Prohibits the mailing of credit card applications; provides for a penalty of no more than one thousand dollars per occurrence; makes exemptions.
TITLE OF BILL: An act to amend the general business law, the banking law and the personal property law, in relation to prohibiting unsolicited mailing of credit card applications
PURPOSE: To prohibit the mailing of unsolicited credit card applications.
SUMMARY OF PROVISIONS: The opening paragraph and subdivision 9 of section 520 of the general business law, the opening paragraph as added by chapter 200 of the laws of 1987 and subdivision 9 as added by chapter 485 of the laws of 1996, are amended and three new subdivisions 10, 11, and 12 are added.
Subdivision 10 states that, except as provided in subdivision 12 of this section, it shall be unlawful for any financial institution, retail merchant or other person to mail or otherwise deliver any credit card application or credit card in this state.
Subdivision 11 states that upon conviction of this section, a fine of no more than one thousand dollars per occurrence shall be imposed.
Subdivision 12 states that this section shall not apply to any credit card application or credit card when mailed or otherwise delivered either: (a) in response to a request or application for a credit card; or (b) as a replacement for a credit card previously issued to the person to whom the credit card is shipped or mailed.
JUSTIFICATION: Gary Blesky of "My Generation" writes, "for a generation hooked on plastic, getting into trouble with credit cards has never been easier." This problem stems from more than 3 billion offers that the industry mails out each year. They pull the consumer in with low introductory rates and then the rates skyrocket up to 19.9 percent permanently.
In 1991, the last year that America went through a recession, the country was spending 12.6 percent of its disposable income on household debt. That ratio has now been raised to 14.1 percent which is dangerously close to the 15 percent level that financial pros flag as the line between having debt and having a debt problem. This reliance on plastic is not likely to diminish now, as the economy slows and cash gets tighter.
According to Cardweb.com, Inc., an independent research firm that focuses on the payment card industry, there are currently 281 million people in the US. Approximately 185 million Americans use credit cards.
There are about 500 million consumer bank credit cards (VISA, MasterCard, Discover, and American Express) and about 700 million retail credit cards and other credit cards. With a total of 1.2 billion credit cards the average per cardholder would be 6.5 cards. Approximately only 40% of credit card accounts are paid off each month nationally. Of these credit card holders 1.3 million declared bankruptcy last year. It is easy to see why this is happening when, depending on how you calculate it, out of 110 million us households, the average debt per household is about $6000. For households with at least one credit card, the average debt per household is about $8000. Or for each credit card the average balance yearly per account is currently about $2500. The average household pays $1,000 a year in interest on credit cards, which figures out to be about $83.33 per month.
These credit card companies prey on people who can least afford to use and manage credit cards; students and low-income families. The average credit card debt that a college student owes by the time they graduate is approximately $3000. According to an article published on NellieMae.com by Alan Blair, today undergraduate students are leaving school with average indebtedness of over $12,000 in federal student loans.
Daniel McGinn of Newsweek referenced a study published by the University of Michigan to illustrate the rise in consumer debt (credit card debt) among low-income families in his article titled, "Are You Maxed Out?". The study found that more than half of low-income families with high consumer debts and low net worth in 1994 were still broke in 1999. It shows that their average indebtedness grew from $2,900 to $18,500.
These statistics are a clear indication of how unsolicited credit cards applications can lead to problems. These offers are aimed to get the consumer in debt not only with one credit card, but with numerous cards carrying high annual percentage rates. This aim of this legislation is to protect the consumers who are drowning in debt.
LEGISLATIVE HISTORY: 2009-10: S.1915 Referred to Consumer Protection 2008-07: S.5177 Referred to Consumer Protection 2005-06: S.1673 Referred to Consumer Protection 2004-03: S.4055 Referred to Consumer Protection 2002: S.6060 Referred to Consumer Protection
FISCAL IMPLICATIONS: None to the State
EFFECTIVE DATE: This act shall take effect one hundred eighty days after it shall have become a law.
STATE OF NEW YORK ________________________________________________________________________ 4299 2011-2012 Regular Sessions IN SENATE March 28, 2011 ___________Introduced by Sen. CARLUCCI -- read twice and ordered printed, and when printed to be committed to the Committee on Consumer Protection AN ACT to amend the general business law, the banking law and the personal property law, in relation to prohibiting unsolicited mailing of credit card applications THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. The opening paragraph and subdivision 9 of section 520 of the general business law, the opening paragraph as added by chapter 200 of the laws of 1987 and subdivision 9 as added by chapter 485 of the laws of 1996, are amended and three new subdivisions 10, 11 and 12 are added to read as follows: Any application form
[or preapproved written solicitation]to enter into a credit card agreement for personal, family, or household purposes which is mailed to an individual residing in this state on or after January first, nineteen hundred eighty-eight, by or on behalf of [a]AN issuer, whether or not the issuer is located in this state, other than an application form or solicitation included in a magazine, newspaper, or other publication distributed by someone other than the issuer, and, any application primarily for a credit card to be used for personal, family or household purposes which is distributed or made available in this state to a resident of this state on or after January first, nine- teen hundred eighty-eight in an office or other place of business owned or operated by the issuer, shall contain the following disclosures in chart form and shall put chart headings in bold face type of at least ten point in size and material inside the chart of at least eight point type in size. Such chart shall use substantially the same format and terminology shown below. In completing the chart with the information required for each category, the guidelines hereinafter contained in the corresponding subdivisions numbered one through four shall be utilized:EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD07465-01-1 S. 4299 2
