Mr. Clay....................... X ........ ......... Mr. Barrett (SC). ........ X .........
Mrs. McCarthy.................. X ........ ......... Mr. Gerlach...... ........ X .........
Mr. Baca....................... X ........ ......... Mr. Neugebauer... ........ X .........
Mr. Lynch...................... X ........ ......... Mr. Price (GA)... ........ X .........
Mr. Miller (NC)................ X ........ ......... Mr. McHenry...... ........ X .........
Mr. Scott...................... X ........ ......... Mr. Campbell..... ........ ........ .........
Mr. Green...................... X ........ ......... Mr. Putnam....... ........ X .........
Mr. Cleaver.................... X ........ ......... Mrs. Bachmann.... ........ ........ .........
Ms. Bean....................... X ........ ......... Mr. Marchant..... ........ X .........
Ms. Moore (WI)................. X ........ ......... Mr. McCotter..... ........ X .........
Mr. Hodes...................... X ........ ......... Mr. McCarthy..... ........ ........ .........
Mr. Ellison.................... X ........ ......... Mr. Posey........ X ........ .........
Mr. Klein...................... X ........ ......... Ms. Jenkins...... ........ X .........
Mr. Wilson..................... X ........ ......... Mr. Lee.......... ........ X .........
Mr. Perlmutter................. X ........ ......... Mr. Paulsen...... ........ X .........
Mr. Donnelly................... X ........ ......... Mr. Lance........ ........ X .........
Mr. Foster..................... X ........ .........
Mr. Carson..................... X ........ .........
Mr. Speier..................... ........ ........ .........
Mr. Childers................... X ........ .........
Mr. Minnick.................... X ........ .........
Mr. Adler...................... X ........ .........
Ms. Kilroy..................... X ........ .........
Mr. Driehaus................... X ........ .........
Ms. Kosmas..................... ........ ........ .........
Mr. Grayson.................... X ........ .........
Mr. Himes...................... X ........ .........
Mr. Peters..................... X ........ .........
Mr. Maffei..................... X ........ .........
----------------------------------------------------------------------------------------------------------------
An amendment by Mr. Hensarling, No. 2, relating to
nonapplicability to certain creditors who make available
alternative card options, was not agreed to by a record vote of
22 yeas and 43 nays (Record vote no. FC-12):
RECORD VOTE NO. FC-12
----------------------------------------------------------------------------------------------------------------
Representative Aye Nay Present Representative Aye Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Frank...................... ........ X ......... Mr. Bachus....... X ........ .........
Mr. Kanjorski.................. ........ X ......... Mr. Castle....... X ........ .........
Ms. Waters..................... ........ X ......... Mr. King (NY).... X ........ .........
Mrs. Maloney................... ........ X ......... Mr. Royce........ X ........ .........
Mr. Gutierrez.................. ........ X ......... Mr. Lucas........ X ........ .........
Ms. Velazquez.................. ........ ........ ......... Mr. Paul......... ........ ........ .........
Mr. Watt....................... ........ X ......... Mr. Manzullo..... ........ X .........
Mr. Ackerman................... ........ X ......... Mr. Jones........ ........ X .........
Mr. Sherman.................... ........ X ......... Mrs. Biggert..... X ........ .........
Mr. Meeks...................... ........ X ......... Mr. Miller (CA).. X ........ .........
Mr. Moore (KS)................. ........ X ......... Mrs. Capito...... X ........ .........
Mr. Capuano.................... ........ X ......... Mr. Hensarling... X ........ .........
Mr. Hinojosa................... ........ ........ ......... Mr. Garrett (NJ). X ........ .........
Mr. Clay....................... ........ X ......... Mr. Barrett (SC). X ........ .........
Mrs. McCarthy.................. ........ X ......... Mr. Gerlach...... X ........ .........
Mr. Baca....................... ........ X ......... Mr. Neugebauer... X ........ .........
Mr. Lynch...................... ........ X ......... Mr. Price (GA)... X ........ .........
Mr. Miller (NC)................ ........ X ......... Mr. McHenry...... X ........ .........
Mr. Scott...................... ........ X ......... Mr. Campbell..... ........ ........ .........
Mr. Green...................... ........ X ......... Mr. Putnam....... X ........ .........
Mr. Cleaver.................... ........ X ......... Mrs. Bachmann.... X ........ .........
Ms. Bean....................... ........ X ......... Mr. Marchant..... X ........ .........
Ms. Moore (WI)................. ........ X ......... Mr. McCotter..... X ........ .........
Mr. Hodes...................... ........ X ......... Mr. McCarthy..... X ........ .........
Mr. Ellison.................... ........ X ......... Mr. Posey........ ........ X .........
Mr. Klein...................... ........ X ......... Ms. Jenkins...... X ........ .........
Mr. Wilson..................... ........ X ......... Mr. Lee.......... ........ X .........
Mr. Perlmutter................. ........ X ......... Mr. Paulsen...... ........ X .........
Mr. Donnelly................... ........ X ......... Mr. Lance........ X ........ .........
Mr. Foster..................... ........ X .........
Mr. Carson..................... ........ X .........
Mr. Speier..................... ........ ........ .........
Mr. Childers................... ........ X .........
Mr. Minnick.................... ........ X .........
Mr. Adler...................... ........ X .........
Ms. Kilroy..................... ........ X .........
Mr. Driehaus................... ........ X .........
Ms. Kosmas..................... ........ ........ .........
Mr. Grayson.................... ........ X .........
Mr. Himes...................... ........ X .........
Mr. Peters..................... ........ X .........
Mr. Maffei..................... ........ X .........
----------------------------------------------------------------------------------------------------------------
An amendment by Mr. Hensarling, No. 3a, including in the
study the effects of the amendments made by this Act, to the
amendment offered by Ms. Waters, No. 3, requiring a report to
Congress on reductions of consumer credit card limits based on
certain information as to experience or transactions of the
consumer, was not agreed to by a record vote of 28 yeas and 38
nays (Record vote no. FC-13):
RECORD VOTE NO. FC-13
----------------------------------------------------------------------------------------------------------------
Representative Aye Nay Present Representative Aye Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Frank...................... ........ X ......... Mr. Bachus....... X ........ .........
Mr. Kanjorski.................. ........ X ......... Mr. Castle....... X ........ .........
Ms. Waters..................... ........ X ......... Mr. King (NY).... X ........ .........
Mrs. Maloney................... ........ X ......... Mr. Royce........ X ........ .........
Mr. Gutierrez.................. ........ X ......... Mr. Lucas........ X ........ .........
Ms. Velazquez.................. ........ ........ ......... Mr. Paul......... X ........ .........
Mr. Watt....................... ........ X ......... Mr. Manzullo..... X ........ .........
Mr. Ackerman................... ........ X ......... Mr. Jones........ X ........ .........
Mr. Sherman.................... ........ X ......... Mrs. Biggert..... X ........ .........
Mr. Meeks...................... ........ X ......... Mr. Miller (CA).. X ........ .........
Mr. Moore (KS)................. ........ X ......... Mrs. Capito...... X ........ .........
Mr. Capuano.................... ........ X ......... Mr. Hensarling... X ........ .........
Mr. Hinojosa................... ........ ........ ......... Mr. Garrett (NJ). X ........ .........
Mr. Clay....................... ........ X ......... Mr. Barrett (SC). X ........ .........
Mrs. McCarthy.................. ........ X ......... Mr. Gerlach...... X ........ .........
Mr. Baca....................... ........ X ......... Mr. Neugebauer... X ........ .........
Mr. Lynch...................... ........ X ......... Mr. Price (GA)... X ........ .........
Mr. Miller (NC)................ ........ X ......... Mr. McHenry...... X ........ .........
Mr. Scott...................... ........ X ......... Mr. Campbell..... ........ ........ .........
Mr. Green...................... ........ X ......... Mr. Putnam....... X ........ .........
