[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2399 Considered and Passed House (CPH)]
104th CONGRESS
1st Session
H. R. 2399
To amend the Truth in Lending Act to clarify the intent of such Act and
to reduce burdensome regulatory requirements on creditors.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
September 27, 1995
Mr. McCollum (for himself, Mr. Leach, Mrs. Roukema, Mr. Gonzalez, Mr.
Vento, Mr. Roth, Mr. LaFalce, Mr. Baker of Louisiana, Mr. Lazio of New
York, Mr. King, Mr. Castle, Mr. Weller, and Mr. Ehrlich) introduced the
following bill; which was referred to the Committee on Banking and
Financial Services
September 27, 1995
The Committee on Banking and Financial Services discharged; considered
and passed
_______________________________________________________________________
A BILL
To amend the Truth in Lending Act to clarify the intent of such Act and
to reduce burdensome regulatory requirements on creditors.
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 ``Truth in Lending Act Amendments of
1995''.
SEC. 2. CERTAIN CHARGES.
(a) Third Party Fees.--Section 106(a) of the Truth in Lending Act
(15 U.S.C. 1605(a)) is amended by adding after the 2d sentence the
following new sentence: ``The finance charge shall not include fees and
amounts imposed by third party closing agents (including settlement
agents, attorneys, and escrow and title companies) if the creditor does
not require the imposition of the charges or the services provided and
does not retain the charges.''.
(b) Borrower-Paid Mortgage Broker Fees.--
(1) Inclusion in finance charge.--Section 106(a) of the
Truth in Lending Act (15 U.S.C. 1605(a)) is amended by adding
at the end the following new paragraph:
``(6) Borrower-paid mortgage broker fees, including fees
paid directly to the broker or the lender (for delivery to the
broker) whether such fees are paid in cash or financed.''.
(2) Effective date.--The amendment made by paragraph (1)
shall take effect on the earlier of--
(A) 60 days after the date on which the Board of
Governors of the Federal Reserve System issues final
regulations under paragraph (3); or
(B) the date that is 12 months after the date of
the enactment of this Act.
(3) Regulations implementing borrower-paid mortgage broker
fees.--The Board of Governors of the Federal Reserve System
shall promulgate regulations implementing the amendment made by
paragraph (1) by no later than 6 months after the date of the
enactment of this Act.
(c) Taxes on Security Instruments or Evidences of Indebtedness.--
Section 106(d) of the Truth in Lending Act (15 U.S.C. 1605(d)) is
amended by adding at the end the following new paragraph:
``(3) Any tax levied on security instruments or on
documents evidencing indebtedness if the payment of such taxes
is a precondition for recording the instrument securing the
evidence of indebtedness.''.
(d) Preparation of Loan Documents.--Section 106(e)(2) of the Truth
in Lending Act (15 U.S.C. 1605(e)(2)) is amended to read as follows:
``(2) Fees for preparation of loan-related documents.''.
(e) Fees Relating to Pest Infestations, Inspections, and Hazards.--
Section 106(e)(5) of the Truth in Lending Act (15 U.S.C. 1605(e)(5)) is
amended by inserting ``, including fees related to any pest infestation
or flood hazard inspections conducted prior to closing'' before the
period.
(f) Ensuring Finance Charges Reflect Cost of Credit.--
(1) Report.--
(A) In general.--Not later than 6 months after the
date of the enactment of this Act, the Board of
Governors of the Federal Reserve System shall submit to
the Congress a report containing recommendations on any
regulatory or statutory changes necessary--
(i) to ensure that finance charges imposed
in connection with consumer credit transactions
more accurately reflect the cost of providing
credit; and
(ii) to address abusive refinancing
practices engaged in for the purpose of
avoiding rescission.
(B) Report requirements.--In preparing the report
under this paragraph, the Board shall--
(i) consider the extent to which it is
feasible to include in finance charges all
charges payable directly or indirectly by the
consumer to whom credit is extended, and
imposed directly or indirectly by the creditor
as an incident to the extension of credit
(especially those charges excluded from finance
charges under section 106 of the Truth in
Lending Act as of the date of the enactment of
this Act), excepting only those charges which
are payable in a comparable cash transaction;
and
(ii) consult with and consider the views of
affected industries and consumer groups.
(2) Regulations.--The Board of Governors of the Federal
Reserve System shall prescribe any appropriate regulation in
order to effect any change included in the report under
paragraph (1), and shall publish the regulation in the Federal
Register before the end of the 1-year period beginning on the
date of enactment of this Act.
SEC. 3. TOLERANCES; BASIS OF DISCLOSURES.