_________________________________________________________________________ | | | | |Cash Advance | | | Variable | | |Fee, Trans- | | Annual | Rate Index | Annualized | Grace | action Fee, | | Percentage | and | Membership | Period for |Late Fee, and| | Rate (1) | Spread (1a) | Fee (2) |Purchases (3)| Over-the- | | | | | |Limit Fees(4)| | | | | | | _________________________________________________________________________ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | _________________________________________________________________________ (9) Any application form
[or preapproved written solicitation]to enter into a retail installment credit agreement in which the retail seller or financing agency may take or retain a purchase money security interest, as set forth in paragraph (c) of subdivision twelve of section four hundred thirteen of the personal property law, which is mailed or otherwise made available to an individual residing in this state on or after the effective date of this subdivision, by or on behalf of an issuer, whether or not the issuer is located in this state, other than an application form or solicitation included in a magazine, newspaper, or other publication distributed by someone other than the issuer, shall contain a clear and conspicuous written notice or disclosure to the buyer that the retail seller or financing agency has or may retain a security interest in merchandise covered under paragraph (c) of subdivi- sion twelve of section four hundred thirteen of the personal property law until the full payment price of said merchandise is paid. Further provided, however, in all instances, said written notice must be provided to any buyer prior to the first transaction made under any such retail installment credit agreement in which a security interest has been or may be taken or retained. (10) EXCEPT AS PROVIDED IN SUBDIVISION TWELVE OF THIS SECTION, IT SHALL BE UNLAWFUL FOR ANY FINANCIAL INSTITUTION, RETAIL MERCHANT OR OTHER PERSON TO MAIL OR OTHERWISE DELIVER ANY CREDIT CARD APPLICATION OR CREDIT CARD IN THIS STATE. (11) UPON CONVICTION OF A VIOLATION OF THIS SECTION, A FINE OF NO MORE THAN ONE THOUSAND DOLLARS PER OCCURRENCE SHALL BE IMPOSED. (12) THIS SECTION SHALL NOT APPLY TO ANY CREDIT CARD APPLICATION OR CREDIT CARD WHEN MAILED OR OTHERWISE DELIVERED EITHER: (A) IN RESPONSE TO A REQUEST OR APPLICATION FOR A CREDIT CARD; OR (B) AS A REPLACEMENT FOR A CREDIT CARD PREVIOUSLY ISSUED TO THE PERSON TO WHOM THE CREDIT CARD IS SHIPPED OR MAILED. S 2. The third undesignated paragraph of paragraph (b) of subdivision 5 of section 108 of the banking law, as added by chapter 1 of the laws of 1994, is amended to read as follows: A written agreement, whether it provides for a fixed or variable interest rate, may provide for an introductory rate of interest at either a fixed or a variable rate, provided that the terms of such introductory rate, including, if applicable, the date on which the introductory rate shall terminate, are disclosed to the borrower. SuchS. 4299 3
disclosure shall be contained on an application form
[or pre-approved written solicitation]as specified pursuant to subdivisions one and one-a of section five hundred twenty of the general business law. A change in the interest rate upon expiration of an introductory rate shall not be considered a variable rate or a change in terms. The inter- est rate in effect after expiration of an introductory rate may apply to all amounts due under the agreement regardless of when incurred and disclosure of the same shall be provided to the borrower in the written agreement. S 3. Paragraph (a) of subdivision 3 of section 413 of the personal property law, as amended by chapter 1 of the laws of 1994, is amended to read as follows: (a) A seller may, in a retail [instalment]INSTALLMENT credit agree- ment, contract for and, if so contracted for, the seller or holder ther- eof may charge, receive and collect the service charge authorized by this article, which service charge shall not exceed the rate or rates agreed upon by the seller and the buyer, including, in accordance with the provisions of the credit agreement, rates that may vary, from time to time computed, for the purposes of this section, on the outstanding indebtedness from month to month, or if the service charge so computed is less than seventy cents for any month, seventy cents. If the credit agreement provides for a variable rate of service charge, such rate shall be determined at regular intervals as set forth in the credit agreement and in accordance with such regulations as the banking board shall prescribe but said rate shall not vary more often than once in any three month period and shall be based on a published index that is (a) readily available, (b) independently verifiable, (c) beyond the control of the seller and (d) approved by the superintendent, (e) such charges in credit agreements shall be based on the index values, or the index numbers plus or minus additional percentage points provided, however, that variations in the charge must correspond directly to the movements of the index values plus or minus additional percentage points only. Once such charge is established no lending institution may add any factors to increase the charge other than variations in the established index without the prior approval of the banking board. The banking board shall adopt regulations with respect to credit agreements that provide for a variable rate of service charge, including but not limited to: (a) providing for disclosure to the buyer by the seller of the circumstances under which the rate may increase, any limi- tations on the increase, the effect of an increase and an example of the payment terms that would result from an increase; (b) providing for disclosure to the buyer by the seller of a history of the fluctuations of the index over a reasonable period of time; and (c) providing for notice to the buyer by the seller prior to any rate increase or change in the terms of payment. The regulations shall allow a seller, holder or financing agency after choosing an approved index to choose a spread and a minimum and maximum rate of service charge at its discretion. A retail [instalment]INSTALLMENT credit agreement, whether it provides for a fixed or variable service charge, may provide for an introductory rate of service charge at either a fixed or variable rate, provided that the terms of such introductory rate, including, if applicable, the date on which the introductory rate shall terminate, are disclosed to the buyer. Such disclosure shall be contained on an application form [or pre-ap- proved written solicitation]as specified pursuant to subdivisions one and one-a of section five hundred twenty of the general business law. A change in the service charge rate upon expiration of an introductoryS. 4299 4
rate shall not be considered a variable rate or a change in terms. The service charge rate in effect after expiration of an introductory rate may apply to all amounts due under the credit agreement regardless of when incurred, and disclosure of the same shall be provided to the buyer in the written agreement. S 4. This act shall take effect on the one hundred eightieth day after it shall have become a law.