Mr. Cleaver.................... ........ X ......... Mrs. Bachmann.... X ........ .........
Ms. Bean....................... ........ X ......... Mr. Marchant..... X ........ .........
Ms. Moore (WI)................. ........ X ......... Mr. McCotter..... X ........ .........
Mr. Hodes...................... ........ X ......... Mr. McCarthy..... X ........ .........
Mr. Ellison.................... ........ X ......... Mr. Posey........ X ........ .........
Mr. Klein...................... ........ X ......... Ms. Jenkins...... X ........ .........
Mr. Wilson..................... ........ X ......... Mr. Lee.......... X ........ .........
Mr. Perlmutter................. ........ X ......... Mr. Paulsen...... X ........ .........
Mr. Donnelly................... ........ X ......... Mr. Lance........ X ........ .........
Mr. Foster..................... ........ X
Mr. Carson..................... ........ X .........
Mr. Speier..................... ........ ........ .........
Mr. Childers................... ........ X .........
Mr. Minnick.................... ........ X .........
Mr. Adler...................... ........ X .........
Ms. Kilroy..................... ........ X .........
Mr. Driehaus................... ........ X .........
Ms. Kosmas..................... ........ ........ .........
Mr. Grayson.................... ........ X .........
Mr. Himes...................... ........ X .........
Mr. Peters..................... ........ X .........
Mr. Maffei..................... ........ X .........
----------------------------------------------------------------------------------------------------------------
An amendment by Mr. Price, No. 4, limiting actions for
damages to individual actions, was not agreed to by a record
vote of 24 yeas and 43 nays (Record vote no. FC-14):
RECORD VOTE NO. FC-14
----------------------------------------------------------------------------------------------------------------
Representative Aye Nay Present Representative Aye Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Frank...................... ........ X ......... Mr. Bachus....... X ........ .........
Mr. Kanjorski.................. ........ X ......... Mr. Castle....... ........ X .........
Ms. Waters..................... ........ X ......... Mr. King (NY).... ........ X .........
Mrs. Maloney................... ........ X ......... Mr. Royce........ X ........ .........
Mr. Gutierrez.................. ........ X ......... Mr. Lucas........ X ........ .........
Ms. Velazquez.................. ........ ........ ......... Mr. Paul......... X ........ .........
Mr. Watt....................... ........ X ......... Mr. Manzullo..... X ........ .........
Mr. Ackerman................... ........ X ......... Mr. Jones........ ........ X .........
Mr. Sherman.................... ........ X ......... Mrs. Biggert..... X ........ .........
Mr. Meeks...................... ........ X ......... Mr. Miller (CA).. X ........ .........
Mr. Moore (KS)................. ........ X ......... Mrs. Capito...... X ........ .........
Mr. Capuano.................... ........ X ......... Mr. Hensarling... X ........ .........
Mr. Hinojosa................... ........ ........ ......... Mr. Garrett (NJ). X ........ .........
Mr. Clay....................... ........ X ......... Mr. Barrett (SC). X ........ .........
Mrs. McCarthy.................. ........ X ......... Mr. Gerlach...... ........ X .........
Mr. Baca....................... ........ X ......... Mr. Neugebauer... X ........ .........
Mr. Lynch...................... ........ X ......... Mr. Price (GA)... X ........ .........
Mr. Miller (NC)................ ........ X ......... Mr. McHenry...... X ........ .........
Mr. Scott...................... ........ X ......... Mr. Campbell..... ........ ........ .........
Mr. Green...................... ........ X ......... Mr. Putnam....... X ........ .........
Mr. Cleaver.................... ........ X ......... Mrs. Bachmann.... X ........ .........
Ms. Bean....................... ........ X ......... Mr. Marchant..... X ........ .........
Ms. Moore (WI)................. ........ X ......... Mr. McCotter..... X ........ .........
Mr. Hodes...................... ........ X ......... Mr. McCarthy..... X ........ .........
Mr. Ellison.................... ........ X ......... Mr. Posey........ X ........ .........
Mr. Klein...................... ........ X ......... Ms. Jenkins...... X ........ .........
Mr. Wilson..................... ........ X ......... Mr. Lee.......... X ........ .........
Mr. Perlmutter................. ........ X ......... Mr. Paulsen...... X ........ .........
Mr. Donnelly................... ........ X ......... Mr. Lance........ X ........ .........
Mr. Foster..................... ........ X .........
Mr. Carson..................... ........ X .........
Mr. Speier..................... ........ X .........
Mr. Childers................... ........ X .........
Mr. Minnick.................... ........ X .........
Mr. Adler...................... ........ X .........
Ms. Kilroy..................... ........ X .........
Mr. Driehaus................... ........ X .........
Ms. Kosmas..................... ........ ........ .........
Mr. Grayson.................... ........ X .........
Mr. Himes...................... ........ X .........
Mr. Peters..................... ........ X .........
Mr. Maffei..................... ........ X .........
----------------------------------------------------------------------------------------------------------------
An amendment by Mr. Hensarling, No. 6, regarding
transparent advanced notice of a rate increase, was not agreed
to by a record vote of 28 yeas and 39 nays (Record vote no. FC-
15):
RECORD VOTE NO. FC-15
----------------------------------------------------------------------------------------------------------------
Representative Aye Nay Present Representative Aye Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Frank...................... ........ X ......... Mr. Bachus....... X ........ .........
Mr. Kanjorski.................. ........ X ......... Mr. Castle....... X ........ .........
Ms. Waters..................... ........ X ......... Mr. King (NY).... X ........ .........
Mrs. Maloney................... ........ X ......... Mr. Royce........ X ........ .........
Mr. Gutierrez.................. ........ X ......... Mr. Lucas........ X ........ .........
Ms. Velazquez.................. ........ ........ ......... Mr. Paul......... X ........ .........
Mr. Watt....................... ........ X ......... Mr. Manzullo..... X ........ .........
Mr. Ackerman................... ........ X ......... Mr. Jones........ X ........ .........
Mr. Sherman.................... ........ X ......... Mrs. Biggert..... X ........ .........
Mr. Meeks...................... ........ X ......... Mr. Miller (CA).. X ........ .........
Mr. Moore (KS)................. ........ X ......... Mrs. Capito...... X ........ .........
Mr. Capuano.................... ........ X ......... Mr. Hensarling... X ........ .........
Mr. Hinojosa................... ........ ........ ......... Mr. Garrett (NJ). X ........ .........
Mr. Clay....................... ........ X ......... Mr. Barrett (SC). X ........ .........
Mrs. McCarthy.................. ........ X ......... Mr. Gerlach...... X ........ .........
Mr. Baca....................... ........ X ......... Mr. Neugebauer... X ........ .........
Mr. Lynch...................... ........ X ......... Mr. Price (GA)... X ........ .........
Mr. Miller (NC)................ ........ X ......... Mr. McHenry...... X ........ .........
Mr. Scott...................... ........ X ......... Mr. Campbell..... ........ ........ .........
Mr. Green...................... ........ X ......... Mr. Putnam....... X ........ .........
Mr. Cleaver.................... ........ X ......... Mrs. Bachmann.... X ........ .........
Ms. Bean....................... ........ X ......... Mr. Marchant..... X ........ .........
Ms. Moore (WI)................. ........ X ......... Mr. McCotter..... X ........ .........
Mr. Hodes...................... ........ X ......... Mr. McCarthy..... X ........ .........
Mr. Ellison.................... ........ X ......... Mr. Posey........ X ........ .........
Mr. Klein...................... ........ X ......... Ms. Jenkins...... X ........ .........
Mr. Wilson..................... ........ X ......... Mr. Lee.......... X ........ .........
Mr. Perlmutter................. ........ X ......... Mr. Paulsen...... X ........ .........
Mr. Donnelly................... ........ X ......... Mr. Lance........ X ........ .........
Mr. Foster..................... ........ X .........
Mr. Carson..................... ........ X .........
Mr. Speier..................... ........ X .........
