[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 458 Engrossed in House (EH)]

  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
109th CONGRESS
  1st Session
                                H. R. 458

_______________________________________________________________________

                                 AN ACT


 
  To prevent the sale of abusive insurance and investment products to 
              military personnel, and for other purposes.

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Military Personnel 
Financial Services Protection Act''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; table of contents.
               TITLE I--INSURANCE AND INVESTMENT PRODUCTS

Sec. 101. Congressional findings.
Sec. 102. Prohibition on future sales of periodic payment plans.
Sec. 103. Method of maintaining broker/dealer registration, 
                            disciplinary, and other data.
Sec. 104. Filing depositories for investment advisers.
Sec. 105. State insurance and securities jurisdiction on military 
                            installations.
Sec. 106. Required development of military personnel protection 
                            standards regarding insurance sales.
Sec. 107. Required disclosures regarding life insurance.
Sec. 108. Improving life insurance product standards.
Sec. 109. Required reporting of disciplined insurance producers.
Sec. 110. Reporting barred persons engaging in financial services 
                            activities.
Sec. 111. Sense of Congress.
Sec. 112. Definitions.
              TITLE II--LENDING TO ARMED FORCES PERSONNEL

Sec. 201. Requirements applicable to certain loans to military 
                            servicemembers.

               TITLE I--INSURANCE AND INVESTMENT PRODUCTS

SEC. 101. CONGRESSIONAL FINDINGS.

    The Congress finds the following:
            (1) Our military personnel perform great sacrifices in 
        protecting our Nation in the War on Terror and promoting 
        democracy abroad.
            (2) Our brave men and women in uniform deserve to be 
        offered first-rate financial products in order to provide for 
        their families and to save and invest for retirement.
            (3) Our military personnel are being offered high-cost 
        securities and life insurance products by some financial 
        services companies engaging in abusive and misleading sales 
        practices.
            (4) One securities product being offered to our service 
        members, the contractual plan, has largely disappeared from the 
        civilian market since the 1980s due to its excessive sales 
        charges and the emergence of low-cost products. A 50-percent 
        sales commission is typically assessed against the first year 
        of contributions made under a contractual plan, even though the 
        average commission on other securities products such as mutual 
        funds is less than 6 percent on each sale.
            (5) The excessive sales charge of the contractual plan 
        makes it susceptible to abusive and misleading sales practices.
            (6) Certain life insurance products being offered to our 
        service members are being improperly marketed as investment 
        products. These products provide very low death benefits for 
        very high premiums that are front-loaded in the first few 
        years, making them completely inappropriate for most military 
        personnel.
            (7) Regulation of these securities and life insurance 
        products and their sale on military bases has been clearly 
        inadequate and requires Congressional legislation to address.

SEC. 102. PROHIBITION ON FUTURE SALES OF PERIODIC PAYMENT PLANS.

    (a) Amendment.--Section 27 of the Investment Company Act of 1940 
(15 U.S.C. 80a-27) is amended by adding at the end the following new 
subsection:
    ``(j) Termination of Sales.--
            ``(1) Termination.--Effective 30 days after the date of 
        enactment of the Military Personnel Financial Services 
        Protection Act, it shall be unlawful, subject to subsection 
        (i)--
                    ``(A) for any registered investment company to 
                issue any periodic payment plan certificate; or
                    ``(B) for such company, or any depositor of or 
                underwriter for any such company, or any other person, 
                to sell such a certificate.
            ``(2) No invalidation of existing certificates.--Paragraph 
        (1) shall not be construed to alter, invalidate, or otherwise 
        affect any rights or obligations, including rights of 
        redemption, under any periodic payment plan certificate issued 
        and sold before 30 days after such date of enactment.''.
    (b) Technical Amendment.--Section 27(i)(2)(B) of such Act is 
amended by striking ``section 26(e)'' each place it appears and 
inserting ``section 26(f)''.
    (c) Report on Refunds, Sales Practices, and Revenues From Periodic 
Payment Plans.--Within 6 months after the date of enactment of this 
Act, the Securities and Exchange Commission shall submit to the 
Committee on Financial Services of the House of Representatives and the 
Committee on Banking, Housing, and Urban Affairs of the Senate, a 
report describing--
            (1) any measures taken by a broker or dealer registered 
        with the Securities and Exchange Commission pursuant to section 
        15(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(b)) 
        to voluntarily refund payments made by military service members 
        on any periodic payment plan certificate, and the amounts of 
        such refunds;
            (2) after such consultation with the Secretary of Defense 
        as the Commission considers appropriate, the sales practices of 
        such brokers or dealers on military installations over the past 
        5 years and any legislative or regulatory recommendations to 
        improve such practices; and
            (3) the revenues generated by such brokers or dealers in 
        the sales of periodic payment plan certificates over the past 5 
        years and what products such brokers or dealers market to 
        replace the revenue generated from the sales of periodic 
        payment plan certificates prohibited under subsection (a) of 
        this section.

