SENATE DOCKET, NO. 1000 FILED ON: 1/13/2009
SENATE . . . . . . . . . . . . . . No. 177
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The Commonwealth of Massachusetts
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In the Year Two Thousand Nine
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An Act to protect consumers who hold credit cards..
Be it enacted by the Senate and House of Representatives in General Court assembled, and by the authority of the same, as follows:
SECTION 1. Chapter 26 of the General Laws as appearing in the 2006 official edition is hereby amended by adding after section 5A the following new section:
Section 5B Consumer Credit Card Protection
1. Whereas the Annual Percentage Rate established by the federal Truth in Lending Act is not alone a sufficient vehicle for comparison between credit card contracts; and
Whereas disclosure law is not sufficient to eliminate all predatory lending and solicitation practices in the issuance of credit cards; and
Whereas regulation of debt counseling agencies has not prevented abuses against consumers who have acquired significant credit card debt; and
Whereas the use of credit cards is common among consumers nation-wide; and
Whereas the Commonwealth is barred by federal law from regulating many substantive terms of credit card contracts between out-of-state credit card issuers and Massachusetts consumers;
Therefore, it is the intent of the General Court to increase consumer education within the Commonwealth regarding the practices of credit card issuers and to enhance consumer choice.
2. Purpose
It is the intent of the General Court to develop an effective system for enabling Massachusetts consumers to make informed decisions regarding the acceptance of credit card contracts and the acquisition and management of credit card debt. This system shall include the creation of a rubric and grading mechanism for credit card issuers and their contracts, rely on enhanced disclosure requirements in credit card advertisements and solicitation materials, involve the development of state consumer counseling services for holders of credit cards, promote competition between credit card issuers, and increase the availability of credit-card alternatives.
3. Definitions. The following words and phrases when used in this section shall have the following meanings:--
“Card holder”, any person to whom a credit card is issued or any person who has agreed with the card issuer to pay obligations arising from the issuance of a credit card to another person.
“Card issuer” or “issuer”, any bank, retailer, corporate entity, bank holding company, or other financial or commercial institution, or any individual who issues a credit card, or the agent of such person with respect to such card.
“Commissioner”, the commissioner of banks.
“Consumer”, A natural person whose money, property, or services are the subject of transactions.
“Credit”, the right granted by a creditor to a debtor to defer payment of debt or to incur debt and defer its payment.
“Credit card”, any card, plate, coupon book, or other credit device existing for the purpose of obtaining money, property, labor, or services on credit, including temporary credit cards, such as paper slips containing an account number, issued for use while a permanent credit card is manufactured.
SECTION 4. Creation of the office of credit card information services
There shall be an office of credit card information services, in this chapter called the office, and a director of credit card information services who shall have and shall exercise supervision and control of the office. The commissioner of banks shall appoint, with the approval of the governor, the director of credit card information services, who shall serve at the pleasure of the commissioner and may be removed by the commissioner at any time, subject to approval by the governor. The director shall appoint and may remove such agents and subordinate officers as the director may deem necessary.
The office of credit card information services shall have the power to enforce the provisions of this Act, and to levy fines and other civil or criminal penalties against violators of this Act.
SECTION 5. Credit Card Issuer Grading
The office of credit card information services shall establish a rubric for grading the lending practices of credit card issuers that contract with credit card holders and solicit consumers in the Commonwealth.
The rubric shall rely upon the following criteria, considering generally the bulk of an issuer’s contracts, correspondences, transactions, advertisements, and solicitations and all of an issuer’s credit card programs, if the issuer offers several, within Massachusetts:
The issuer’s overall compliance with disclosure law;
The issuer’s debt-collection practices;
The issuer’s customer service record;
The issuer’s fees and interest charges as compared with other issuers or credit lenders;
The understandability of the issuer’s credit card contracts, solicitations, and advertisements;
The extent to which the issuer engages in intentionally misleading practices or disseminates purposely misleading correspondences, advertisements, or solicitations; and
Any other factors which the office reasonably deems to be in accordance with the purpose and goals of this Act.
Said rubric shall be publically disseminated and made available online.
The office shall review the rubric at least once annually and shall update the rubric as is necessary to respond to the changing needs of Massachusetts consumers.
The office shall give any credit card issuer which contracts with or solicits consumers in the Commonwealth an A, B, C, D or F grade corresponding to the issuer’s placement on the rubric.
Issuer grades shall be given on a curve to ensure that the rubric and grading system are a vehicle for comparing issuers to one another rather than to a static set of criteria.
No more than 15% and no fewer than 5% of issuers shall receive an A grade.
No more than 50% of issuers shall receive a B grade.
No more than 50% of issuers shall receive a C grade.
No more than 50% of issuers shall receive a D grade.
No more than 15% of issuers shall receive an F grade.
No fewer than 10% of issuers shall receive a grade lower than C.
The office may, five years after this Act goes into effect, discard the percentage requirements contained in provisions (a) through (f) of this subsection if the office finds that the practices of credit card issuers have undergone enough change to merit different curve requirements.
