Amended in Senate March 24, 2014

Senate Bill No. 1338

Introduced by Senator Wyland

February 21, 2014

An act to amend Section 1748.13 of the Civil Code, relating to credit cards.

LEGISLATIVE COUNSEL’S DIGEST

SB 1338, as amended, Wyland. Credit cards: disclosures.

Existing law, the Areias Credit Card Full Disclosure Act of 1986, requires a credit card issuer, with each billing statement provided to a cardholder in this state, to provide certain information on the front of the first page of the billing statement. begin delete Existing law defines various terms for purposes of carrying out that requirement. end delete

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This bill would make nonsubstantive changes to that definition provision.

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This bill would require a credit card issuer, on the front page of a billing statement, also to provide written statements disclosing that a missed credit card bill payment can affect a cardholder’s credit history, credit report score, and ability to acquire more credit, and disclosing how a credit score is typically calculated using payment history, amounts owed, length of credit history, new credit, and types of credit used.

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Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Section 1748.13 of the Civil Code is amended
to read:

1748.13.  

(a) A credit card issuer shall, with each billing
statement provided to a cardholder in this state, provide the
following on the front of the first page of the billing statement in
type no smaller than that required for any other required disclosure,
but in no case in less than 8-point capitalized type:

(1) A written statement in the following form: “Minimum
Payment Warning: Making only the minimum payment will
increase the interest you pay and the time it takes to repay your
balance.”

(2) Either of the following:

(A) A written statement in the form of and containing the
information described in clause (i) or (ii), as applicable, as follows:

(i) A written three-line statement, as follows:

“A one thousand dollar ($1,000) balance will take 17 years and
three months to pay off at a total cost of two thousand five hundred
ninety dollars and thirty-five cents ($2,590.35).
A two thousand five hundred dollar ($2,500) balance will take 30
years and three months to pay off at a total cost of seven thousand
seven hundred thirty-three dollars and forty-nine cents ($7,733.49).
A five thousand dollar ($5,000) balance will take 40 years and two
months to pay off at a total cost of sixteen thousand three hundred
five dollars and thirty-four cents ($16,305.34).
This information is based on an annual percentage rate of 17
percent and a minimum payment of 2 percent or ten dollars ($10),
whichever is greater.”

In the alternative, a credit card issuer may provide this
information for the three specified amounts at the annual percentage
rate and required minimum payment which are applicable to the
cardholder’s account. The statement provided shall be immediately
preceded by the statement required by paragraph (1).

(ii) Instead of the information required by clause (i), retail credit
card issuers shall provide a written three-line statement to read, as
follows:

“A two hundred fifty dollar ($250) balance will take two years
and eight months to pay off begin insert at end insert a total cost of three hundred
twenty-five dollars and twenty-four cents ($325.24).

A five hundred dollar ($500) balance will take four years and five
months to pay off at a total cost of seven hundred nine dollars and
ninety cents ($709.90).
A seven hundred fifty dollar ($750) balance will take five years
and five months to pay off at a total cost of one thousand
ninety-four dollars and forty-nine cents ($1,094.49).
This information is based on an annual percentage rate of 21
percent and a minimum payment of 5 percent or ten dollars ($10),
whichever is greater.”

In the alternative, a retail credit card issuer may provide this
information for the three specified amounts at the annual percentage
rate and required minimum payment which are applicable to the
cardholder’s account. The statement provided shall be immediately
preceded by the statement required by paragraph (1). A retail credit
card issuer is not required to provide this statement if the
cardholder has a balance of less than five hundred dollars ($500).

(B) A written statement providing individualized information
indicating an estimate of the number of years and months and the
approximate total cost to pay off the entire balance due on an
open-end credit card account if the cardholder were to pay only
the minimum amount due on the open-ended account based upon
the terms of the credit agreement. For purposes of this
subparagraph only, if the account is subject to a variable rate, the
creditor may make disclosures based on the rate for the entire
balance as of the date of the disclosure and indicate that the rate
may vary. In addition, the cardholder shall be provided with
referrals or, in the alternative, with the “800” telephone number
of the National Foundation for Credit Counseling through which
the cardholder can be referred, to credit counseling services in, or
closest to, the cardholder’s county of residence. The credit
counseling service shall be in good standing with the National
Foundation for Credit Counseling or accredited by the Council on
Accreditation for Children and Family Services. The creditor is
required to provide, or continue to provide, the information
required by this paragraph only if the cardholder has not paid more
than the minimum payment for six consecutive months, after July
1, 2002.

(3) (A) A written statement in the following form: “For an
estimate of the time it would take to repay your balance, making
only minimum payments, and the total amount of those payments,
call this toll-free telephone number: (Insert toll-free telephone
number).” This statement shall be provided immediately following
the statement required by subparagraph (A) of paragraph (2). A
credit card issuer is not required to provide this statement if the
disclosure required by subparagraph (B) of paragraph (2) has been
provided.

(B) The toll-free telephone number shall be available between
the hours of 8 a.m. and 9 p.m., Pacific standard time, seven days
a week, and shall provide consumers with the opportunity to speak
with a person, rather than a recording, from whom the information
described in subparagraph (A) may be obtained.

(C) The Department of Financial Institutions shall establish a
detailed table illustrating the approximate number of months that
it would take and the approximate total cost to repay an outstanding
balance if the consumer pays only the required minimum monthly
payments and if no other additional charges or fees are incurred
on the account, such as additional extension of credit, voluntary
credit insurance, late fees, or dishonored check fees by assuming
all of the following:

(i) A significant number of different annual percentage rates.

(ii) A significant number of different account balances, with
the difference between sequential examples of balances being no
greater than one hundred dollars ($100).

(iii) A significant number of different minimum payment
amounts.

(iv) That only minimum monthly payments are made and no
additional charges or fees are incurred on the account, such as
additional extensions of credit, voluntary credit insurance, late
fees, or dishonored check fees.

(D) A creditor that receives a request for information described
in subparagraph (A) from a cardholder through the toll-free
telephone number disclosed under subparagraph (A), or who is
required to provide the information required by subparagraph (B)
of paragraph (2), may satisfy its obligation to disclose an estimate
of the time it would take and the approximate total cost to repay
the cardholder’s balance by disclosing only the information set
forth in the table described in subparagraph (C). Including the full
chart along with a billing statement does not satisfy the obligation
under this section.

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(4) A written statement disclosing that a missed credit card bill
payment can affect a cardholder’s credit history, credit report
score, and ability to acquire more credit.

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(5) A written statement disclosing how a credit score is typically
calculated using payment history, amounts owed, length of credit
history, new credit, and types of credit used.

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(b) For the purposes of this section, the following definitions
apply:

(1) “Credit card” has the same meaning as in paragraph (2) of
subdivision (a) of Section 1748.12.

(2) “Open-end credit card account” means an account in which
consumer credit is granted by a creditor under a plan in which the
creditor reasonably contemplates repeated transactions, the creditor
may impose a finance charge from time to time on an unpaid
balance, and the amount of credit that may be extended to the
consumer during the term of the plan is generally made available
to the extent that any outstanding balance is repaid and up to any
limit set by the creditor.

(3) “Retail credit card” means a credit card is issued by or on
behalf of a retailer, or a private label credit card that is limited to
customers of a specific retailer.

(c) (1) This section shall not apply in any billing cycle in which
the account agreement requires a minimum payment of at least 10
percent of the outstanding balance.

(2) This section shall not apply in any billing cycle in which
finance charges are not imposed.