SEC. 103. METHOD OF MAINTAINING BROKER/DEALER REGISTRATION, 
              DISCIPLINARY, AND OTHER DATA.

    Subsection (i) of section 15A of the Securities Exchange Act of 
1934 (15 U.S.C. 78o-3(i)) is amended to read as follows:
    ``(i) Obligation to Maintain Registration, Disciplinary, and Other 
Data.--
            ``(1) Maintenance of system to respond to inquiries.--A 
        registered securities association shall--
                    ``(A) establish and maintain a system for 
                collecting and retaining registration information;
                    ``(B) establish and maintain a toll-free telephone 
                listing, and a readily accessible electronic or other 
                process, to receive and promptly respond to inquiries 
                regarding--
                            ``(i) registration information on its 
                        members and their associated persons; and
                            ``(ii) registration information on the 
                        members and their associated persons of any 
                        registered national securities exchange that 
                        uses the system described in subparagraph (A) 
                        for the registration of its members and their 
                        associated persons; and
                    ``(C) adopt rules governing the process for making 
                inquiries and the type, scope, and presentation of 
                information to be provided in response to such 
                inquiries in consultation with any registered national 
                securities exchange providing information pursuant to 
                subparagraph (B)(ii).
            ``(2) Recovery of costs.--Such an association may charge 
        persons making inquiries, other than individual investors, 
        reasonable fees for responses to such inquiries.
            ``(3) Process for disputed information.--Such an 
        association shall adopt rules establishing an administrative 
        process for disputing the accuracy of information provided in 
        response to inquiries under this subsection in consultation 
        with any registered national securities exchange providing 
        information pursuant to paragraph (1)(B)(ii).
            ``(4) Limitation of liability.--Such an association, or an 
        exchange reporting information to such an association, shall 
        not have any liability to any person for any actions taken or 
        omitted in good faith under this subsection.
            ``(5) Definition.--For purposes of this subsection, the 
        term `registration information' means the information reported 
        in connection with the registration or licensing of brokers and 
        dealers and their associated persons, including disciplinary 
        actions, regulatory, judicial, and arbitration proceedings, and 
        other information required by law, or exchange or association 
        rule, and the source and status of such information.''.

SEC. 104. FILING DEPOSITORIES FOR INVESTMENT ADVISERS.

