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F E D E R A L R E S E R V E BANK O F NEW YO R K November 23, 1970 TRUTH IN LENDING ACT Amendments Relating to C redit Cards To A ll State Member Banks in the Second Federal Reserve D istrict: Enclosed, for your inform ation, is an excerpt from Public Law 91-508, approved October 26, 1970, containing the text of amendments to the Truth in Lending Act. In m ajor p a rt, the amendments — (a) prohibit, effective October 26, 1970, the issuance of unsolicited credit cards except in renewal of, or in substitution for, an accepted credit card; (b) provide, effective January 25, 1971, that a cardholder shall be liable for the unauthorized use of a credit card only if, among other things, the liability is not in excess of $50 and the card iss u e r has provided postagepaid notice form s for use in the event the card is lost or stolen; and (c) provide that a cardholder shall not be liable for the unauthorized use of a credit card issued on or after January 25, 1971, or for the un authorized use, after the expiration of 12 months following January 25, 1971, of a cred it card issued before January 25, 1971, unless the card iss u e r has provided a method for identifying the authorized u ser of the card. Changes in Regulation Z to cover these amendments are being drafted and will be submitted for public comment as soon as they become available. Inquiries relating to these amendments should be directed to our Consumer Inform ation and Securities Regulations Departm ent (Telephone No. 212-732-5700, Extension 8210 o r 8209). Alfred Hayes, President. Pub. Law 9 1- 5 0 8 - 12 - October 26, 1970 84 STAT. 1126 T IT L E V—P R O V IS IO N S R E L A T IN G TO C R E D IT CARDS 15 USC 1602. "Adequate n o tic e ." In fra . "C red it ca rd ." "A ccepted c r e d i t ca rd ," "C ardholder." "Card i s s u e r ." "U nauthorized use 15 USC 1601 n o te . 15 USC 1641. P r o h ib it io n . Sec. 501. Section 103 of the T ru th in L en d in g A ct (82 S ta t. 146) is am ended by redesignating subsections ( j ) , ( k ) ,a n d ( 1) as subsections (P)» ( 9)1 a n d ( r ) , respectively, and by a d d in g a fte r subsection (i) th e fo llo w in g : “ ( j) T he term ‘adequate notice’, as used in section 133, m eans a p rin te d notice to a ca rd h o ld er w hich sets fo rth th e p e rtin e n t facts clearly and conspicuously so th a t a person ag a in st whom it is to o perate could reasonably be expected to have noticed it an d understood its m eaning. S uch notice m ay be given to a card h o ld er by p rin tin g the notice on any cre d it card, o r on eacli periodic statem ent of account, issued to the cardholder, or by any o th e r m eans reasonably assu rin g th e receipt thereof by the cardholder. “ (k ) T he term ‘cre d it c a rd ’ m eans any card , plate, coupon book or o th er cre d it device existing fo r the purpose of o b tain in g money, p ro p erty , labor, o r services 011 credit. “ (1) T he term ‘accepted cred it c a rd ’ m eans any cred it card w hich the cardholder has requested and received or has signed o r has used, o r authorized an o th er to use, fo r the purpose of o b tain in g money, p ro p erty , labor, o r services on credit. “ ( 111) T he term ‘card h o ld er' m eans any person to whom a cre d it card is issued or any person who has agreed w ith the card issuer to pay o bligations a risin g from the issuance of a cred it card to an o th er person. “ (n ) T h e term ‘card issuer’ m eans any person who issues a cred it card, o r the agent of such person w ith respect to such card. “ (o) T he term ‘u n au thorized use’, as used in section 133, m eans a use of a credit card by a person o th er th an the card h o ld er who does not have actual, im plied, or ap p a ren t a u th o rity fo r such use and from w hich the card h o ld er receives no benefit.'’ S e c . 