INACCURATE AND UNFAIR BILLING PRACTICES MONDAY, MAY 21, 1973 U.S. SENATE, COMMITTEE ON BANKING, HOUSING AND URBAN AFFAIRS, Washington, D.C. The subcommittee met at 10 a.m., pursuant to call, in room 5302, Dirksen Senate Office Building, Senator William Proxmire, presiding. Senator PROXMIRE. Today the subcommittee will begin 4 days of hearings on fair credit billing legislation, S. 914 which I introduced and S. 1630 introduced by Senator Sparkman and Senator Brock. S. 1630 is essentially the bill passed by the Senate last year which I wound up voting against on the grounds that vital consumer safeguards were deleted by the bill. S. 914 would restore those safeguards. As the chairman of the newly created Consumer Credit Subcommittee, I will do my best to see that the committee and the Congress will pass a stronger Fair Credit Billing Act this year. S. 914 restores several key provisions stricken by the Senate Banking Committee last year. As the chairman of the newly created Subcommittee on Consumer Credit, I predict the committee will pass a stronger Fair Credit Billing Act this year. The Fair Credit Billing Act, S. 914, has four main objectives: First, to establish a fair and equitable system for resolving billing disputes on monthly charge accounts: Correction of billing errors. Creditors are required to acknowledge customer billing inquiries within 30 days and to resolve those inquiries within 90 days. The creditor cannot send dunning letters, threaten the consumer with an adverse credit report, or take other collection action until the inquiry is resolved. An inquiry is resolved by either correcting the customer's bill or explaining why the original bill was correct. Limitation on credit reports. If a bill is still disputed after the creditor's explanation, he cannot report it as delinquent unless he tells the consumer and informs the credit bureau that the amount is disputed. The creditor must also report any subsequent resolution of the dispute. Disclosures to consumers. Creditors must indicate on their monthly bills an address for handling billing disputes and disclose twice yearly the customer's legal rights to have disputes resolved. Second, to prohibit unfair billing practices and systems: Length of billing period. Creditors must mail their monthly billing statements at least 14 days before the payment is due. Crediting of Payments. Creditors must promptly credit payments and refund any excess payments on request. (1) Prompt notification of returns. Merchants honoring credit cards must promptly notify the card issuer of any return of merchandise or similar adjustment. Ban on minimum finance charges. Minimum finance charges on revolving charge accounts are prohibited unless they are imposed on all accounts regardless of size or manner of payment, or on all accounts more than 60 days delinquent. Ban on retroactive finance charges. Creditors are prohibited from using retroactive billing systems which charge interest against balances outstanding before the due date. Consumers are being charged at least $200 million a year in extra finance charges because of these retroactive systems. Third, to prohibit anticompetitive practices in the credit card industry: Discounts for cash buyers. Credit card issuers cannot prohibit merchants who honor the card from offering a discount to cash buyers. Prohibition of tie-in arrangements. Credit card issuers cannot require merchants to maintain deposits or purchase other services as a condition for participating in the credit card plan. Fourth, to strengthen a consumer's legal rights when he uses credit cards: Prohibition of offsets. Banks cannot offset a consumer's credit card debt against his deposit account unless the customer has previously agreed and has been given 10 days to rescind the offset. Defenses of credit cardholders. Credit card customers are given the legal right to withhold payment for defective merchandise purchased with a bank credit card and to assert the same legal defenses against the card issuer that they have against the merchant honoring the card. [Copies of the two bills and a letter and memorandum from Governor Burns of the Federal Reserve Board, follow:] 93D CONGRESS 1ST SESSION S. 1630 IN THE SENATE OF THE UNITED STATES APRIL 18, 1973 Mr. SPARKMAN (for himself and Mr. BROCK) introduced the following bill; which was read twice and referred to the Committee on Banking, Housing and Urban Affairs A BILL To amend the Truth in Lending Act to protect consumers against inaccurate and unfair billing practices, and for other purposes. 1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 3 That this Act may be cited as the "Truth in Lending Act 4 Amendments of 1973". 5 TITLE I-FAIR CREDIT BILLING 6 § 101. Short title 7 This title may be cited as the "Fair Credit Billing Act". 8 § 102. Declaration of purpose 9 The last sentence of section 102 of the Truth in Lending 10 Act (15 U.S.C. 1601) is amended by striking out the period 2 1 and inserting in lieu thereof a comma and the following: 2 "and to protect the consumer against inaccurate and unfair 3 credit billing and credit card practices." 4 §103. Definition of creditor 5 Section 103 (f) of the Truth in Lending Act (15 U.S.C. 6 1602 (f)) is amended by adding at the end thereof the fol7 lowing: "Notwithstanding the foregoing, for the purposes of 8 the requirements imposed under sections 127 (a) (6), 127 9 (a) (7), 127 (a) (8), 127 (b) (1), 127 (b) (2), 127(b) 10 (3), 127 (b) (11), and chapter 4 of this title, the term 11 'creditor' means any person who regularly extends credit or 12 arranges for the extension of credit in connection with loans, sales of property or services, or otherwise." 13 14 § 104. Identification of transaction 15 16 17 18 19 222 20 21 22 2 23 Section 127 (b) (2) of the Truth in Lending Act (15 U.S.C. 1637 (b) (2)) is amended to read as follows: "(2) The amount and date of each extension of credit during the period and a brief identification on or accompanying the statement of each extension of credit in a form prescribed by regulations of the Board sufficient to enable the obligor to identify the transaction, or relate it to copies of sales vouchers or similar instruments previously furnished." 24 § 105. Disclosure of fair credit billing rights 2225 (a) Section 127 (a) of the Truth in Lending Act (15 3 1 U.S.C. 1637) is amended by adding at the end thereof a 2 new paragraph as follows: 3 4 5 6 7 8 "(8) A statement, in a form prescribed by regulations of the Board, of the protection provided by sec tion 161 to an obligor and the creditor's responsibilities under section 162. Such statement shall be provided to the obligor at least semiannually." (b) Section 127 (c) of the Truth in Lending Act (15 9 U.S.C. 1637 (c)) is amended to read as follows: 10 "(c) In the case of any existing account under an open11 end consumer credit plan having an outstanding balance of 12 more than $1 at or after the close of the creditor's first full 13 billing cycle under the plan after the effective date of sub14 section (a) or any amendments thereto, the items described 15 in subsection (a), to the extent applicable and not previously 16 disclosed, shall be disclosed in a notice mailed or delivered 17 to the obligor not later than the time of mailing the periodic 18 billing statement required by subsection (b)." 19 § 106. Disclosure of billing contact 20 Section 127 (b) of the Truth in Lending Act (15 21 U.S.C. 1637 (b)) is amended by adding at the end thereof 22 a new paragraph as follows: 222 23 24 25 "(11) The address to be used by the creditor for the purpose of receiving billing inquiries from the obligor." |