    (a) Amendment.--Section 204 of the Investment Advisers Act of 1940 
(15 U.S.C. 80b-4) is amended--
            (1) by striking ``Every investment'' and inserting the 
        following:
    ``(a) In General.--Every investment''; and
            (2) by adding at the end the following:
    ``(b) Filing Depositories.--The Commission may, by rule, require an 
investment adviser--
            ``(1) to file with the Commission any fee, application, 
        report, or notice required to be filed by this title or the 
        rules issued under this title through any entity designated by 
        the Commission for that purpose; and
            ``(2) to pay the reasonable costs associated with such 
        filing and the establishment and maintenance of the systems 
        required by subsection (c).
    ``(c) Access to Disciplinary and Other Information.--
            ``(1) Maintenance of system to respond to inquiries.--The 
        Commission shall require the entity designated by the 
        Commission under subsection (b)(1) to establish and maintain a 
        toll-free telephone listing, or a readily accessible electronic 
        or other process, to receive and promptly respond to inquiries 
        regarding information (including disciplinary actions, 
        regulatory, judicial, and arbitration proceedings, and other 
        information required by law or rule to be reported) involving 
        investment advisers and persons associated with investment 
        advisers. Such information shall include information on an 
        investment adviser (and the persons associated with that 
        adviser) whether the investment adviser is registered with the 
        Commission under section 203 or regulated solely by a State as 
        described in section 203A.
            ``(2) Recovery of costs.--An entity designated by the 
        Commission under subsection (b)(1) may charge persons making 
        inquiries, other than individual investors, reasonable fees for 
        responses to inquiries made under paragraph (1).
            ``(3) Limitation on liability.--An entity designated by the 
        Commission under subsection (b)(1) shall not have any liability 
        to any person for any actions taken or omitted in good faith 
        under this subsection.''.
    (b) Conforming Amendments.--
            (1) Section 203A of the Investment Advisers Act of 1940 (15 
        U.S.C. 80b-3a) is amended--
                    (A) by striking subsection (d); and
                    (B) by redesignating subsection (e) as subsection 
                (d).
            (2) Section 306 of the National Securities Markets 
        Improvement Act of 1996 (15 U.S.C. 80b-10, note; Public Law 
        104-290; 110 Stat. 3439) is repealed.

SEC. 105. STATE INSURANCE AND SECURITIES JURISDICTION ON MILITARY 
              INSTALLATIONS.

    (a) Clarification of Jurisdiction.--Any law, regulation, or order 
of a State with respect to regulating the business of insurance or the 
offer or sale (or both) of securities shall apply to such activities 
conducted on Federal land or facilities in the United States and 
abroad, including military installations, except to the extent that 
such law, regulation, or order--
            (1) directly conflicts with any applicable Federal law, 
        regulation, or authorized directive; or
            (2) would not apply if such activity were conducted on 
        State land.
    (b) Primary State Jurisdiction.--To the extent that multiple State 
laws would otherwise apply pursuant to subsection (a) to an insurance 
or securities activity of an individual or entity on Federal land or 
facilities, the State having the primary duty to regulate such activity 
and whose laws shall apply to such activity in the case of a conflict 
shall be--
            (1) the State within which the Federal land or facility is 
        located; or
            (2) if the Federal land or facility is located outside of 
        the United States, the State in which--
                    (A) in the case of an individual engaged in the 
                business of insurance, such individual has been issued 
                a resident license;
                    (B) in the case of an individual engaged in the 
                offer or sale (or both) of securities, such individual 
                is registered or required to be registered to do 
                business or the person solicited by such individual 
                resides;
                    (C) in the case of an entity engaged in the 
                business of insurance, such entity is domiciled; or
                    (D) in the case of an entity engaged in the offer 
                or sale (or both) of securities, such entity is 
                registered or is required to be registered to do 
                business or the person solicited by such entity 
                resides.

SEC. 106. REQUIRED DEVELOPMENT OF MILITARY PERSONNEL PROTECTION 
              STANDARDS REGARDING INSURANCE SALES.

    (a) State Standards.--The Congress intends that--
            (1) the States collectively work with the Secretary of 
        Defense to ensure implementation of appropriate standards to 
        protect members of the Armed Forces from dishonest and 
        predatory insurance sales practices while on a military 
        installation of the United States (including installations 
        located outside of the United States); and
            (2) each State identify its role in promoting the standards 
        described in paragraph (1) in a uniform manner within 12 months 
        after the date of the enactment of this Act.
    (b) State Report.--It is the sense of the Congress that the NAIC 
should, after consultation with the Secretary of Defense and within 12 
months after the date of the enactment of this Act, conduct a study to 
determine the extent to which the States have met the requirement of 
subsection (a) and report such study to the Committee on Financial 
Services of the House of Representatives and the Committee on Banking, 
Housing, and Urban Affairs of the Senate.

SEC. 107. REQUIRED DISCLOSURES REGARDING LIFE INSURANCE.