Mr. Childers................... ........ X .........
Mr. Minnick.................... ........ X .........
Mr. Adler...................... ........ X .........
Ms. Kilroy..................... ........ X .........
Mr. Driehaus................... ........ X .........
Ms. Kosmas..................... ........ ........ .........
Mr. Grayson.................... ........ X .........
Mr. Himes...................... ........ X .........
Mr. Peters..................... ........ X .........
Mr. Maffei..................... ........ X .........
----------------------------------------------------------------------------------------------------------------
The following other amendments were also considered by the
Committee:
An amendment by Ms. Waters, No. 3, requiring a report to
Congress on reductions of consumer credit card limits based on
certain information as to experience or transactions of the
consumer, was agreed to by voice vote.
An amendment by Mrs. McCarthy (NY), No. 5, changing ``in''
to ``on'' regarding periodic statements, was agreed to by voice
vote.
An amendment by Mr. Miller (NC), No. 7, regarding minimum
payment advisory, was offered and withdrawn.
An amendment by Mr. Moore (KS) (and Mrs. McCarthy (NY),
Mrs. Capito, and Mrs. Biggert), No. 8, regarding small issuers,
was agreed to by voice vote.
During the Subcommittee on Financial Institutions and
Consumer Credit markup, the following amendments were disposed
of by record votes. The names of Members voting for and against
follow:
An amendment by Mr. Ackerman, No. 1, prohibiting fees for
payment on credit card accounts by electronic fund transfers,
was agreed to by a record vote of 18 yeas and 17 nays (Record
vote no. FI-1):
RECORD VOTE NO. FI-1
----------------------------------------------------------------------------------------------------------------
Representative Aye Nay Present Representative Aye Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Gutierrez.................. X ........ ......... Mr. Hensarling... ........ X .........
Mrs. Maloney................... X ........ ......... Mr. Barrett...... ........ X .........
Mr. Watt....................... X ........ ......... Mr. Castle....... ........ X .........
Mr. Ackerman................... X ........ ......... Mr. King......... ........ X .........
Mr. Sherman.................... X ........ ......... Mr. Royce........ ........ X .........
Mr. Moore...................... X ........ ......... Mr. Jones........ ........ ........ .........
Mr. Kanjorski.................. X ........ ......... Mrs. Capito...... ........ X .........
Ms. Waters..................... X ........ ......... Mr. Garrett...... ........ ........ .........
Mr. Hinojosa................... ........ ........ ......... Mr. Gerlach...... ........ ........ .........
Mrs. McCarthy.................. X ........ ......... Mr. Neugebauer... ........ X .........
Mr. Baca....................... X ........ ......... Mr. Price........ ........ X .........
Mr. Green...................... ........ ........ ......... Mr. McHenry...... ........ X .........
Mr. Clay....................... X ........ ......... Mr. Campbell..... ........ X .........
Mr. Miller..................... X ........ ......... Mr. McCarthy..... ........ ........ .........
Mr. Scott...................... X ........ ......... Mr. Marchant..... ........ X .........
Mr. Cleaver.................... X ........ ......... Mr. Lee.......... ........ X .........
Ms. Bean....................... ........ X ......... Mr. Paulsen...... ........ ........ .........
Mr. Hodes...................... ........ ........ ......... Mr. Lance........ ........ X .........
Mr. Ellison.................... ........ ........ ......... Mr.Bachus ........ ........ .........
(ExOfficio)
Mr. Klein...................... X ........ .........
Mr. Wilson..................... ........ X .........
Mr. Meeks...................... X ........ .........
Mr. Foster..................... X ........ .........
Mr. Perlmutter................. X ........ .........
Ms. Speier..................... ........ ........ .........
Mr. Childers................... ........ X .........
Mr. Minnick.................... ........ X .........
Mr.Frank(ExOfficio) ........ ........ .........
----------------------------------------------------------------------------------------------------------------
An amendment by Mr. Hensarling, No. 4, regarding repeated
history of irresponsible borrowing, was not agreed to by a
record vote of 15 yeas and 24 nays (Record vote no. FI-2):
RECORD VOTE NO. FI-2
----------------------------------------------------------------------------------------------------------------
Representative Aye Nay Present Representative Aye Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Gutierrez.................. ........ X ......... Mr. Hensarling... X ........ .........
Mrs. Maloney................... ........ X ......... Mr. Barrett...... X ........ .........
Mr. Watt....................... ........ X ......... Mr. Castle....... X ........ .........
Mr. Ackerman................... ........ X ......... Mr. King......... X ........ .........
Mr. Sherman.................... ........ X ......... Mr. Royce........ X ........ .........
Mr. Moore...................... ........ X ......... Mr. Jones........ ........ ........ .........
Mr. Kanjorski.................. ........ X ......... Mrs. Capito...... X ........ .........
Ms. Waters..................... ........ X ......... Mr. Garrett...... X ........ .........
Mr. Hinojosa................... ........ ........ ......... Mr. Gerlach...... X ........ .........
Mrs. McCarthy.................. ........ X ......... Mr. Neugebauer... X ........ .........
Mr. Baca....................... ........ X ......... Mr. Price........ X ........ .........
Mr. Green...................... ........ X ......... Mr. McHenry...... X ........ .........
Mr. Clay....................... ........ X ......... Mr. Campbell..... X ........ .........
Mr. Miller..................... ........ X ......... Mr. McCarthy..... ........ ........ .........
Mr. Scott...................... ........ X ......... Mr. Marchant..... X ........ .........
Mr. Cleaver.................... ........ X ......... Mr. Lee.......... X ........ .........
Ms. Bean....................... ........ X ......... Mr. Paulsen...... ........ ........ .........
Mr. Hodes...................... ........ X ......... Mr. Lance........ X ........ .........
Mr. Ellison.................... ........ ........ ......... Mr.Bachus ........ ........ .........
(ExOfficio)
Mr. Klein...................... ........ X .........
Mr. Wilson..................... ........ X .........
Mr. Meeks...................... ........ X .........
Mr. Foster..................... ........ X .........
Mr. Perlmutter................. ........ X .........
Ms. Speier..................... ........ ........ .........
Mr. Childers................... ........ X .........
Mr. Minnick.................... ........ X .........
Mr.Frank(ExOfficio) ........ ........ .........
----------------------------------------------------------------------------------------------------------------
An amendment by Mr. Hensarling, No. 5, delaying the
effective date pending certification by the Federal Reserve
Board, was not agreed to by a record vote of 15 yeas and 25
nays (Record vote no. FI-3):
RECORD VOTE NO. FI-3
----------------------------------------------------------------------------------------------------------------
Representative Aye Nay Present Representative Aye Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Gutierrez.................. ........ X ......... Mr. Hensarling... X ........ .........
Mrs. Maloney................... ........ X ......... Mr. Barrett...... X ........ .........
Mr. Watt....................... ........ X ......... Mr. Castle....... X ........ .........
Mr. Ackerman................... ........ X ......... Mr. King......... X ........ .........
Mr. Sherman.................... ........ X ......... Mr. Royce........ X ........ .........
Mr. Moore...................... ........ X ......... Mr. Jones........ ........ ........ .........
Mr. Kanjorski.................. ........ X ......... Mrs. Capito...... X ........ .........
Ms. Waters..................... ........ X ......... Mr. Garrett...... X ........ .........
Mr. Hinojosa................... ........ ........ ......... Mr. Gerlach...... X ........ .........
Mrs. McCarthy.................. ........ X ......... Mr. Neugebauer... X ........ .........
Mr. Baca....................... ........ X ......... Mr. Price........ X ........ .........
Mr. Green...................... ........ X ......... Mr. McHenry...... X ........ .........
Mr. Clay....................... ........ X ......... Mr. Campbell..... ........ X .........
Mr. Miller..................... ........ X ......... Mr. McCarthy..... ........ ........ .........
Mr. Scott...................... ........ X ......... Mr. Marchant..... X ........ .........
