Regional Antidiscrimination and Credit Card Disclosure Act of 1991

Regional Antidiscrimination and Credit Card Disclosure Act of 1991 - Amends the Truth in Lending Act to prohibit a creditor from: (1) unilaterally terminating an open end consumer credit card account and requiring immediate repayment of the balance; or (2) reducing the credit limit of such account below the balance and requiring the immediate repayment of the balance in excess of the new limit. Provides exceptions for fraud and breach of contract.

Prohibits: (1) an agreement under an open end consumer credit plan from containing a provision allowing a creditor to unilaterally change certain terms before a specified period of notice to the consumer; and (2) arbitrary or capricious changes by the creditor. Declares that those prohibitions do not apply to a prohibition on additional extensions of credit or a reduction in the credit limit in the case of: (1) a material change in the consumer's financial circumstances; (2) default by the consumer; or (3) any change that will benefit the consumer.

Requires the Board of Governors of the Federal Reserve System to: (1) conduct a study of econometric credit review scoring systems to determine credit risk prediction accuracy; and (2) develop a credit risk assessment model for open end plan creditors which protects the institution from excessive risk and protects the availability of credit under fair and objective standards.

Amends title VII (Equal Credit Opportunity Act) of the Consumer Credit Protection Act to prohibit discrimination in any aspect of a credit transaction on the basis of: (1) the geographic region in which the applicant resides, unless the creditor has a geographically localized credit business; or (2) the location of the residence of the applicant, whether determined specifically or through zip code, census tract, or other means for determining the demographic characteristics of the neighborhood. Amends the Truth in Lending Act to prohibit any creditor from taking any action with regard to any open end consumer credit plan on such basis.