    (a) Requirement.--Except as provided in subsection (d), no insurer 
or producer may sell or solicit, in person, any life insurance product 
to any member of the Armed Forces on a military installation of the 
United States unless a disclosure in accordance with this section is 
provided to such member before the sale of such insurance.
    (b) Disclosure.--A disclosure in accordance with this section is a 
written disclosure that--
            (1) states that subsidized life insurance may be available 
        to the member of the Armed Forces from the Federal Government;
            (2) states that the United States Government has in no way 
        sanctioned, recommended, or encouraged the sale of the product 
        being offered;
            (3) is made in plain and readily understandable language 
        and in a type font at least as large as the font used for the 
        majority of the policy; and
            (4) with respect to a sale or solicitation on Federal land 
        or facilities located outside of the United States by an 
        individual or entity engaged in the business of insurance, 
        except to the extent otherwise specifically provided by the 
        laws of such State in reference to this Act, lists the address 
        and phone number where consumer complaints are received by the 
        State insurance commissioner for the State in which the 
        individual has been issued a resident license or the entity is 
        domiciled, as applicable.
    (c) Enforcement.--If it is determined by a State or Federal agency, 
or in a final court proceeding, that any individual or entity has 
intentionally failed to provide a disclosure required by this section, 
such individual or entity shall be prohibited from further engaging in 
the business of insurance with respect to employees of the Federal 
Government on Federal land, except--
            (1) with respect to existing policies; and
            (2) to the extent required by the Federal Government 
        pursuant to previous commitments.
    (d) Exceptions.--
            (1) Federal and state insurance activity.--This section 
        shall not apply to insurance activities--
                    (A) specifically contracted by or through the 
                Federal Government or any State government; or
                    (B) specifically exempted from the applicability of 
                this Act by a Federal or State law, regulation, or 
                order that specifically refers to this paragraph.
            (2) Uniform state standards.--If a majority of the States 
        have adopted, in materially identical form, a standard setting 
        forth the disclosures required under this section that apply to 
        insurance solicitations and sales to military personnel on 
        military installations of the United States, after the 
        expiration of the 2-year period beginning on such majority 
        adoption, such standard shall apply in lieu of the requirements 
        of this section to all insurance solicitations and sales to 
        military personnel on military installations, with respect to 
        such States, to the extent that such standards do not directly 
        conflict with any applicable authorized Federal regulation or 
        directive.
            (3) Materially identical form.--For purposes of this 
        subsection, standards adopted by more than one State shall be 
        considered to have materially identical form to the extent that 
        such standards require or prohibit identical conduct with 
        respect to the same activity, notwithstanding that the 
        standards may differ with respect to conduct required or 
        prohibited with respect to other activities.

SEC. 108. IMPROVING LIFE INSURANCE PRODUCT STANDARDS.

    (a) In General.--It is the sense of the Congress that the NAIC 
should, after consultation with the Secretary of Defense and within 12 
months after the date of the enactment of this Act, conduct a study and 
submit a report to the Committee on Financial Services of the House of 
Representatives and the Committee on Banking, Housing, and Urban 
Affairs of the Senate on ways of improving the quality of and sale of 
life insurance products sold by insurers and producers on military 
installations of the United States, which may include limiting sales 
authority to companies and producers that are certified as meeting 
appropriate best practices procedures or creating standards for 
products specifically designed for members of the Armed Forces 
regardless of the sales location.
    (b) Conditional GAO Report.--If the NAIC does not submit the report 
to the committees as described in subsection (a), the Comptroller 
General of the United States shall study any proposals that have been 
made to improve the quality and sale of life insurance products sold by 
insurers and producers on military installations of the United States 
and report to the Committee on Financial Services of the House of 
Representatives and the Committee on Banking, Housing, and Urban 
Affairs of the Senate on such proposals within 6 months after the 
expiration of the period referred to in subsection (a).

SEC. 109. REQUIRED REPORTING OF DISCIPLINED INSURANCE PRODUCERS.

