110 HR 2871 IH: Payday Loan Reform Act of U.S. House of Representatives 2007-06-26 text/xml EN Pursuant to Title 17 Section 105 of the United States Code, this file is not subject to copyright protection and is in the public domain.

I 110th CONGRESS 1st Session H. R. 2871 IN THE HOUSE OF REPRESENTATIVES June 26, 2007 Mr. Udall of New Mexico (for himself, Mr. Gutierrez, Mr. Ellison, and Ms. Schakowsky) introduced the following bill; which was referred to the Committee on Financial Services A BILL To amend the Truth in Lending Act and the Federal Deposit Insurance Act to prohibit payday loans based on checks drawn on, or authorized withdrawals from, depository institutions and to prohibit insured depository institutions from making payday loans, and for other purposes.

1.

Short title

This Act may be cited as the Payday Loan Reform Act of 2007.

2.

Prohibition on payday loans based on checks drawn on, or authorized withdrawals from, depository institutions

Section 128 of the Truth in Lending Act (15 U.S.C. 1638) is amended by adding at the end the following new subsection: (e)

Prohibition on payday loans based on checks drawn on, or authorized withdrawals from, depository institutions

(1)

In general

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

Definitions

For purposes of this subsection, the following definitions shall apply: (A)

Depository institution

The term depository institution has the same meaning as in section 19(b)(1)(A) of the Federal Reserve Act. (B)

Payday loan

The term payday loan means any transaction in which a short-term cash advance is made to a consumer in exchange for— (i)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 (ii)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: (y)

Prohibition on insured depository institutions making payday loans

(1)

In general

An insured depository institution may not make or extend— (A)any payday loan, either directly or indirectly; or (B)any loan or credit 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. .

4.

Penalties and remedies

(a)

Contract void

Any credit agreement, promissory note, or other contract prohibited under any amendment made by this Act shall be void from the inception of such agreement, note, or contract. (b)

Clarification of liability

Section 130(a) of the Truth in Lending Act (15 U.S.C. 1640(a)) is amended by inserting after the penultimate sentence the following new sentence: Any creditor who violates section 128(e) with respect to any person shall be liable to such person under paragraphs (1), (2) and (3). (c)

Preservation of other remedies

The remedies and rights provided under any amendment made by this Act are in addition to and do not preclude any remedy otherwise available under law to the person claiming relief under any provision of law, including any award for general, consequential, or punitive damages.

5.

Effective date

The amendments made by this Act shall take effect at the end of the 30-day period beginning on the date of the enactment of this Act and shall apply to all loans initiated on or after such date and to any extension or renewal of loans made on or after such date.