502. (a) T he T ru th in L en d in g A ct (82 S tat. 140) is am ended by ad d in g a fte r section 131 the follow ing sections: “ § 132. Issu an ce of c re d it c a rd s “ No credit card shall be issued except in response to a request or ap plication th erefo r. T h is p rohibitio n does not ap p ly to the issuance o f a cre d it card in renewal of, o r in su b stitu tio n for, an accepted c red it card. “ § 133. L iab ility of h o ld er o f c red it card “ (a) A card h o ld er shall be liable fo r th e u n au th o rized use of a c re d it card only if the card is an accepted credit card, the lia b ility is not in excess of $50, th e card issuer gives adequate notice to th e c a rd h older of the p otential lia b ility , the card issuer has provided the c ard h o ld er w ith a self-addressed, p restam ped notification to be m ailed by the. card h o ld er in the event of the loss o r th e ft of th e cred it card, and th e unau th o rized use occurs before th e card h o ld er has notified the card issuer th a t an unauthorized use of th e credit card has occurred or m ay occur as the result of loss, th e ft, or otherw ise. N o tw ith stan d in g th e foregoing, no card h o ld er shall be liable fo r th e u n au th o rized use of any credit card w hich was issued on or a fte r the effective d ate of th is section, and, a fte r the ex p ira tio n of tw elve m onths follow ing such effective date, 110 card h o ld er shall he liable fo r th e u n au th o rized use of any credit card regardless of the d ate of its issuance, unless ( 1 ) th e conditions of lia b ilitv specified in th e preceding sentence are m et, and ( 2) the card issuer has provided a m ethod w hereby th e user of such card can be identified as th e person au th o rized to use it. F o r the purposes of th is section, a card h o ld er notifies a card issuer by ta k in g such steps as mnv be reasonably required in the o rd in a ry course of business to provide the card issuer w ith th e p e rtin e n t in fo rm atio n w hether or not any p a rtic u la r officer, em ployee, or ag en t of th e ca rd issuer docs in fact receive such in fo rm atio n . (Over) October 26, 1970 - 13 - Pub. Law 91-508 84 STAT. 1127 (b ) 1n any action by a card issuer to enforce lia b ility fo r th e use of a cred it card, the burden of p roof is upon the card issuer to show th a t th e use was authorized or, if the use was unauthorized, th en th e b urden of proof is upon the card issuer to show th a t the conditions of liab ility fo r th e unauthorized use of a cred it card, as set fo rth in subsection ( a ) , have been met. **(c) N othin# in th is section imposes liab ility upon a card h o ld er for the un authorized use of a credit card in excess of his lia b ility fo r such use under o th er applicable law o r un d er any agreem ent w ith th e card issuer. “ (d ) E xcept as provided in th is section, a ca rd h o ld er in cu rs no liab ility from the unauthorized use of a cred it card. “ § 134. Fraudulent use of credit card “W hoever, in a tran sactio n affecting in terstate or foreign commerce, Penalty. uses any counterfeit, fictitious, altered, forged, lost, stolen, or fra u d u lently obtained cre d it card to obtain goods or services, o r both, h av in g a reta il value ag g re g atin g $5,000 or more, shall be fined n ot m ore th a n $10,000 o r im prisoned not m ore th a n five years, or b o th /’ (b) T he table of contents o f chap ter 2 o f the T ru th in L en d in g 82 S t a t . 152. Act is am ended by a d d in g at the end thereof the fo llo w in g : ‘132. I ss u a n c e o f c re d it card s. “ 138. L ia b ility o f h o ld er o f c re d it card. "134. F r a u d u le n t u se o f c re d it c a rd .” 15 USC 16311641. S ec. 503. T he am endm ents to the T ru th in L ending A ct m ade by Effective dates. th is title become effective as follow s: (1) Section 132 of such Act takes eti'ect upon th e d ate o f en act m ent of this title. (2) Section 133 of such Act takes effect upon th e ex p ira tio n o f 00 days a fte r such date of enactm ent. (3 ) Section 134 of such Act applies to offenses com m itted on or a fte r such date of enactm ent.
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