The office shall review individual issuer grades annually and update such grades if the issuer’s practices have changed, the rubric has changed, or as the office deems necessary. The office may change an issuer’s grade before the annual review if the issuer is found to be in violation of this act or if the issuer has committed an extreme deviation from its usual practices.
The office shall notify a credit card issuer of a change in grade, whether pursuant to annual review or otherwise.
A credit card issuer may appeal its grade to the office. The office shall establish an internal appeals process for this purpose and shall have discretion to determine its own appeals procedure. The office may deny appeals that it reasonably finds lack merit.
A credit card issuers may petition to change its individual grade prior to the next annual review if the issuer’s practices have changed or if office of credit card information services has updated the rubric in such a way that may potentially impact the issuer’s grade. The office shall establish an internal system for reviewing such petitions and shall have discretion to determine its petition review procedure. The office may deny petitions that it reasonably finds lack merit.
Each credit card issuer shall print the grade that it is assigned by the Massachusetts office of credit card information services in the upper left corner of the front or only page of any still advertisement it disseminates within the Commonwealth, including but not limited to fliers, magazine pages, pamphlets, bill boards, floor stands, window hangings, posters, post cards, and cardboard cut outs, and on any letter, pamphlet, booklet, flier, postcard or other printed material solicitation that is sent by mail to any individual person or household, named or unnamed, within the state of Massachusetts.
If such mailing contains multiple, separate pamphlets, letters, booklets or other print material solicitation, the issuer shall print its grade at the top left corner of the front or only page of each such solicitation.
The grade shall be printed in red ink inside of a white box. The white box shall be no smaller than five percent of the surface area of the largest page contained within the solicitation or advertisement. The grade shall be printed to fit exactly inside the white box.
There shall be nothing printed directly above or to the left of the grade. Directly beneath each grade box shall be printed in red ink the words “rating by the Massachusetts office of credit card information services” on blank, white space in size ten font or larger.
In the event that an advertisement or solicitation is irregularly shaped and does not have an upper left corner, the grade box shall be printed within the top twenty percent of the page subject to all other provisions for regularly shaped pages.
Radio credit card advertisements broadcast within Massachusetts shall verbally disclose the issuer’s grade by clearly stating, “[name of issuer] is rated [grade] by the Massachusetts office of credit card information services” at a normal talking speed.
Televised credit card advertisements broadcast within Massachusetts shall verbally disclose the issuer’s grade by clearly stating, “[name of issuer] is rated [grade] by the Massachusetts office of credit card information services” at a normal talking speed and display the grade in red against a white screen for the duration of the verbal disclosure. The white space shall cover the entire screen and the grade shall be framed to an exact fit with the screen.
SECTION 6. Misleading Information
No credit card issuer shall refer to a print material disseminated within Massachusetts as a “questionnaire,” “survey,” or a synonym therefore unless the issuer intends to use that print material specifically and exclusively for its own information gathering purposes. A questionnaire or survey may not be printed on the same page as nor affixed to a document that signifies a consumer’s assent to any new contract terms, the purchase of any new product or service, or payment of a new charge or fee.
SECTION 7. Targeting of consumers
Credit card issuers may not specifically target or concentrate advertising or solicitations in low-income neighborhoods, localities with low English-literacy, or localities where large percentages of the population have not completed high school. The office of credit card information shall promulgate standards for determining when a credit card issuer is singling out such areas for advertising or solicitation and shall issue regulations curbing these practices.
SECTION 8. Services
The office of credit card information services shall take reasonable action to inform the public of the services that it provides.
The office of credit card information services shall conduct regular public information sessions at high schools, colleges, community centers, and other places of public gathering throughout the state. Public information sessions shall be conducted in such a way to meet the following goals:
Increasing financial literacy;
Addressing the questions of individuals regarding their specific credit card contracts;
Aiding individuals to develop debt management skills;
Helping consumers to choose the right credit card for their individual needs.
The office of credit card information services shall offer an online help service to address individuals’ questions about credit cards, the terms of their own credit card contracts and debt management. Such online help service may involve a public e-mail address, blogging, forums or message boards, real time chat, or any other electronic methods the office chooses to employ. The office shall also consider making available a telephone hotline.
The office shall collect and disseminate information regarding various debt counseling agencies that operate within the state of Massachusetts. The office shall rate such agencies based on the extent to which they respond to the needs of indebted consumers and promulgate a list of approved and unapproved debt counseling agencies, to be made available on its website. The office shall refer indebted consumers to debt counseling agencies based on these ratings and shall only refer consumers to those agencies that it has approved.
The office shall not approve a debt counseling agency that:
Regularly pressures consumers into debt repayment plans they cannot afford;
Is affiliated with or funded by creditors or acts as a debt collection service;
Claims to be able to positively alter a consumer’s credit report for a fee;
Regularly misrepresent the terms of debt consolidation loans.