Mr. Cleaver.................... ........ X ......... Mr. Lee.......... X ........ .........
Ms. Bean....................... ........ X ......... Mr. Paulsen...... X ........ .........
Mr. Hodes...................... ........ X ......... Mr. Lance........ X ........ .........
Mr. Ellison.................... ........ ........ ......... Mr.Bachus ........ ........ .........
(ExOfficio)
Mr. Klein...................... ........ X .........
Mr. Wilson..................... ........ X .........
Mr. Meeks...................... ........ X .........
Mr. Foster..................... ........ X .........
Mr. Perlmutter................. ........ X .........
Ms. Speier..................... ........ ........ .........
Mr. Childers................... ........ X .........
Mr. Minnick.................... ........ X .........
Mr.Frank(ExOfficio) ........ ........ .........
----------------------------------------------------------------------------------------------------------------
The following other amendments were considered by the
Subcommittee:
An amendment by Mr. Hensarling, No. 2, regarding
nonapplicability to certain creditors who make available
alternative card options, was not agreed to by a voice vote.
An amendment by Mr., Gutierrez (and Mr. Castle, Mrs.
McCarthy (N.Y), Mr. Paulsen, Mr. Cleaver and Mr. Meeks), No. 3,
regarding the effective date, was agreed to by a voice vote.
Committee Oversight Findings
Pursuant to clause 3(c)(1) of rule XIII of the Rules of the
House of Representatives, the Committee held a hearing and made
findings that are reflected in this report.
Performance Goals and Objectives
Pursuant to clause 3(c)(4) of rule XIII of the Rules of the
House of Representatives, the Committee establishes the
following performance related goals and objectives for this
legislation:
H.R. 627 prohibits certain unfair and deceptive credit card
practices and provides consumers with tools to manage their
credit card debt responsibly.
New Budget Authority, Entitlement Authority, and Tax Expenditures
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee adopts as its
own the estimate of new budget authority, entitlement
authority, or tax expenditures or revenues contained in the
cost estimate prepared by the Director of the Congressional
Budget Office pursuant to section 402 of the Congressional
Budget Act of 1974.
Committee Cost Estimate
The Committee adopts as its own the cost estimate prepared
by the Director of the Congressional Budget Office pursuant to
section 402 of the Congressional Budget Act of 1974.
Congressional Budget Office Estimate
Pursuant to clause 3(c)(3) of rule XIII of the Rules of the
House of Representatives, the following is the cost estimate
provided by the Congressional Budget Office pursuant to section
402 of the Congressional Budget Act of 1974:
April 27, 2009.
Hon. Barney Frank,
Chairman, Committee on the Financial Services,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 627, the Credit
Cardholders' Bill of Rights Act of 2009.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact for federal
revenues is Barbara Edwards; for federal spending, Susan
Willie; and for the private-sector impact, Jacob Kuipers.
Sincerely,
Douglas W. Elmendorf.
Enclosure.
H.R. 627--Credit Cardholders' Bill of Rights Act of 2009
Summary: H.R. 627 would amend the Truth in Lending Act to
restrict the use of a number of billing practices applied to
consumer credit cards, including those related to changes in
interest rates and calculations of balances to which interest
rates are applied. It would direct the Board of Governors of
the Federal Reserve System (Federal Reserve), in consultation
with other financial regulatory agencies, to issue regulations
implementing the new standards. It also would increase the
information that the Federal Reserve is required to collect on
the financial activities of credit card issuers. Finally, H.R.
627 would require the Federal Reserve to report to the Congress
about certain practices of credit card issuers, the prevalence
of those practices during the 3 years preceding enactment of
the bill, and recommendations for regulations or statutes to
prevent such practices.
CBO estimates that enacting H.R. 627 would have no
significant impact on direct spending or revenues.
H.R. 627 contains no intergovernmental mandates as defined
in the Unfunded Mandates Reform Act (UMRA) and would impose no
costs on state, local, or tribal governments.
H.R. 627 would impose private-sector mandates, as defined
in UMRA. The bill would require creditors to submit detailed
information on a semiannual basis to the Federal Reserve and
prohibit creditors from engaging in certain credit card billing
and issuing practices. Based on information from the Federal
Reserve and industry sources, CBO estimates that the aggregate
cost of those requirements would likely exceed the annual
threshold established in UMRA for private-sector mandates ($139
million in 2009, adjusted annually for inflation) in at least
one of the first five years the mandates are in effect.
Estimated cost to the Federal Government: For this
estimate, CBO assumes that the bill will be enacted near the
end of fiscal year 2009. CBO estimates that enacting H.R. 627
would affect direct spending and revenues, but that those
effects would not be significant.
According to the Federal Reserve and other federal
financial regulatory agencies, the activities required by H.R.
627 would not have a significant effect on their workload or
budgets. In May 2008, the Federal Reserve proposed a number of
regulatory changes that covered some of the same issues
addressed by H.R. 627, and issued those regulations in December
2008. The related changes are scheduled to take effect in July
of 2010. CBO expects the additional requirements for the
Federal Reserve to collect data and provide reports would not
have a significant effect on its workload and we anticipate
that existing resources would be used to comply with H.R. 627.
The budgetary effects on the Federal Reserve are recorded as
changes in revenues (governmental receipts). Costs incurred by
the other financial regulatory agencies affect direct spending,
but most of those expenses are offset by fees or income from
deposit insurance premiums. Thus, CBO estimates that enacting
this bill would not significantly affect revenues, and would
have a negligible net effect on direct spending.
Estimated impact on state, local, and tribal governments:
H.R. 627 contains no intergovernmental mandates as defined in
UMRA and would impose no costs on state, local, or tribal
governments.
Estimated impact on the private sector: H.R. 627 contains
several private-sector mandates as defined in UMRA because it
would require creditors to submit detailed information to the
Federal Reserve on a semiannual basis and prohibit creditors
from engaging in certain billing and issuing practices. The
aggregate cost for creditors to comply with those mandates
would likely exceed the annual threshold established in UMRA
for private-sector mandates ($139 million in 2009, adjusted
annually for inflation) in at least one of the first five years
the mandates are in effect.
The bill also would codify several requirements included in
credit card regulations recently established by the Federal
Reserve and other financial regulatory agencies. CBO believes
that action would not constitute a new mandate.
Reporting requirements
The bill would require the Federal Reserve to collect
additional data from creditors on the profitability of their
credit card operations, the percentages of income derived from
different sources, the level of fees on cardholders and
merchants, certain changes made to credit limits and interest
rates, and any other specified material sources of income.
Under current law, the Federal Reserve collects financial data
semiannually from a large sample of creditors. Those data are
readily compiled by creditors, and the cost of submitting the
data is minimal. However, according to the Federal Reserve and
industry sources, in order to comply with the new requirements
creditors would need to develop and implement new software
programs and systems to compile the necessary data. Information
from the Federal Reserve and industry sources indicates that
the mandate would affect a large number of creditors and the
cost to set up the systems could be significant.
Over-the-limit fees
The bill would require creditors to allow cardholders to
establish a credit limit that cannot be exceeded. As such,
creditors would be prevented from completing any transaction
that would put the cardholder in excess of their credit limit.
Under current practice, most cardholders are allowed to exceed
their credit limit and are charged a fee for doing so. Under
the bill, creditors would be prohibited from charging over-the-
limit fees on accounts which the cardholder has requested a
credit limit that cannot be exceeded. Because the bill also
would require creditors to notify their cardholders of the
option to establish a credit limit and provide the necessary
tools for cardholders to do so, the Federal Reserve and
industry representatives believe that many cardholders would
elect to use the option. According to the Federal Reserve and
industry sources, this requirement could significantly affect
the amount that creditors collect in fees each year. The
industry currently collects billions of dollars in such fees
annually. Even if only a small percentage of cardholders
elected to use this option, creditors could lose a significant
amount of fees.