(a) Tolerances for Accuracy.--Section 106 of the Truth in Lending
Act (15 U.S.C. 1605) is amended by adding at the end the following new
subsection:
``(f) Tolerances for Accuracy.--In connection with credit
transactions not under an open end credit plan that are secured by real
property or a dwelling, the disclosure of the finance charge and other
disclosures affected by any finance charge--
``(1) shall be treated as being accurate for purposes of
this title if the amount disclosed as the finance charge--
``(A) does not vary from the actual finance charge
by more than $100; or
``(B) is greater than the amount required to be
disclosed under this title; and
``(2) shall be treated as being accurate for purposes of
section 125 if--
``(A) except as provided in subparagraph (B), the
amount disclosed as the finance charge does not vary
from the actual finance charge by more than an amount
equal to one-half of one percent of the total amount of
credit extended; or
``(B) in the case of a transaction, other than a
mortgage referred to in section 103(aa), which--
``(i) is a refinancing of the principal
balance then due and any accrued and unpaid
finance charges of a residential mortgage
transaction as defined in section 103(w), or is
any subsequent refinancing of such a
transaction; and
``(ii) does not provide any new
consolidation or new advance;
if the amount disclosed as the finance charge does not
vary from the actual finance charge by more than an
amount equal to one percent of the total amount of
credit extended.''.
(b) Basis of Disclosure for Per Diem Interest.--Section 121(c) of
the Truth in Lending Act (15 U.S.C. 1631(c)) is amended by adding at
the end the following new sentence: ``In the case of any consumer
credit transaction a portion of the interest on which is determined on
a per diem basis and is to be collected upon the consummation of such
transaction, any disclosure with respect to such portion of interest
shall be deemed to be accurate for purposes of this title if the
disclosure is based on information actually known to the creditor at
the time that the disclosure documents are being prepared for the
consummation of the transaction.''.
SEC. 4. LIMITATION ON LIABILITY.
(a) In General.--Chapter 2 of the Truth in Lending Act (15 U.S.C.
1631 et seq.) is amended by adding at the end the following new
section:
``SEC. 139. CERTAIN LIMITATIONS ON LIABILITY.
``(a) Limitations on Liability.--For any consumer credit
transaction subject to this title that is consummated before the date
of the enactment of the Truth in Lending Act Amendments of 1995, a
creditor or any assignee of a creditor shall have no civil,
administrative, or criminal liability under this title for, and a
consumer shall have no extended rescission rights under section 125(f)
with respect to--
``(1) the creditor's treatment, for disclosure purposes,
of--
``(A) taxes described in section 106(d)(3);
``(B) fees described in section 106(e)(2) and (5);
``(C) fees and amounts referred to in the 3rd
sentence of section 106(a); or
``(D) borrower-paid mortgage broker fees referred
to in section 106(a)(6);
``(2) the form of written notice used by the creditor to
inform the obligor of the rights of the obligor under section
125 if the creditor provided the obligor with a properly dated
form of written notice published and adopted by the Board or a
comparable written notice, and otherwise complied with all the
requirements of this section regarding notice; or
``(3) any disclosure relating to the finance charge imposed
with respect to the transaction if the amount or percentage
actually disclosed--
``(A) may be treated as accurate for purposes of
this title if the amount disclosed as the finance
charge does not vary from the actual finance charge by
more than $200;
``(B) may, under section 106(f)(2), be treated as
accurate for purposes of section 125; or
``(C) is greater than the amount or percentage
required to be disclosed under this title.
``(b) Exceptions.--Subsection (a) shall not apply to--
``(1) any individual action or counterclaim brought under
this title which was filed before June 1, 1995;
``(2) any class action brought under this title for which a
final order certifying a class was entered before January 1,
1995;
``(3) the named individual plaintiffs in any class action
brought under this title which was filed before June 1, 1995;
or
``(4) any consumer credit transaction with respect to which
a timely notice of rescission was sent to the creditor before
June 1, 1995.''.
(b) Clerical Amendment.--The table of sections for chapter 2 of the
Truth in Lending Act is amended by inserting after the item relating to
section 138 the following new item:
``139. Certain limitations on liability.''.
SEC. 5. LIMITATION ON RESCISSION LIABILITY.
Section 125 of the Truth in Lending Act (15 U.S.C. 1635) is further
amended by adding at the end the following new subsection:
``(h) Limitation on Rescission.--An obligor shall have no
rescission rights arising solely from the form of written notice used
by the creditor to inform the obligor of the rights of the obligor
under this section, if the creditor provided the obligor the
appropriate form of written notice published and adopted by the Board,
or a comparable written notice of the rights of the obligor, that was
properly completed by the creditor, and otherwise complied with all
other requirements of this section regarding notice.''.
SEC. 6. CALCULATION OF DAMAGES.
