[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[S. 1831 Introduced in Senate (IS)]







110th CONGRESS
  1st Session
                                S. 1831

 To amend the Truth in Lending Act, to improve disclosures for private 
                 student loans, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             July 19, 2007

  Mr. Schumer introduced the following bill; which was read twice and 
    referred to the Committee on Banking, Housing, and Urban Affairs

_______________________________________________________________________

                                 A BILL


 
 To amend the Truth in Lending Act, to improve disclosures for private 
                 student loans, 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.

    This Act may be cited as the ``Private Student Loan Disclosure 
Enhancement Act of 2007''.

SEC. 2. APPLICATION OF TRUTH IN LENDING ACT .

    Section 104(3) of the Truth in Lending Act (15 U.S.C. 1603(3)) is 
amended by inserting before the period at the end the following ``, and 
other than private education loans, as that term is defined in section 
128(e), regardless of the amount financed''.

SEC. 3. ENHANCED DISCLOSURES FOR PRIVATE STUDENT LOANS.

    (a) In General.--Section 128 of the Truth in Lending Act (15 U.S.C. 
1638) is amended by adding at the end the following:
    ``(e) Terms and Disclosure With Respect to Private Student Loans.--
            ``(1) Disclosures required in private student loan 
        applications and solicitations.--In any application for a 
        private student loan, or a solicitation for a private student 
        loan without requiring an application, the lender shall 
        disclose to the borrower, clearly and conspicuously--
                    ``(A) the potential range of annual percentage 
                rates of interest applicable to the private student 
                loan;
                    ``(B) whether the rate of interest applicable to 
                the private student loan is fixed or variable;
                    ``(C) limitations on interest rate adjustments, 
                both in terms of frequency and amount, or the lack 
                thereof;
                    ``(D) requirements for a parent or co-borrower, 
                including any changes in the applicable interest rates 
                without a parent or co-borrower;
                    ``(E) all potential finance charges, late fees, 
                penalties, and adjustments to principal, based on 
                transgressions of the borrower;
                    ``(F) fees or range of fees (along with basis for 
                variations in fees) applicable to the private student 
                loan;
                    ``(G) the term of loan;
                    ``(H) whether interest will accrue while the 
                student to whom the private student loan relates is 
                enrolled at an institution of higher education;
                    ``(I) payment deferral options, including whether 
                the deferment would apply to interest or principal, or 
                both;
                    ``(J) if only principal may be deferred, whether 
                the student may postpone the payment of interest by 
                capitalization of the interest;
                    ``(K) whether deferrals may be extended for 
                additional periods of enrollment at an institution of 
                higher education;
                    ``(L) the duration of any payment grace period;
                    ``(M) eligibility criteria for the private student 
                loan;
                    ``(N) 3 examples of the total cost of the private 
                student loan over the life of the loan--
                            ``(i) 2 of which shall be calculated using 
                        the same principal amount, one of those using 
                        the maximum possible rate of interest (or 36 
                        percent, if no maximum amount is specified in 
                        the terms of the loan); and
                            ``(ii) calculated both with and without 
                        capitalization of interest if that is an option 
                        for postponing interest payments;
                    ``(O) in any case in which the applicable rate of 
                interest is variable, a disclosure that interest rates 
                are variable and that any projected cost at less than 
                the maximum rate of interest is likely to go up 
                significantly;
                    ``(P) a statement that an institution of higher 
                education may have school-specific student loan 
                benefits and terms not detailed on the disclosure form; 
                and
                    ``(Q) such other information as the Board shall 
                prescribe, by rule, as necessary for consumers to make 
                informed borrowing decisions.
            ``(2) Disclosures at the time of private student loan 
        approval.--Contemporaneously with the approval of a private 
        student loan application, and before the loan transaction is 
        consummated, the lender shall disclose to the borrower, clearly 
        and conspicuously--
                    ``(A) the applicable rate of interest;
                    ``(B) whether the rate of interest applicable to 
                the private student loan is fixed or variable;
                    ``(C) limitations on interest rate adjustments, 
                both in terms of frequency and amount, or the lack 
                thereof;
                    ``(D) the principal amount for repayment;
                    ``(E) the applicable annual percentage rate (or 
                `APR') with respect to the private student loan;
                    ``(F) applicable finance charges, late fees, 
                penalties, and adjustments to principal, based upon 
                borrower transgressions;
                    ``(G) fees upon disbursement of the private student 
                loan;
                    ``(H) the term of the private student loan;
                    ``(I) the monthly payment, calculated using the 