Standards for issuing cards
The bill also would prohibit creditors from allowing
individuals to pay any fees as part of the credit made
available to them when the terms of the credit card include
fees in the first year totaling more than 25 percent of the
credit limit. According to the Federal Reserve and industry
experts, credit cards with such fees are typically issued to
individuals who have low credit scores and they typically carry
a higher-than-average interest rate. The Federal Reserve
believes that demand for such cards would fall under the bill
because some customers in this market would no longer be able
to pay the fees. The loss in net income to creditors could be
substantial because the industry currently collects billions of
dollars annually in interest and fees from such cards.
The bill also would prohibit creditors from issuing credit
cards to individuals under the age of 18, unless they meet the
exceptions specified in the bill. According to industry
representatives and the Federal Reserve, individuals under the
age of 18 account for a very small percentage of credit
cardholders. Therefore, CBO estimates that the cost to
creditors to comply with this mandate would be small relative
to the annual threshold established in UMRA.
Credit account features
H.R. 627 would impose several new requirements on creditors
regarding account pricing, terms, and disclosures. The bill
would prohibit creditors from charging interest on payments
received between the end of the account period and the receipt
of the payment. The bill also would impose new requirements on
creditors regarding the disclosure of activation information
and interest rate increases and would require creditors to
provide a service through which cardholders can determine their
payoff balance. Creditors would be prohibited from charging
credit cardholders for making payments regardless of the manner
in which the payment is made. Finally, the bill would prohibit
creditors from using the term ``prime rate'' unless the term is
based on the definition provided in the bill. The cost to
creditors would likely be small because compliance would
involve only a small adjustment in current procedures, because
some of the fees prohibited do not generate much income for the
industry, and because most creditors do not engage in the
prohibited acts.
Previous CBO estimate: On April 24, 2009, CBO transmitted
an estimate for S. 414, the Credit Card Accountability,
Responsibility, and Disclosure Act of 2009, as ordered reported
by the Senate Committee on Banking, Housing, and Urban Affairs
on March 31, 2009. Both H.R. 627 and S. 414 would require the
Federal Reserve to develop regulations that restrict the use of
certain billing practices applied to consumer credit cards. S.
414 also contains provisions, not included in H.R. 627, that
would make changes to the funds administered by the Federal
Deposit Insurance Corporation and the National Credit Union
Administration (NCUA) including an increase in the amounts they
could borrow from the U.S. Treasury. S. 414 also would lengthen
the amount of time the NCUA would have to replenish its
insurance fund after experiencing losses. CBO's cost estimates
for the two bills reflect those differences.
Estimate prepared by: Federal revenues: Barbara Edwards;
Federal costs: Susan Willie; Impact on state, local, and tribal
governments: Elizabeth Delisle; Impact on the private sector:
Jacob Kuipers.
Estimate approved by: Frank J. Sammartino, Acting Assistant
Director for Tax Analysis; Theresa Gullo, Deputy Assistant
Director for Budget Analysis.
Federal Mandates Statement
The Committee adopts as its own the estimate of Federal
mandates prepared by the Director of the Congressional Budget
Office pursuant to section 423 of the Unfunded Mandates Reform
Act.
Advisory Committee Statement
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
Constitutional Authority Statement
Pursuant to clause 3(d)(1) of rule XIII of the Rules of the
House of Representatives, the Committee finds that the
Constitutional Authority of Congress to enact this legislation
is provided by Article 1, section 8, clause 1 (relating to the
general welfare of the United States) and clause 3 (relating to
the power to regulate interstate commerce).
Applicability to Legislative Branch
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of section
102(b)(3) of the Congressional Accountability Act.
Earmark Identification
H.R. 627 does not contain any congressional earmarks,
limited tax benefits, or limited tariff benefits as defined in
clause 9 of rule XXI.
Section-by-Section Analysis of the Legislation
Section 1. Short title
This section establishes the short title of the bill, the
``Credit Cardholders' Bill of Rights Act of 2009.''
Section 2. Credit cards on terms consumers can repay
Retroactive rate increases and universal default limited
Section 2(a). A creditor is prohibited from raising the
annual percentage rate of interest (APR) on existing consumer
credit card balances, except as provided in section 2(b). If a
creditor raises an APR and there is an existing balance to
which such rate increase may not apply, the creditor must allow
the consumer to repay that existing balance through a method
that is at least as beneficial to the consumer as one of the
following: (1) a five-year amortization period or (2) the
percentage of the existing balance included in the minimum
payment before the rate increase cannot be more than doubled.
``Existing balance'' means the amount owed on a consumer credit
card as of the end of the 14th day after the creditor provides
notice of the rate increase under section 2(c). A creditor is
prohibited from assessing a fee or charge based solely on an
existing balance to which an APR increase may not apply.
Section 2(b). A creditor may increase an APR on an existing
balance on a consumer credit card only if the increase is due
solely to (1) the operation of an index that is not under the
creditor's control and is available to the general public; (2)
the expiration of a promotional rate; (3) the consumer's
failure to comply with a negotiated workout plan with the
creditor (but the new APRs for each category of transactions
cannot exceed the corresponding APRs on the day before the
effective date of the workout plan); or (4) the consumer's
failure to make minimum payment within 30 days of the minimum
payment due date.
Section 2(c). No increase in any consumer credit card APR
(other than an increase due solely to the operation of an index
that is not under the creditor's control and is available to
the general public) may take effect unless the creditor
provides the consumer a written notice at least 45 days before
the effective date that fully describes the changes in the APR
and the extent to which such increase would apply to an
existing balance. Except for the types of rate increases
described in paragraph 2(b), no written notice of an APR
increase for which notice is required by this paragraph may
take effect until at least one year after the account was
opened.
A creditor also must provide written notice to the consumer
of all significant changes to a credit card contract at least
45 days before such changes take effect.
Section 3. Additional provisions regarding account features, terms, and
pricing
Double cycle billing prohibited
Section 3(a). Some creditors provide a time within which
any credit extended under the credit plan for purchases of
goods and services may be repaid by the consumer without
incurring a finance charge (a ``grace period''). The bill
prohibits a creditor from imposing a finance charge on a credit
card balance that is based on balances for days in billing
cycles preceding the most recent billing cycle as a result of a
loss of any grace period, with exceptions that allow the
creditor to adjust finance charges if a payment is returned for
insufficient funds or following resolution of a billing
dispute.
Limitations relating to account balances attributable only
to accrued interest
Section 3(b). If the outstanding balance 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 that period,
then the creditor may not impose a fee on such balance
attributable only to interest before such end of the billing
period and may not treat any failure to pay such balance before
such end of the billing period as a default on the account.
Such balance remains a legally binding debt obligation of the
consumer, and interest may accrue on that balance in accordance
with the account terms.
Payoff balance information
Section 3(c). This section generally requires a creditor to
provide on each periodic statement a toll-free telephone
number, Internet address, and web site at which a consumer may
request a payoff balance. A creditor that issues fewer than
500,000 credit cards would be required to provide only one of
these notification methods.
Consumer right to reject card before notice is provided of
open account
Section 3(d). A creditor is prohibited from furnishing to a
consumer reporting agency (as defined in section 603 of the
Truth in Lending Act) information about the establishment of a
newly-opened credit card account until the cardholder uses or
activates the card. This does not, however, prohibit the
creditor from furnishing information to a credit reporting
agency about any application for a credit card account or any
inquiry about any such account.
Use of terms
Section 3(e). The term ``fixed rate,'' when used with
respect to an APR or interest rate for a credit card account,
may be used to refer only to a rate that will not change for
any reason over the period of time clearly specified in the
account terms.
The term ``prime rate'' when used in an agreement or
contract for a credit card account, may be used to refer only
to the bank prime rate published by the Federal Reserve in the
H.15 statistical release (or any successor publication).