    (a) Reporting by Insurers.--After the expiration of the 2-year 
period beginning on the date of the enactment of this Act, no insurer 
may enter into or renew a contractual relationship with a producer that 
solicits or sells life insurance on military installations of the 
United States unless the insurer has implemented a system to report, to 
the State insurance commissioner of the State of the domicile of the 
insurer and the State of residence of the insurance producer, 
disciplinary actions taken against the producer with respect to the 
producer's sales or solicitation of insurance on a military 
installation of the United States, as follows:
            (1) Any disciplinary action taken by any government entity 
        that the insurer knows has been taken.
            (2) Any significant disciplinary action taken by the 
        insurer.
    (b) Reporting by States.--It is the sense of the Congress that 
within 2 years after the date of the enactment of this Act, the States 
should collectively implement a system to--
            (1) receive reports of disciplinary actions taken against 
        insurance producers by insurers or government entities with 
        respect to the producers' sale or solicitation of insurance on 
        a military installation; and
            (2) disseminate such information to all other States and to 
        the Secretary of Defense.

SEC. 110. REPORTING BARRED PERSONS ENGAGING IN FINANCIAL SERVICES 
              ACTIVITIES.

    (a) Establishment.--The Secretary of Defense shall maintain a list 
of the name, address, and other appropriate information of persons 
engaged in financial services activities that have been barred, banned, 
or otherwise limited in any manner that is not generally applicable to 
all such type of persons, from any or all military installations of the 
United States or from patronage by military members.
    (b) Notice and Access.--The Secretary shall ensure that--
            (1) the appropriate Federal and State agencies responsible 
        for any financial services regulation are promptly notified 
        upon the inclusion or removal of a person under such agencies' 
        jurisdiction; and
            (2) the list is kept current and easily accessible--
                    (A) for use by such agencies; and
                    (B) for purposes of enforcing or considering any 
                such bar, ban, or limitation by the appropriate Federal 
                personnel, including commanders of military 
                installations.
    (c) Regulations.--
            (1) In general.--The Secretary shall issue regulations in 
        accordance with this subsection to provide for the 
        establishment and maintenance of the list under this section, 
        including appropriate due process considerations.
            (2) Timing.--
                    (A) Proposed regulations.--Not later than the 
                expiration of the 60-day period beginning on the date 
                of the enactment of this Act, the Secretary shall 
                prepare and submit to the appropriate Committees a copy 
                of the regulations under this subsection that are 
                proposed to be published for comment. The Secretary may 
                not publish such regulations for comment in the Federal 
                Register until the expiration of the 15-day period 
                beginning upon such submission to the appropriate 
                Committees.
                    (B) Final regulations.--Not later than 90 days 
                after the date of the enactment of this Act, the 
                Secretary shall submit to the appropriate Committees a 
                copy of the regulations under this section to be 
                published as final.
                    (C) Effective date.--Such regulations shall become 
                effective upon the expiration of the 30-day period 
                beginning upon such submission to the appropriate 
                Committees.
            (3) Definition.--For the purposes of this section, the term 
        ``appropriate Committees'' means--
                    (A) the Committee on Financial Services and the 
                Committee on Armed Services of the House of 
                Representatives; and
                    (B) the Committee on Banking, Housing, and Urban 
                Affairs and the Committee on Armed Services of the 
                Senate.

SEC. 111. SENSE OF CONGRESS.

    It is the sense of the Congress that the Federal and State agencies 
responsible for insurance and securities regulation should provide 
advice to the appropriate Federal entities to consider--
            (1) significantly increasing the life insurance coverage 
        made available through the Federal Government to members of the 
        Armed Forces;
            (2) implementing appropriate procedures to encourage 
        members of the Armed Forces to improve their financial literacy 
        and obtain objective financial counseling before purchasing 
        additional life insurance coverage or investments beyond those 
        provided by the Federal Government; and
            (3) improving the benefits and matching contributions 
        provided under the Thrift Savings Plan to members of the Armed 
        Forces.

SEC. 112. DEFINITIONS.

    For purposes of this Act, the following definitions shall apply:
            (1) Entity.--The term ``entity'' includes insurers.
            (2) Individual.--The term ``individual'' includes insurance 
        agents and producers.
            (3) NAIC.--The term ``NAIC'' means the National Association 
        of Insurance Commissioners.
            (4) State insurance commissioner.--The term ``State 
        insurance commissioner'' means, with respect to a State, the 
        officer, agency, or other entity of the State that has primary 
        regulatory authority over the business of insurance and over 
        any person engaged in the business of insurance, to the extent 
        of such business activities, in such State.

