[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[S. 279 Introduced in Senate (IS)]

103d CONGRESS
  1st Session
                                 S. 279

  To prohibit the receipt of advance fees by unregulated loan brokers.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

             February 2 (legislative day, January 5), 1993

  Mr. Lieberman (for himself and Mr. Bryan) introduced the following 
 bill; which was read twice and referred to the Committee on Banking, 
                       Housing, and Urban Affairs

_______________________________________________________________________

                                 A BILL


 
  To prohibit the receipt of advance fees by unregulated loan brokers.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Advance Fee Loan Scam Prevention Act 
of 1993''.

SEC. 2. DEFINITIONS.

    For purposes of this Act--
            (1) Loan broker.--The term ``loan broker''--
                    (A) means any person who--
                            (i) for, or in expectation of, a 
                        consideration, arranges or attempts to arrange 
                        or offers to find for any individual, consumer 
                        credit;
                            (ii) for, or in expectation of, a 
                        consideration, assists or advises an individual 
                        on obtaining, or attempting to obtain, consumer 
                        credit; or
                            (iii) acts or purports to act for, or on 
                        behalf of, a loan broker for the purpose of 
                        soliciting individuals interested in obtaining 
                        consumer credit; and
                    (B) does not include--
                            (i) any insured depository institution (as 
                        defined in section 3(c)(2) of the Federal 
                        Deposit Insurance Act), any insured credit 
                        union (as defined in section 101(7) of the 
                        Federal Credit Union Act), or any depository 
                        institution which is eligible for deposit 
                        insurance under the Federal Deposit Insurance 
                        Act or the Federal Credit Union Act and has 
                        deposit insurance coverage provided by any 
                        State;
                            (ii) any lender approved by the Federal 
                        Housing Administration, Farmers Home 
                        Administration, or Department of Veterans 
                        Affairs;
                            (iii) any seller or servicer of mortgages 
                        approved by the Federal National Mortgage 
                        Association or the Federal Home Loan Mortgage 
                        Corporation; or
                            (iv) any consumer finance company, retail 
                        installment sales company, securities broker or 
                        dealer, real estate broker or real estate 
                        salesperson, attorney, credit card company, 
                        installment loan licensee, mortgage broker or 
                        lender, or insurance company if such person 
                        is--
                                    (I) licensed by and subject to 
                                regulation or supervision by any agency 
                                of the United States or by the State in 
                                which the person seeking to utilize the 
                                services of the loan broker resides; 
                                and
                                    (II) is acting within the scope of 
                                that license or regulation.
            (2) Advance fee.--The term ``advance fee''--
                    (A) means any fee (including any advance payment of 
                interest or other fees for any extension of consumer 
                credit) which is assessed or collected by a loan broker 
                from any person seeking the consumer credit before the 
                extension of such credit; and
                    (B) does not include--
                            (i) any amount that the loan broker can 
                        demonstrate is collected solely for the purpose 
                        of payment to unaffiliated, third party vendors 
                        for actual expenses incurred and payable before 
                        the extension of any consumer credit; or
                            (ii) any application fee or other charge 
                        assessed or collected--
                                    (I) by a retail seller of property 
                                that is primarily for personal, family, 
                                or household purposes or automobiles;
                                    (II) in connection with a consumer 
                                credit transaction in which a purchase 
                                money security interest arising under 
                                an installment sales contract (or any 
                                equivalent consensual security 
                                interest) is created or retained 
                                against any such property or automobile 
                                being sold by the retail seller to the 
                                person seeking the extension of credit; 
                                or
                                    (III) in connection with a 
                                residential real estate transaction 
                                that is secured by a first lien on the 
                                property, including a purchase, 
                                refinancing, or consolidation of an 
                                extension of credit.
            (3) Consumer; credit.--The terms ``consumer'' and 
        ``credit'' have the meanings given to such terms in section 103 
        of the Truth in Lending Act.

SEC. 3. PROHIBITION ON ADVANCE FEES.

    (a) In General.--No loan broker may receive an advance fee in 
connection with--
            (1) arranging or attempting to arrange consumer credit;
            (2) offering to find for any individual consumer credit; or
            (3) advising any individual as to how to obtain consumer 
        credit.
    (b) Prohibition on False or Misleading Representations.--No loan 
broker may--
            (1) make or use any false or misleading representations or 
        omit any material fact in the offer or sale of the service of a 
        loan broker; or
            (2) engage, directly or indirectly, in any act that 
        operates or would operate as fraud or deception upon any person 
        in connection with the offer or sale of the services of a loan 
        broker, notwithstanding the absence of reliance by the person 
        to whom the loan broker's services are offered or sold.

SEC. 4. ENFORCEMENT BY THE FTC.

    Any violation of section 3 of this Act shall--
            (1) be treated as a violation of a rule of the Federal 
        Trade Commission issued pursuant to section 18(a)(1)(B) of the 
        Federal Trade Commission Act; and
            (2) be subject to enforcement by the Federal Trade 
        Commission under the enforcement and penalty provisions 
        applicable to violations of such rules.

SEC. 5. CRIMINAL PENALTY.

    (a) In General.--Whoever knowingly violates section 3 shall be 
fined under title 18, United States Code, imprisoned for not more than 
5 years, or both.
    (b) Civil Forfeiture.--Section 981(a)(1)(C) of title 18, United 
States Code, is amended--
            (1) by striking ``title or a violation'' and inserting 
        ``title, a violation''; and
            (2) by inserting ``, or a violation of section 5(a) of the 
        Advance Fee Loan Scam Prevention Act of 1993'' before the 
        period.
    (c) Nonmailable Matter.--For purposes of section 3005(a) of title 
39, United States Code, a violation of section 3 by any person shall 
constitute prima facie evidence that such person is engaged in 
conducting a scheme or device for obtaining money or property through 
the mail by means of false representations.

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