To clarify the term ``due date,'' this section requires
that each periodic statement contain a date by which the next
periodic payment must be made to avoid a late fee or be
considered a late payment. Any payment received by 5 P.M.,
local time at the location specified by the creditor for the
receipt of payment, on the specified date shall be timely for
all purposes. Online and telephone payments that are made
directly to the creditor before 5 p.m., local time at the
location specified by the creditor, on a business day must be
credited to the consumer's account that business day. A receipt
from the U.S. Postal Service or a common carrier indicating
that a payment was sent no less than 7 days before the due date
creates a presumption of timely payment, which may be rebutted
by the creditor for fraud or dishonesty with respect to the
mailing date.
Payment allocations
Section 3(f). If two or more different APRs apply to
different portions of an outstanding credit card balance and
the consumer pays more than the minimum payment, the creditor
must apply the excess payment either (1) to the portion with
the highest APR (and then to additional portions, if any, in
descending order of APR) or (2) in the same proportion as each
such portion bears to the total outstanding balance. A creditor
may allocate the entire amount of an excess payment to a
balance on which interest is deferred for the two billing
cycles preceding the expiration of the interest deferral
period. A creditor that offers an interest-free period to a
consumer who pays the balance in full may not deny a consumer
who takes advantage of a promotional rate or deferred interest
offer any such time period for repaying credit without
incurring finance charges.
Timely provision of periodic statement
Section 3(g). A creditor must send each periodic statement
with respect to a credit card account to the consumer not less
than 21 days before the due date.
Due dates
Section 3(h). If a due date falls on a day that mail is not
delivered to, or accepted for processing by, the creditor, then
the payment would be timely if received by mail the next
business day.
Section 4. Consumer choice with respect to Over-the-Limit transactions
If a creditor imposes an over-the-limit (OTL) fee for an
extension of credit that exceeds the consumer's credit limit,
the consumer may elect to prohibit the creditor from completing
any transaction that would involve extending credit in excess
of the consumer's credit limit. Such an election becomes
effective three business days after the creditor receives it
and remains effective until the consumer revokes it.
A creditor generally must establish and maintain a
notification system, including a toll-free telephone number,
Internet address, and web site, through which consumers can opt
out of OTL transactions. A creditor that maintains fewer than
500,000 credit card accounts would be required to maintain only
one of these notification methods. A consumer may exercise the
OTL transaction opt-out by notifying the creditor either
through this notification system or by submitting a form issued
by the creditor for this purpose.
A creditor must notify consumers of the availability of the
OTL transaction opt-out at least annually on the periodic
statement and on any periodic statement that reflects
imposition of an OTL fee during the period covered by the
statement.
If a consumer exercises the OTL opt-out right, then the
creditor may not charge an OTL fee for any reason that caused
the outstanding balance to exceed the consumer's credit limit.
If a consumer does not exercise the right to opt out of OTL
transactions, an OTL fee may be imposed only once during a
billing cycle if the credit limit is exceeded on the last day
of such billing cycle, and an OTL fee may be imposed only once
in each of the two subsequent billing cycles with respect to
such charges in excess of the credit limit (unless the consumer
has obtained an additional extension of credit or the consumer
reduces the outstanding balance below the credit limit as of
the end of such billing cycle). A creditor may not charge an
OTL fee due solely to credit holds, unless the actual amount of
the transaction subject to the hold exceeded the credit limit.
The Federal Reserve must issue rules allowing for the
completion of OTL transactions that for operational reasons
exceed the credit limit by a de minimis amount, even if the
cardholder has opted out. These rules cannot, however, allow
for the imposition of any fee or rate increase based on an OTL
transaction permitted under these rules.
Section 5. Strengthen credit card information collection
This section amends an existing provision, which requires
the FRB to collect credit card price and availability data on a
semiannual basis, to specify in detail information to be
collected with respect to each creditor regarding the type and
level of credit card rates and fees charged by issuers
(including the number of consumers assessed such rates and
fees), the total number and value of credit card accounts and
transactions, and other information relating to consumer credit
card accounts.
This section also requires the Federal Reserve annually to
transmit to Congress and make public a report of estimates of
the approximate relative percentage of income derived by the
credit card operations of depository institutions from interest
(including separate estimates for income derived from interest
with an annual APR at/above and below 25 percent); fees on
cardholders; fees on merchants; and other material sources.
Section 6. Standards applicable to initial issuance of subprime or
``Fee Harvester'' cards
If the terms of a credit card account require the payment
of any fee (other than late fees, OTL fees, or fees for
payments returned for insufficient funds) by the consumer in
the first year the account is open in an amount that exceeds 25
percent of the credit limit at account opening, then the
consumer cannot use credit made available by the card to pay
any fee (other than late fees, OTL fees, or fees for payments
returned for insufficient funds).
Section 7. Extension of credit to underage consumers
This section prohibits issuance of credit cards to a
consumer who is under 18, unless the consumer is emancipated
under applicable State law. A signed application by a consumer
stating that (s)he is over 18 is sufficient proof of age.
Section 8. Prohibit fees for payment on credit card accounts by
electronic fund transfer
This section prohibits the imposition of any fee based on
the manner in which payment on any credit card account is made,
including a fee for making a payment by electronic fund
transfer. This section applies to all payments made after the
date of enactment, and any fee imposed after such date in
contravention of this provision shall be promptly recredited to
the consumer's account.
Section 9. Report to Congress on reductions of consumer credit card
limits based on certain information as to experience or
transactions of the consumer
Within 6 months of enactment, this section requires the
Federal Reserve Board, in consultation with the other Federal
banking agencies and the Federal Trade Commission, to report to
the House Financial Services Committee and the Senate Banking,
Housing, and Urban Affairs Committee on the extent to which
creditors have, during the previous 3 years, reduced credit
limits or raised interest rates applicable to credit cards
based on the geographical area in which a transaction occurs,
the identity of the merchant involved in a transaction, the
identity of the creditor that extended or holds the consumer's
mortgage loan, or other characteristics of the consumer's
credit transactions (such as transaction types or prices or the
types of items purchased).
The report to the congressional committees must include the
number and identity of creditors engaged in the above-mentioned
practices, the extent to which such practices adversely affect
minority and low-income consumers, any other relevant
information regarding such practices, and recommendations on
regulatory or statutory changes that may be needed to restrict
or prevent such practices.
Section 10. Effective date
The bill generally takes effect after the earlier of the
end of the 12-month period beginning on the date of enactment
or after June 30, 2010. An interim effective period for notices
regarding APR increases provides that, during the period
beginning 90 days after the date of enactment and ending on the
effective date of the Act, no increase in APR may take effect
without a written notice being delivered at least 45 days
before the increase takes effect, except that notice shall not
be required during this period for increases due solely to
operation of a publically available index not set by the
creditor, expiration of a promotional rate, or the consumer's
failure to comply with a negotiated workout plan.
The Federal Reserve, in consultation with the other Federal
banking agencies, must promulgate final implementing rules by
the earlier of the end of the 5 month period beginning on the
date of enactment or June 1, 2010.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):
TRUTH IN LENDING ACT
* * * * * * *
TITLE I--CONSUMER CREDIT COST DISCLOSURE
* * * * * * *
CHAPTER 1--GENERAL PROVISIONS
* * * * * * *
Sec. 101. Short title
This title may be cited as the Truth in Lending Act.
* * * * * * *
CHAPTER 2--CREDIT TRANSACTIONS
Sec.
121. General requirement of disclosure.
* * * * * * *
127B. Additional requirements for credit card accounts under an open end
consumer credit plan.
* * * * * * *
Sec. 127. Open end consumer credit plans
(a) * * *
* * * * * * *
(c) Disclosure in Credit and Charge Card Applications and
Solicitations.--
(1) * * *
* * * * * * *
(8) Extensions of credit to underage consumers.--
(A) In general.--No credit card may be
knowingly issued to, or open end credit plan
established on behalf of, a consumer who has
not attained the age of 18, unless the consumer
is emancipated under applicable State law.