 
HR 1625 IH
102d CONGRESS
1st Session
 H. R. 1625
To amend the Truth in Lending Act and the Equal Credit Opportunity Act to
prohibit credit card issuers from taking adverse actions against consumers
on the basis of the location of the consumer's residence, to prohibit the
unfair acceleration of outstanding balances on consumer credit card accounts
and limit the extent to which credit card issuers can change the terms of
the account agreement unilaterally, arbitrarily, and without adequate notice
to the consumer, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
March 22, 1991
Mr. KENNEDY (for himself and Mr. MARKEY) introduced the following bill;
which was referred to the Committee on Banking, Finance and Urban Affairs
A BILL
To amend the Truth in Lending Act and the Equal Credit Opportunity Act to
prohibit credit card issuers from taking adverse actions against consumers
on the basis of the location of the consumer's residence, to prohibit the
unfair acceleration of outstanding balances on consumer credit card accounts
and limit the extent to which credit card issuers can change the terms of
the account agreement unilaterally, arbitrarily, and without adequate notice
to the consumer, and for other purposes.
  Be it enacted by the Senate and House of Representatives of the United
  States of America in Congress assembled,
SECTION 1. SHORT TITLE.
  This Act may be cited as the `Regional Antidiscrimination and Credit Card
  Disclosure Act of 1991'.
SEC. 2. CONSUMER CREDIT CARDHOLDER PROTECTIONS.
  (a) IN GENERAL- Chapter 2 of the Truth in Lending Act (15 U.S.C. 1631 et
  seq.) is amended by adding at the end the following new section:
`SEC. 138. CONSUMER CREDIT CARD PROTECTIONS.
  `(a) PROHIBITION ON ACCELERATION-
  `(1) IN GENERAL- In the case of any credit card account under an open end
  consumer credit plan, the creditor may not--
  `(A) unilaterally terminate the account and require the immediate repayment
  of the outstanding balance; or
  `(B) reduce the credit limit applicable to the account below the amount of
  any outstanding balance on the account and require the immediate repayment
  of that portion of the outstanding balance in excess of the new applicable
  credit limit.
  `(2) EXCEPTION FOR FRAUD, BREACH OF CONTRACT, ETC- Paragraph (1) shall
  not apply with respect to any credit card account referred to in such
  paragraph in the case of--
  `(A) fraud or material misrepresentation on the part of the consumer in
  connection with the account; or
  `(B) failure by the consumer to meet the repayment terms of the agreement
  for any outstanding balance.
  `(b) REGULATION OF CHANGES IN TERMS-
  `(1) PROHIBITION ON UNILATERAL CHANGES IN TERMS WITHOUT ADEQUATE NOTICE-
  No credit card account agreement under an open end consumer credit plan
  may contain a provision which permits a creditor to change unilaterally
  any term required to be disclosed under section 127(a) or any other term
  (other than an insignificant term) before the end of the 60-day period
  beginning on the date the consumer receives actual notice of such change.
  `(2) PROHIBITION ON ARBITRARY CHANGES-
  `(A) IN GENERAL- No change in any term required to be disclosed under
  section 127(a) with respect to any credit card account under an open end
  consumer credit plan may be made arbitrarily or capriciously by the creditor.
  `(B) REGULATIONS- The Board shall prescribe such regulations as the Board
  determines to be necessary to implement and enforce the requirement of
  subparagraph (A) and prevent evasions of such requirement.
  `(C) CREDIT REVIEW SCORING SYSTEMS- The regulations prescribed by the Board
  under subparagraph (A) prohibiting arbitrary credit determinations shall
  include requirements relating to the methodology used in developing credit
  review scoring systems and the manner in which and the circumstances under
  which such systems may be used in reviewing any consumer credit cardholder's
  credit standing.
  `(3) CERTAIN CHANGES NOT PRECLUDED- Paragraph (1) and (2) shall not apply
  to any of the following changes with respect to any credit card account:
  `(A) A prohibition on additional extensions of credit or a reduction in
  the credit limit applicable to the account during any period in which the
  creditor has reason to believe that the consumer will be unable to comply
  with the repayment requirements of the account due to a material change
  in that consumer's financial circumstances.
  `(B) A prohibition on additional extensions of credit or a reduction in
  the credit limit applicable to the account during any period in which the
  consumer is in default with respect to material obligation of the consumer
  under the agreement.
  `(C) Any change that will benefit the consumer.
  `(3) MATERIAL OBLIGATION- At the time an agreement is entered into by a
  consumer to open a credit card account under an open end consumer credit
  plan, the consumer shall be given a list of the categories of contract
  obligations which are considered by the creditor to be material obligations
  of the consumer under the agreement for purposes of paragraph (2)(B).'.
  (b) CLERICAL AMENDMENT- The table of sections for chapter 2 of the Truth
  in Lending Act is amended by inserting after the item relating to section
  137 the following new item:
`138. Consumer credit card protections.'.
SEC. 3. FEDERAL RESERVE BOARD STUDY AND CREDIT RISK ASSESSMENT MODEL.
  The Board of Governors of the Federal Reserve System shall--
  (1) conduct a study of econometric credit review scoring systems in use
  today to determine the extent to which such systems accurately predict
  credit risk; and
  (2) develop a credit risk assessment model for use by creditors under open
  end consumer credit plans which--
  (A) protects the institution from excessive credit risk; and
  (B) protects the availability of adequate credit for consumers under fair
  and objective credit standards.
SEC. 4. PROHIBITION ON ADVERSE CONSUMER CREDIT ACTIONS ON BASIS OF GEOGRAPHIC
LOCATION.
  (a) ADDITION TO LIST OF ACTIVITIES CONSTITUTING UNLAWFUL DISCRIMINATION-
  (1) IN GENERAL- Section 701(a) of title VII of the Consumer Credit
  Protection Act (commonly referred to as the `Equal Credit Opportunity Act')
  (15 U.S.C. 1691(a)) is amended--
  (A) by striking `or' at the end of paragraph (2);
  (B) by striking the period at the end of paragraph (3) and inserting `;
  or'; and
  (C) by inserting after paragraph (3) the following new paragraph:
  `(4) on the basis of--
  `(A) the geographic region in which the applicant resides, unless the
  creditor has established a geographically localized credit business; or
  `(B) the location of the residence of the applicant, whether such location
  is determined specifically or is taken into account on the basis of the
  zip code, census tract, or other means for determining the demographic
  characteristics of the neighborhood in which the applicant resides.'.
  (2) GEOGRAPHICALLY LOCALIZED CREDIT BUSINESS- Section 702 of title VII of
  the Consumer Credit Protection Act (commonly referred to as the `Equal
  Credit Opportunity Act') (15 U.S.C. 1691a) is amended by adding at the
  end the following new subsection:
  `(h) GEOGRAPHICALLY LOCALIZED CREDIT BUSINESS DEFINED- The term
  `geographically localized credit business' means any business which, from
  the time such business was first organized and on the basis of a general
  business plan which is strictly adhered to, limits extensions of credit under
  any open end consumer credit plan to applicants and consumers who reside
  within a circumscribed geographic region described in the business plan.'.
  (b) PROHIBITION ON ADVERSE ACTIONS ON BASIS OF LOCATION OF CONSUMER'S
  RESIDENCE- Section 127 of the Truth in Lending Act (15 U.S.C. 1637) is
  amended by adding at the end the following new subsection:
  `(h) CERTAIN FORMS OF DISCRIMINATION PROHIBITED UNDER OPEN END CREDIT
  CARD PLANS- No creditor may take any action or impose any condition with
  respect to any credit card account under any open end consumer credit plan,
  or change any term of the agreement for such account (including the amount
  of credit available under such agreement), on the basis of--
  `(1) the geographic region in which the consumer resides, unless the
  creditor has established a geographically localized credit business (as
  defined in section 702(h) of this Act); or
  `(2) the location of the residence of the consumer, whether such location
  is determined specifically or is taken into account on the basis of the
  zip code, census tract, or any other means for determining the demographic
  characteristics of the neighborhood in which the applicant resides.'.