                rate of interest in effect on the date of approval, 
                initially required after the student to whom the 
                private student loan relates is no longer enrolled at 
                an institution of higher education, and the maximum 
                monthly payment to which such amount could increase if 
                rates are variable, which amounts shall be calculated--
                            ``(i) using the principal amount that will 
                        be in effect at that post-enrollment time 
                        (incorporating accrual of interest during the 
                        educational years, if applicable), rather than 
                        at the time of consummation of the loan; and
                            ``(ii) in the case of a variable rate 
                        private student loan that has no cap on the 
                        rate of interest, assuming a maximum interest 
                        rate of 36 percent;
                    ``(J) an estimate of the total amount for 
                repayment, at both the interest rate in effect on the 
                date of approval, and at the maximum possible rate of 
                interest if the rate is variable (assuming a maximum 
                rate of 36 percent if no maximum rate is specified by 
                the terms of the loan);
                    ``(K) any principal and interest payments required 
                while the student to whom the private student loan 
                relates is enrolled at an institution of higher 
                education and interest which will accrue during such 
                enrollment;
                    ``(L) payment deferral options, including whether 
                the deferment would apply to interest or principal, or 
                both;
                    ``(M) if only principal may be deferred, whether 
                the student may postpone the payment of interest by 
                capitalization of the interest;
                    ``(N) whether deferrals may be extended for 
                additional periods of enrollment at an institution of 
                higher education;
                    ``(O) the duration of any payment grace period;
                    ``(P) any penalty for early repayment of the 
                private student loan;
                    ``(Q) whether monthly payments are graduated;
                    ``(R) that the borrower shall have 30 calendar days 
                following the date on which the application for the 
                private education loan is approved and the borrower 
                receives the disclosure documents required under this 
                subsection for the loan, to accept the terms of the 
                private education loan and consummate the transaction, 
                and the rates and terms of the loan may not be changed 
                by the lender during that period; and
                    ``(S) such other information as the Board shall 
                prescribe, by rule, as necessary for consumers to make 
                informed borrowing decisions.
            ``(3) Format of disclosures.--Disclosures required under 
        paragraphs (1) and (2) shall appear in a clearly legible (not 
        less than 12-point font), uniform format, subject to section 
        122(c).
            ``(4) Effective period of approved rate of interest and 
        loan terms.--With respect to a private student loan, the 
        borrower shall have 30 calendar days following the date on 
        which the application for the private education loan is 
        approved and the borrower receives the disclosure documents 
        required under this subsection for the loan to accept the terms 
        of the loan and consummate the transaction, and the rates and 
        terms of the loan may not be changed by the lender during that 
        period, subject to the rules of the Board.
            ``(5) Definitions.--For purposes of this subsection--
                    ``(A) the term `institution of higher education' 
                has the same meaning as in section 102 of the Higher 
                Education Act of 1965 (20 U.S.C. 1002);
                    ``(B) the term `lender' means a creditor, other 
                than an issuer of credit under a residential mortgage 
                transaction, and any agent thereof; and
                    ``(C) the term `private education loan' means a 
                private loan provided by a lender that--
                            ``(i) is not made, insured, or guaranteed 
                        under any Federal, State, or local government 
                        unit, including under subtitle B of title IV of 
                        the Higher Education Act of 1965 (20 U.S.C. 
                        1070 et seq.); and
                            ``(ii) is issued by a lender for 
                        postsecondary educational expenses to a 
                        student, or the parent of the student, 
                        regardless of whether the loan is provided 
                        through the educational institution that the 
                        student attends or directly to the student or 
                        parent from the lender.''.
    (b) Regulations To Carry Out Private Education Loan Disclosures.--
            (1) In general.--The Board of Governors of the Federal 
        Reserve System (in this section referred to as the ``Board'') 
        shall issue regulations in final form to carry out section 
        128(e) of the Truth in Lending Act, as added by this section, 
        not later than 6 months after the date of enactment of this 
        Act.
            (2) Development and testing of disclosure statement.--The 
        Board shall, in issuing regulations under paragraph (1), 
        develop and test for readability a disclosure statement for 
        student borrowers that is consistent with the requirements of 
        section 122(c) of the Truth in Lending Act (15 U.S.C. 1638(c)).
    (c) Conforming Amendment.--Section 122(c) of the Truth in Lending 
Act (15 U.S.C. 1632(c)) is amended by inserting ``and in section 
128(e)'' before ``shall be''.