(B) Rule of construction.--For the purposes
of determining the age of an applicant, the
submission of a signed application by a
consumer stating that the consumer is over 18
shall be considered sufficient proof of age.
* * * * * * *
(i) Payments by EFT.--In the case of a credit card account
under an open end consumer credit plan, a creditor may not
impose a fee based on the manner in which payment on the
account is made, including a fee for making any such payment by
electronic fund transfer (as defined in section 903).
* * * * * * *
Sec. 127B. Additional requirements for credit card accounts under an
open end consumer 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
consumer 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 consumer
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 1 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 consumer 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.--
(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 consumer 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 of promotional rate.--The
increase is due solely to the expiration of a
promotional rate.
(C) Failure to comply with workout plan.--The
increase is due solely to the fact the consumer
failed to comply with a negotiated workout plan
with the creditor.
(D) Payment not received during 30-day grace
period after due date.--The increase is due
solely to the fact that any 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 failure to comply
with workout plan.--Notwithstanding paragraph (1)(C),
the annual percentage rate in effect with respect to
each category of transactions for a credit card account
under an open end consumer credit plan after the
increase permitted under such subsection due to the
failure of a consumer to comply with a workout plan may
not exceed the annual percentage applicable to such
category of transactions on the day before the
effective date of the workout plan.
(3) Standards required.--The Board shall prescribe,
by regulation, standards--
(A) for entering into any workout plan
applicable to any credit card account under an
open end consumer credit plan; and
(B) governing any such workout plan.
(c) Advance Notice of Rate Increases.--
(1) In general.--In the case of any credit card
account under an open end consumer credit plan, no
increase in any annual percentage rate of interest
(other than an increase described in subsection
(b)(1)(A)) 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.
(2) Limitation on rate increase notices within first
year.--Except in the case of an increase described in
subparagraph (B), (C), or (D) of subsection (b)(1), no
written notice under paragraph (1) of an increase in
any annual percentage rate of interest on any credit
card account under an open end consumer credit plan
(for which notice is required under such paragraph)
shall be effective before the end of the 1-year period
beginning when the account is opened.
(d) Advance Notice of Significant Contract Changes.--In the
case of any credit card account under an open end consumer
credit plan, no significant change to the contract (such as any
fee) may take effect unless the creditor provides a written
notice of at least 45 days before the change takes effect which
fully describes the changes in the contract, in a complete and
conspicuous manner.
(e) 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 consumer credit plan that is
based on balances for days in billing cycles preceding
the most recent billing cycle as a result of the loss
of any grace period.
(2) Exceptions.--Paragraph (1) shall not apply so as
to prohibit a creditor from--
(A) adjusting finance charges following the
return of a payment for insufficient funds; or
(B) adjusting finance charges following
resolution of a billing error dispute.
(3) Grace period.--For purposes of this subsection,
the term ``grace period'' means, with respect to any
credit card account under an open end consumer credit
plan, the time period, if any, provided by the creditor
within which any credit extended under such credit plan
for purchases of goods or services may be repaid by the
consumer without incurring a finance charge.
(f) 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 consumer 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 consumer 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.
(g) Payoff Balance Information.--
(1) In general.--Each periodic statement provided by
a creditor to a consumer with respect to a credit card
account under an open end consumer credit plan shall
contain the toll-free telephone number, Internet
address, and website at which the consumer may request
the payoff balance on the account.
(2) Small issuers.--Notwithstanding paragraph (1), in
the case of any credit card issuer which issues fewer
than 50,000 credit cards in conjunction with credit
card accounts under open end consumer credit plans,
each periodic statement provided by such a creditor to
a consumer with respect to any such credit card account
shall contain the toll-free telephone number, Internet
address, or website at which the consumer may request
the payoff balance on the account.
(h) 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 consumer
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 consumer credit plan or any
inquiry about any such account to a consumer reporting
agency (as so defined).
(i) 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
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.
(j) Payment Allocations.--
(1) In general.--If 2 or more different annual
percentage rates apply to different portions of an
outstanding balance on a credit card account under an
open end consumer credit plan, the amount of any
periodic payment in excess of the required minimum
payment shall be applied using 1 of the following
methods:
(A) High-to-low method.--The excess amount is
allocated first to the balance with the highest
annual percentage rate and any remaining
portion is allocated to any other balance in
descending order, based on the applicable
annual percentage rate each portion of such
balance bears, from the highest such rate to
the lowest.
(B) Pro rata method.--The excess amount is
allocated among each of the portions of such
balance which bear different rates of interest
in the same proportion as each such portion of
the outstanding balance bears to the total
outstanding balance.
(2) Clarification relating to certain deferred
interest arrangements.--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.
(3) Prohibition on restricted grace periods under
certain circumstances.--If, with respect to any credit
card account under an open end consumer credit plan, 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.
(k) Timely Provision of Periodic Statements.--Each periodic
statement with respect to a credit card account under an open
end consumer credit plan shall be sent by the creditor to the
consumer not less than 21 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
``21'' for ``fourteen''.
(l) Due Dates.--If the date established by a creditor as the
date on which a periodic payment on a credit card account under
an open end consumer credit plan is due is a day on which mail
is either not delivered to such creditor or is not accepted by
the creditor for processing on such day, the creditor may not
treat the receipt by the creditor of any such periodic payment
by mail as of the next business day of the creditor as late for
any purpose.
(m) 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, with respect to such account, from completing
any transaction involving the extension of credit, with
respect to such account, in excess of the amount of
credit authorized 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 creditor receives
notice from the consumer in accordance with paragraph
(2) and shall remain effective until the consumer
revokes the election.
(4) Notification system.--
(A) In general.--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
website, 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).
(B) Small issuers.--Notwithstanding
subparagraph (A), any credit card issuer which
issues fewer than 50,000 credit cards in
conjunction with credit card accounts under
open end consumer credit plans shall establish
and maintain a notification system, which shall
include a toll-free telephone number, Internet
address, or website, 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 notice--
(A) on the periodic statement required under
section 127(b) with respect to such account at
least once each calendar year; and
(B) on 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.
(7) Regulations.--
(A) In general.--The Board shall issue
regulations allowing for the completion of
over-the-limit transactions that for
operational reasons exceed the credit limit by
a de minimis amount, even where the cardholder
has made an election under paragraph (1).
(B) Subject to no fee limitation.--The
regulations prescribed under subparagraph (A)
shall not allow for the imposition of any fee
or any rate increase based on the permitted
over-the-limit transactions.
(n) Over-the-Limit Fee Restrictions.--With respect to a
credit card account under an open end consumer credit plan, an
over-the-limit fee 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 an over-the-limit fee,
with respect to such excess credit, may be imposed only once in
each of the 2 subsequent billing cycles, unless the consumer
has obtained an additional extension of credit in excess of
such credit limit during any such subsequent cycle or the
consumer reduces the outstanding balance below the credit limit
as of the end of such billing cycle.
(o) Over-the-Limit Fees Prohibited in Conjunction With
Certain Credit Holds.--Notwithstanding subsection (n), an over-
the-limit fee may not be imposed if the credit limit was
exceeded due to a hold unless the actual amount of the
transaction for which the hold was placed would have resulted
in the consumer exceeding the credit limit.
(p) Standards Applicable to Initial Issuance of Subprime or
``Fee Harvester'' Cards.--
(1) In general.--In the case of any credit card
account under an open end consumer credit plan the
terms of which require the payment of any fee (other
than any late fee, any over-the-limit fee, or any fee
for a payment returned for insufficient funds) by the
consumer in the first year the account is opened in an
amount in excess of 25 percent of the total amount of
credit authorized under the account when the account is
opened, no payment of any fee (other than any late fee,
any over-the-limit fee, or any fee for a payment
returned for insufficient funds) may be made from the
credit made available by the card.
(2) Rule of construction.--No provision of this
subsection may be construed as authorizing any
imposition or payment of advance fees otherwise
prohibited by any provision of law.