Section 130(a)(2)(A) of the Truth in Lending Act (15 U.S.C.
1640(a)(2)(A)) is amended--
(1) by striking ``or (ii)'' and inserting ``(ii)''; and
(2) by inserting before the semicolon at the end the
following: ``, or (iii) in the case of an individual action
relating to a credit transaction not under an open end credit
plan that is secured by real property or a dwelling, not less
than $200 or greater than $2,000''.
SEC. 7. ASSIGNEE LIABILITY.
(a) Violations Apparent on the Face of Transaction Documents.--
Section 131 of the Truth in Lending Act (15 U.S.C. 1641) is amended by
adding at the end the following new subsection:
``(e) Liability of Assignee for Consumer Credit Transactions
Secured by Real Property.--
``(1) In general.--Except as otherwise specifically
provided in this title, any civil action against a creditor for
a violation of this title, and any proceeding under section 108
against a creditor, with respect to a consumer credit
transaction secured by real property may be maintained against
any assignee of such creditor only if--
``(A) the violation for which such action or
proceeding is brought is apparent on the face of the
disclosure statement provided in connection with such
transaction pursuant to this title; and
``(B) the assignment to the assignee was voluntary.
``(2) Violation apparent on the face of the disclosure
described.--For the purpose of this section, a violation is
apparent on the face of the disclosure statement if--
``(A) the disclosure can be determined to be
incomplete or inaccurate by a comparison of the
disclosure statement, any itemization of the amount
financed, the note, or any other disclosure of
disbursement; or
``(B) the disclosure statement does not use the
terms or format required to be used by this title.''.
(b) Servicer Not Treated as Assignee.--Section 131 of the Truth in
Lending Act (15 U.S.C. 1641) is further amended by adding after
subsection (e) (as added by subsection (a) of this section) the
following new subsection:
``(f) Treatment of Servicer.--
``(1) In general.--A servicer of a consumer obligation
arising from a consumer credit transaction shall not be treated
as an assignee of such obligation for purposes of this section
unless the servicer is or was the owner of the obligation.
``(2) Servicer not treated as owner on basis of assignment
for administrative convenience.--A servicer of a consumer
obligation arising from a consumer credit transaction shall not
be treated as the owner of the obligation for purposes of this
section on the basis of an assignment of the obligation from
the creditor or another assignee to the servicer solely for the
administrative convenience of the servicer in servicing the
obligation. Upon written request by the obligor, the servicer
shall provide the obligor, to the best knowledge of the
servicer, with the name, address, and telephone number of the
owner of the obligation or the master servicer of the
obligation.
``(3) Servicer defined.--For purposes of this subsection,
the term `servicer' has the same meaning as in section 6(i)(2)
of the Real Estate Settlement Procedures Act of 1974.
``(4) Applicability.--This subsection shall apply to all
consumer credit transactions in existence or consummated on or
after the date of the enactment of the Truth in Lending Act
Amendments of 1995.''.
SEC. 8. RESCISSION RIGHTS IN FORECLOSURE.
Section 125 of the Truth in Lending Act (15 U.S.C. 1635) is amended
by inserting after subsection (h) (as added by section 5 of this Act)
the following new subsection:
``(i) Rescission Rights in Foreclosure.--
``(1) In general.--Notwithstanding section 139, and subject
to the time period provided in subsection (f), in addition to
any other right of rescission available under this section for
a transaction, after the initiation of any judicial or
nonjudicial foreclosure process on the primary dwelling of an
obligor securing an extension of credit, the obligor shall have
a right to rescind the transaction equivalent to other
rescission rights provided by this section, if--
``(A) a mortgage broker fee is not included in the
finance charge in accordance with the laws and
regulations in effect at the time the consumer credit
transaction was consummated; or
``(B) the form of notice of rescission for the
transaction is not the appropriate form of written
notice published and adopted by the Board or a
comparable written notice, and otherwise complied with
all the requirements of this section regarding notice.
``(2) Tolerance for disclosures.--Notwithstanding section
106(f), and subject to the time period provided in subsection
(f), for the purposes of exercising any rescission rights after
the initiation of any judicial or nonjudicial foreclosure
process on the principal dwelling of the obligor securing an
extension of credit, the disclosure of the finance charge and
other disclosures affected by any finance charge shall be
treated as being accurate for purposes of this section if the
amount disclosed as the finance charge does not vary from the
actual finance charge by more than $35 or is greater than the
amount required to be disclosed under this title.
``(3) Right of recoupment under state law.--Nothing in this
subsection affects a consumer's right of rescission in
recoupment under State law.
``(4) Applicability.--This subsection shall apply to all
consumer credit transactions in existence or consummated on or
after the date of the enactment of the Truth in Lending Act
Amendments of 1995.''.
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