              TITLE II--LENDING TO ARMED FORCES PERSONNEL

SEC. 201. REQUIREMENTS APPLICABLE TO CERTAIN LOANS TO MILITARY 
              SERVICEMEMBERS.

    (a) Definitions.--For purposes of this section, the following 
definitions shall apply:
            (1) Military lender.--
                    (A) In general.--The term ``military lender'' 
                means--
                            (i) a person engaged in the business of 
                        extending consumer credit that--
                                    (I) targets customers who are 
                                active duty members of the Armed 
                                Forces; or
                                    (II) knows or has reason to know 
                                that more than 10 percent of the 
                                person's customers for consumer credit 
                                products are active duty members of the 
                                Armed Forces; and
                            (ii) any assignee of such person with 
                        respect to any credit extended to any such 
                        customer.
                    (B) Exception.--The term ``military lender'' does 
                not include any insured depository institution, except 
                as provided in paragraph (3)(B).
                    (C) Treatment of each office as lender.--In the 
                case of any person engaged in the business of extending 
                consumer credit from more than 1 office or at more than 
                1 location, each office or location at which credit is 
                offered or extended or a credit transaction is 
                consummated shall be treated as a separate person for 
                purposes of this section.
            (2) Covered loan.--The term ``covered loan''--
                    (A) means any extension of credit to an active duty 
                member of the Armed Forces by a military lender that 
                has an annual percentage rate that exceeds by more than 
                5 percentage points the average annual percentage rate 
                for 24-month personal loans, as published by the Board 
                of Governors of the Federal Reserve System for the most 
                recent calendar quarter preceding the quarter in which 
                such extension of credit is made; and
                    (B) does not include any extension of credit on 
                margin on securities by a broker or dealer registered 
                with the Securities and Exchange Commission under the 
                Securities Exchange Act of 1934 to the extent such 
                extension of credit complies with the rules and 
                regulations of the Board of Governors of the Federal 
                Reserve System, the Securities and Exchange Commission, 
                and any applicable self-regulatory organization 
                relating to credit on margin on securities.
            (3) Insured depository institution.--
                    (A) In general.--The term ``insured depository 
                institution''--
                            (i) has the meaning given such term in 
                        section 3 of the Federal Deposit Insurance Act; 
                        and
                            (ii) includes any insured credit union (as 
                        defined in section 101(7) of the Federal Credit 
                        Union Act).
                    (B) Exclusion.--For purposes of this section, the 
                term ``insured depository institution'' does not 
                include an insured depository institution in any 
                circumstance in which--
                            (i) such depository institution is 
                        extending credit pursuant to a contractual 
                        relationship with a third-party agent; and
                            (ii) such agent would be a military lender, 
                        under this section, if the agent made the same 
                        loan as a principal.
            (4) Active duty member of the armed forces.--The term 
        ``active duty member of the Armed Forces'' means any member of 
        the Armed Forces who is on active duty (as defined in section 
        101(d)(1) of title 10, United States Code) under a call or 
        order that does not specify a period of 30 days or less.
            (5) Targets customers.--For purposes of paragraph 
        (1)(A)(i)(I), the term ``targets customers'' means to, directly 
        or indirectly, solicit, or engage in other promotional 
        activities explicitly directed at, members of the Armed Forces 
        for the purpose of securing business from the recipients of 
        such solicitations or promotions.
            (6) Annual percentage rate.--The term ``annual percentage 
        rate'' has the same meaning as in section 107 of the Truth in 
        Lending Act, as implemented by regulations of the Board of 
        Governors of the Federal Reserve System.
    (b) Protection of Military Servicemembers.--Any military lender who 
makes a loan to an active duty member of the Armed Forces (other than a 
loan described in paragraph (2)(B)) may not, with respect to such 
loan--
            (1) garnish any military salary or wages, or accept any 
        assignment of or institute any allotment of any military salary 
        or wages, to secure payment of the loan, unless any such 
        allotment or assignment is voluntary and may be cancelled at 
        any time by the borrower;
            (2) contact, or threaten to contact, the borrower's 
        commanding officer or any other person in the borrower's 