* * * * * * *
Sec. 136. Dissemination of annual percentage rates
(a) * * *
(b) Credit Card Price and Availability Information.--
(1) [Collection required.--The Board shall]
Collection required.--
(A) In general.--The Board shall collect, on
a semiannual basis, credit card price and
availability information, including the
information required to be disclosed under
section 127(c) of this chapter, from a broad
sample of financial institutions which offer
credit card services.
(B) Information to be included.--The
information under subparagraph (A) shall
include, for the relevant semiannual period,
the following information with respect each
creditor in connection with any consumer credit
card account:
(i) A list of each type of
transaction or event during the
semiannual period for which 1 or more
creditors has imposed a separate
interest rate upon a consumer credit
card accountholder, 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 consumer credit card
accountholder during the
semiannual period; and
(II) the number of
cardholders to whom each such
interest rate was applied
during the last calendar month
of the semiannual period, and
the total amount of interest
charged to such accountholders
at each such rate during such
month.
(iii) A list of each type of fee that
1 or more of the creditors has imposed
upon a consumer credit card
accountholder during the semiannual
period, 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
accountholders upon whom the fee was
imposed during each calendar month of
the semiannual period, and the total
amount of fees imposed upon cardholders
during such month.
(v) The total number of consumer
credit card accountholders that
incurred any finance charge or any
other fee during the semiannual period.
(vi) The total number of consumer
credit card accounts maintained by each
creditor as of the end of the
semiannual period.
(vii) The total number and value of
cash advances made during the
semiannual period under a consumer
credit card account.
(viii) The total number and value of
purchases involving or constituting
consumer credit card transactions
during the semiannual period.
(ix) The total number and amount of
repayments on outstanding balances on
consumer credit card accounts in each
month of the semiannual period.
(x) The percentage of all consumer
credit card accountholders (with
respect to any creditor) who--
(I) incurred a finance charge
in each month of the semiannual
period on any portion of an
outstanding balance on which a
finance charge had not
previously been incurred; and
(II) incurred any such
finance charge at any time
during the semiannual period.
(xi) The total number and amount of
balances accruing finance charges
during the semiannual period.
(xii) The total number and amount of
the outstanding balances on consumer
credit card accounts as of the end of
such semiannual period.
(xiii) Total credit limits in effect
on consumer credit card accounts as of
the end of such semiannual period and
the amount by which such credit limits
exceed the credit limits in effect as
of the beginning of such period.
(xiv) Any other information related
to interest rates, fees, or other
charges that the Board deems of
interest.
* * * * * * *
(5) Report to congress.--The Board shall, on an
annual basis, transmit to Congress and make public a
report containing estimates by the Board of the
approximate, relative percentage of income derived by
the credit card operations of depository institutions
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.
* * * * * * *
DISSENTING VIEWS
The way that consumers pay for products and services is
dramatically changing, with electronic payments (credit and
debit cards) now accounting for more than half of all
transactions. Credit cards provide quick, easy and convenient
ways for consumers to conduct their daily financial
transactions. And given the crucial role that credit cards have
come to play for individual consumers and the economy, it may
be appropriate to consider new ways to protect consumers from
unfair and deceptive credit card practices, ensuring that they
receive useful and complete disclosures about the terms and
conditions governing their cards. But policymakers must realize
that in endeavoring to protect consumers, they may end up
imposing considerable costs on the U.S. economy, because even
the best policy cannot substitute for personal responsibility
and may end up both raising the price of credit for some and
unfairly limiting access to credit to others. It is our view
that the Credit Cardholders' Bill of Rights Act of 2009 (H.R.
627) is likely to impose such costs.
In limiting credit card issuers' ability to price for risk,
Congress needs to avoid overreacting by forcing responsible
card-holders to subsidize irresponsible ones through higher
fees and fewer rewards. Moreover, in the midst of an economic
downturn, we should not be restricting options for success,
especially for small businesses, which are the economic engine
and America's number one jobs creator. The Small Business
Administration has testified that small businesses rely on
credit cards as a tool for their day-to-day operations and
often shut down or lay off employees when banks will not
provide the necessary credit.
And the Federal Reserve (Fed) has already proffered new
rules--due to be implemented on July 1, 2010--to protect
consumers who use credit cards. Utilizing its statutory
authority under the Federal Trade Commission Act to limit
unfair or deceptive acts or practices and its power under the
Truth in Lending Act (Regulation Z) to regulate account
disclosures, the Fed has issued 1,200 pages of regulations that
fully address many of the practices that consumers find
offensive and that H.R. 627 purports to remedy. Given the
complexity of credit card products and cardholder agreements,
the Fed engaged in an extensive rule-writing process and
conducted wide-ranging consumer testing to ensure that the new
rules could be effective.
Even as it spent more than three years drafting rules,
reacting to the concerns that more than 60,000 individuals
shared in comment letters and studying the ways that
individuals process card disclosures, the Fed acknowledged that
its regulations may increase the costs of credit and limit its
availability. As former Fed Governor Randall Kroszner said when
announcing the new rules, ``Unfair practices can impose
significant costs on consumers. Likewise, the new rules will
have a cost, too. . . . Although consumers might see some costs
decline as new business models emerge, consumers might see
other costs increase.'' The strong possibility that responsible
credit cardholders will face higher costs from limitations on
issuers' ability to price for risk is all the more reason why
layering potentially conflicting statutory directives on top of
the comprehensive regulatory regime established by the Federal
Reserve is unwise.
Implementing sweeping reforms that might work takes time.
In a December 2008 meeting to finalize the rules, the Federal
Reserve System's Director of Consumer Affairs explained to
Chairman Ben Bernanke that because card issuers will need to
rethink their entire business models, reprogram their systems,
and redesign their marketing materials, solicitations, periodic
statements and contracts, no earlier implementation date than
July 2010 would be feasible. Fed representatives have also
testified previously that speeding up implementation could be
counter-productive if issuers passed higher expenses on to
customers or eliminated some product offerings that consumers
depend on. The Majority seems to disagree.
Yet the Majority cannot credibly contend that the
regulators are stalling or that its solutions are inadequate.
H.R. 627 has been designed to address identical consumer
concerns. Like the Fed rules, H.R. 627 seeks to prevent card
companies from accruing finance charges because of two-cycle
billing computation methods; increasing interest rates
retroactively; allocating payments to maximize interest rate
charges; and providing consumers insufficient time to make
payments. Heeding the Fed's warnings that H.R. 627's three-
month implementation period was unreasonably short and
potentially harmful to consumers, the Financial Institutions
and Consumer Credit Subcommittee accepted an amendment to delay
H.R. 627's implementation date. But the Full Committee undid
the Subcommittee's work, over the regulators' objections, and
accepted an amendment offered by Mrs. Maloney and Mr. Maffei to
re-accelerate the implementation of certain disclosure rules.
The Committee Majority also defeated--on a straight party-
line vote--a second-degree amendment that Mr. Hensarling
offered to a provision added by Mrs. Waters requiring the
Federal banking regulators to study the ways creditors make
credit decisions based on geography and consumer spending
patterns. The Hensarling amendment would have simply required
the study to also encompass the impact of the legislation on
the costs and availability of credit for consumers, yet
Democrats voted in lock-step to block it. This suggests that
the Majority either does not care about the consequences of the
legislation it passes, or fears that the findings of an
independent study of such consequences would validate the
concerns of those who believe that H.R. 627 threatens to do
more harm than good.
Economic anxiety is widespread and Americans do not feel
secure. Yet H.R. 627, a bill whose proponents claim will
address one of the sources of that anxiety, may only make
matters worse, by driving up the costs of credit and
significantly curtailing its availability. It is the wrong bill
at the wrong time.
Michele Bachmann.
Scott Garrett.
Thomas Price.
Spencer Bachus.
Jeb Hensarling.
Randy Neugebauer.
Frank D. Lucas.