Credit CARD Act of 2009
Title I ~ SEC. 101. PROTECTION OF CREDIT CARDHOLDERS
(a) Advance Notice of Rate Increase and Other Changes Required-
(1) AMENDMENT TO TILA- Section 127 of the Truth in Lending Act (15 U.S.C. 1637) is amended by adding at the end the following:
(i) Advance Notice of Rate Increase and Other Changes Required-
(1)
ADVANCE NOTICE OF INCREASE IN INTEREST RATE REQUIRED- In the case of
any credit card account under an open end consumer credit plan, a
creditor shall provide a written notice of an increase in an annual
percentage rate (except in the case of an increase described in
paragraph (1), (2), or (3) of section 171(b)) not later than 45 days
prior to the effective date of the increase.
(2) ADVANCE NOTICE
OF OTHER SIGNIFICANT CHANGES REQUIRED- In the case of any credit card
account under an open end consumer credit plan, a creditor shall
provide a written notice of any significant change, as determined by
rule of the Board, in the terms (including an increase in any fee or
finance charge, other than as provided in paragraph (1)) of the
cardholder agreement between the creditor and the obligor, not later
than 45 days prior to the effective date of the change.
(3)
NOTICE OF RIGHT TO CANCEL- Each notice required by paragraph (1) or (2)
shall be made in a clear and conspicuous manner, and shall contain a
brief statement of the right of the obligor to cancel the account
pursuant to rules established by the Board before the effective date of
the subject rate increase or other change.
(4) RULE OF
CONSTRUCTION- Closure or cancellation of an account by the obligor
shall not constitute a default under an existing cardholder agreement,
and shall not trigger an obligation to immediately repay the obligation
in full or through a method that is less beneficial to the obligor than
one of the methods described in section 171(c)(2), or the imposition of
any other penalty or fee.
(2) EFFECTIVE DATE- Notwithstanding
section 3, section 127(i) of the Truth in Lending Act, as added by this
subsection, shall become effective 90 days after the date of enactment
of this Act.
(b) Retroactive Increase and Universal Default
Prohibited- Chapter 4 of the Truth in Lending Act (15 U.S.C. 1666 et
seq.) is amended--
(1) by redesignating section 171 as section 173; and
(2) by inserting after section 170 the following:
(a) In General- In the case of any credit card account under an open end consumer credit plan, no creditor may increase any annual percentage rate, fee, or finance charge applicable to any outstanding balance, except as permitted under subsection (b).
(b) Exceptions- The prohibition under subsection (a) shall not apply to-
(1) an increase in an annual percentage rate upon the expiration of a specified period of time, provided that--
(A) prior to commencement of that period, the creditor disclosed to the consumer, in a clear and conspicuous manner, the length of the period and the annual percentage rate that would apply after expiration of the period;
(B) the increased annual percentage rate does not exceed the rate disclosed pursuant to subparagraph (A); and
(C) the increased annual percentage rate is not applied to transactions that occurred prior to commencement of the period;
(2) an increase in a variable annual percentage rate in accordance with a credit card agreement that provides for changes in the rate according to operation of an index that is not under the control of the creditor and is available to the general public;
(3) an increase due to the completion of a workout or temporary hardship arrangement by the obligor or the failure of the obligor to comply with the terms of a workout or temporary hardship arrangement, provided that--
(A) the annual percentage rate, fee, or finance charge applicable to a category of transactions following any such increase does not exceed the rate, fee, or finance charge that applied to that category of transactions prior to commencement of the arrangement; and
(B) the creditor has provided the obligor, prior to the commencement of such arrangement, with clear and conspicuous disclosure of the terms of the arrangement (including any increases due to such completion or failure); or
(4) an increase due solely to the fact that a minimum payment by the obligor has not been received by the creditor within 60 days after the due date for such payment, provided that the creditor shall--
(A) include, together with the notice of such increase required under section 127(i), a clear and conspicuous written statement of the reason for the increase and that the increase will terminate not later than 6 months after the date on which it is imposed, if the creditor receives the required minimum payments on time from the obligor during that period; and
(B) terminate such increase not later than 6 months after the date on which it is imposed, if the creditor receives the required minimum payments on time during that period.