        military chain of command in an effort to collect on such loan;
            (3) include any provision in the loan agreement, or in any 
        other instrument or agreement made in connection with such 
        loan, that purports to--
                    (A) waive any rights of the borrower under any 
                Federal or State law, including this section and the 
                Servicemembers Civil Relief Act (50 U.S.C. App. 501 et 
                seq.); or
                    (B) provide the consent of the borrower for any 
                action prohibited under paragraph (1);
            (4) at any time, use oral or written representations, or 
        use any symbols, that suggest, give the appearance, or provide 
        reasonable cause to believe that any component of the Armed 
        Forces, the Department of Defense, or any federal entity 
        sponsors or endorses the military lender, any agent of the 
        lender, or any good, service, commodity, or credit that is 
        sold, provided, or extended by the military lender (unless 
        expressly authorized in writing by such entity); or
            (5) if such loan is a covered loan, enter into the loan 
        without disclosing, prior to consummation of the transaction 
        and in conspicuous form, the following notice:
                    ``Notice to military servicemembers:
                    ``You are not required to complete this agreement 
                merely because you have received these disclosures or 
                even if you have signed an application for an extension 
                of credit. If you obtain this credit to repay other 
                loans, you may get into serious financial difficulties 
                if you use this credit to pay off old debts and then 
                replace them with other new debts. Before you complete 
                this agreement, you should consider applying for credit 
                through other organizations or entities. Interest-free 
                loans or grants may be available from the Army, Air 
                Force, or Navy-Marine Corps Relief Society, the United 
                Service Organizations, or another base or military 
                service organization for military personnel seeking 
                short-term credit in response to a family or other 
                emergency.
                    ``This extension of credit is not sponsored or 
                endorsed by any component of the Armed Forces, the 
                Department of Defense, or any Federal entity.
                    ``Your lender may not garnish your salary or wages, 
                or accept any assignment of or institute an allotment 
                of your salary or wages, to secure repayment of the 
                debt, unless any such allotment or assignment is 
                voluntary and may be cancelled by you at any time. Your 
                lender may not contact your commanding officer or 
                anyone in your chain of command in an effort to collect 
                on the loan.
                    ``You and your dependents may have additional 
                rights and protections under Federal and State law with 
                respect to this loan, including the Servicemembers 
                Civil Relief Act, which you cannot waive and which the 
                lender may not ask or require you to waive.''.
    (c) Rule of Construction.--No provision of this section shall be 
construed as--
            (1) authorizing any person that is not a military lender to 
        engage in any activity that is prohibited for military lenders 
        under this section;
            (2) creating any inference that any activity described in 
        subsection (b) is a lawful activity for any person or would be 
        a lawful activity for a military lender but for this section; 
        or
            (3) creating any inference that any right or protection 
        provided for consumers under any Federal or State law can be 
        waived by any consumer.
    (d) Enforcement.--The provisions of this section shall be enforced 
under section 917 of the Consumer Credit Protection Act, in the manner 
provided in such section. For the purposes of any enforcement under 
such section 917, any violation of a provision or requirement of this 
section shall be treated as a violation of a provision or requirement 
of title IX of such Act.
    (e) Circumvention Prohibited.--The Federal Trade Commission shall, 
with respect to entities and activities under its jurisdiction, 
prescribe regulations to become effective not later than 90 days after 
the date of the enactment of this Act to prevent a military lender from 
taking any action in connection with any loan made to an active duty 
member of the Armed Forces to structure a loan transaction, by 
structuring any loan as an open-end credit plan (as defined in section 
103 of the Truth in Lending Act), dividing any loan into separate 
transactions, using a lower temporary or introductory rate of interest 
to lower the overall annual percentage rate applicable for any loan, or 
any similar action, for the purpose of avoiding designation as a 
covered loan for purposes of this section or otherwise circumventing or 
evading any requirement of this title.

            Passed the House of Representatives June 28, 2005.

            Attest:

                                                                 Clerk.
109th CONGRESS

  1st Session

                               H. R. 458

_______________________________________________________________________

                                 AN ACT

  To prevent the sale of abusive insurance and investment products to 
              military personnel, and for other purposes.