II 109th CONGRESS 1st Session S. 1878 IN THE SENATE OF THE UNITED STATES October 17, 2005 Mr. Akaka introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs A BILL To prohibit predatory payday loans, and for other purposes.

1.

Short title

This Act may be cited as the Predatory Payday Loan Prohibition Act of 2005.

2.

Prohibition on creditors making payday loans

The Truth in Lending Act (15 U.S.C. 1601 et seq.) is amended by inserting after section 109 the following:

110.

Prohibition on payday loans

(a)

In general

A creditor may not make a payday loan to any person, if the creditor knows or has reasonable cause to believe that— (1)the personal check or share draft that the creditor receives from the person in exchange for the loan is drawn on an insured depository institution or an insured credit union; or (2)the account that will be debited in exchange for the loan is a transaction account or share draft account at an insured depository institution or an insured credit union. (b)

Definitions

In this section, the following definitions shall apply: (1)

Insured institutions

The terms insured depository institution and insured credit union have the meanings given those terms in section 3 of the Federal Deposit Insurance Act and section 101 of the Federal Credit Union Act, respectively. (2)

Payday loan

The term payday loan means any transaction in which a short-term cash advance is made to a consumer in exchange for— (A)the personal check or share draft of the consumer, in the amount of the advance plus a fee, where presentment or negotiation of such check or share draft is deferred by agreement of the parties until a designated future date; or (B)the authorization of a consumer to debit the transaction account or share draft account of the consumer, in the amount of the advance plus a fee, where such account will be debited on or after a designated future date.

.

3.

Prohibition on insured depository institutions making payday loans

Section 18 of the Federal Deposit Insurance Act (12 U.S.C. 1828) is amended by adding at the end the following: (x)

Prohibition on certain unsafe and unsound banking practices

(1)

In general

An insured depository institution may not— (A)make any payday loan, either directly or indirectly; or (B)make any loan to any other lender for purposes of financing a payday loan or refinancing or extending any payday loan. (2)

Payday loan defined

For purposes of this subsection, the term payday loan means any transaction in which a short-term cash advance is made to a consumer in exchange for— (A)the personal check or share draft of the consumer, in the amount of the advance plus a fee, where presentment or negotiation of such check or share draft is deferred by agreement of the parties until a designated future date; or (B)the authorization of the consumer to debit the transaction account or share draft account of the consumer, in the amount of the advance plus a fee, where such account will be debited on or after a designated future date. .