(c) Repayment of Outstanding Balance-
(1) IN GENERAL- The creditor shall not change the terms governing the repayment of any outstanding balance, except that the creditor may provide the obligor with one of the methods described in paragraph (2) of repaying any outstanding balance, or a method that is no less beneficial to the obligor than one of those methods.
(2) METHODS- The methods described in this paragraph are--
(A) an amortization period of not less than 5 years, beginning on the effective date of the increase set forth in the notice required under section 127(i); or
(B) a required minimum periodic payment that includes a percentage of the outstanding balance that is equal to not more than twice the percentage required before the effective date of the increase set forth in the notice required under section 127(i).
(d) Outstanding Balance Defined- For purposes of this section, the term ‘outstanding balance’ means the amount owed on a credit card account under an open end consumer credit plan as of the end of the 14th day after the date on which the creditor provides notice of an increase in the annual percentage rate, fee, or finance charge in accordance with section 127(i).
(c) Interest Rate Reduction on Open End Consumer Credit Plans- Chapter 3 of the Truth in Lending Act (15 U.S.C. 1661 et seq.) is amended by adding at the end the following:
SEC. 148. INTEREST RATE REDUCTION ON OPEN END CONSUMER CREDIT PLANS
(a) In General- If a creditor increases the annual percentage rate applicable to a credit card account under an open end consumer credit plan, based on factors including the credit risk of the obligor, market conditions, or other factors, the creditor shall consider changes in such factors in subsequently determining whether to reduce the annual percentage rate for such obligor.
(b) Requirements- With respect to any credit card account under an open end consumer credit plan, the creditor shall--
(1) maintain reasonable methodologies for assessing the factors described in subsection (a);
(2) not less frequently than once every 6 months, review accounts as to which the annual percentage rate has been increased since January 1, 2009, to assess whether such factors have changed (including whether any risk has declined);
(3) reduce the annual percentage rate previously increased when a reduction is indicated by the review; and
(4) in the event of an increase in the annual percentage rate, provide in the written notice required under section 127(i) a statement of the reasons for the increase.
(c) Rule of Construction- This section shall not be construed to require a reduction in any specific amount.
(d) Rule making- The Board shall issue final rules not later than 9 months after the date of enactment of this section to implement the requirements of and evaluate compliance with this section, and subsections (a), (b), and (c) shall become effective 15 months after that date of enactment.’.
(d) Introductory and Promotional Rates- Chapter 4 of the Truth in Lending Act (15 U.S.C. 1666 et seq.) is amended by inserting after section 171, as amended by this Act, the following:
SEC. 172. ADDITIONAL LIMITS ON INTEREST RATE INCREASES
(a) Limitation on Increases Within First Year- Except in the case of an increase described in paragraph (1), (2), (3), or (4) of section 171(b), no increase in any annual percentage rate, fee, or finance charge on any credit card account under an open end consumer credit plan shall be effective before the end of the 1-year period beginning on the date on which the account is opened.
(b) Promotional Rate Minimum Term- No increase in any annual percentage rate applicable to a credit card account under an open end consumer credit plan that is a promotional rate (as that term is defined by the Board) shall be effective before the end of the 6-month period beginning on the date on which the promotional rate takes effect, subject to such reasonable exceptions as the Board may establish, by rule.’.
(e) Clerical Amendment- The table of sections for chapter 4 of the Truth in Lending Act is amended by striking the item relating to section 171 and inserting the following:
171. Limits on interest rate, fee, and finance charge increases applicable to outstanding balances
172. Additional limits on interest rate increases
173. Applicability of State laws