SEC. 4. ENFORCEMENT OF REQUIREMENTS FOR PRIVATE EDUCATION LOANS.

    Section 130 of the Truth in Lending Act (15 U.S.C. 1640) is 
amended--
            (1) in subsection (a), in the fourth sentence of the 
        undesignated matter at the end, by inserting ``or section 
        128(e),'' before ``or for failing''; and
            (2) in subsection (e), in the first sentence, by inserting 
        before the period the following: ``, except that, in the case 
        of a private education loan (as defined in section 127(e)), 
        such an action may be brought not later than one year after the 
        date on which the first monthly payment on the loan is due 
        after the student to whom the private student loan relates is 
        no longer enrolled at an institution of higher education, 
        unless full repayment begins earlier with no deferral of 
        interest or principal''.

SEC. 5. DISCLOSURES OF FEDERAL LOAN AVAILABILITY.

    (a) Disclosure Required.--The Board shall issue regulations in 
final form not later than 6 months after the date of enactment of this 
Act to require each lender to disclose in accordance with subsection 
(b), contemporaneously with the disclosures required under paragraphs 
(1) and (2) of section 128(e) of the Truth in Lending Act (as added by 
this Act), that the student borrower may be eligible for a Federal 
education loan.
    (b) Development and Testing of Disclosure Statement.--The Board 
shall, in issuing regulations under subsection (a), develop and test 
for readability a disclosure statement for student borrowers that--
            (1) encourages students to maximize their use of Federal 
        education loans;
            (2) discloses that Federal educational loans are less 
        costly than private education loans; and
            (3) discloses the average rate of interest for Federal 
        educational loans.
    (c) Format.--The disclosures developed under this section shall be 
made in clear language and in a conspicuous location separate from the 
disclosures made under section 128(e) of the Truth in Lending Act, as 
added by this Act, using at least size 12 point font.
    (d) Definitions.--As used in this section--
            (1) the term ``Board'' means the Board of Governors of the 
        Federal Reserve System ;
            (2) the term ``Federal education loan'' means a loan that 
        is --
                    (A) made, insured, or guaranteed under title IV of 
                the Higher Education Act of 1965 (20 U.S.C. 1070 et 
                seq.); and
                    (B) is issued for postsecondary educational 
                expenses to a student, or the parent of the student, 
                regardless of whether the loan is provided through the 
                educational institution that the student attends or 
                directly to the student or parent from the lender;
            (3) the term ``institution of higher education'' has the 
        same meaning as in section 102 of the Higher Education Act of 
        1965 (20 U.S.C. 1002);
            (4) the term ``lender'' means a creditor, other than an 
        issuer of credit under a residential mortgage transaction, and 
        any agent thereof, as those terms are defined in section 103 of 
        the Truth in Lending Act; and
            (5) the term ``private education loan'' means a private 
        loan provided by a lender that--
                    (A) is not made, insured, or guaranteed under any 
                Federal, State, or local government unit, including 
                under subtitle B of title IV of the Higher Education 
                Act of 1965 (20 U.S.C. 1070 et seq.); and
                    (B) is issued by a lender for postsecondary 
                educational expenses to a student, or the parent of the 
                student, regardless of whether the loan is provided 
                through the educational institution that the student 
                attends or directly to the student or parent from the 
                lender.
                                 <all>