[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[S. 3632 Introduced in Senate (IS)]







110th CONGRESS
  2d Session
                                S. 3632

To combat predatory lending practices and to provide access to capital 
      to those living in low-income and traditionally underserved 
                  communities, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

           September 26 (legislative day, September 17), 2008

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

_______________________________________________________________________

                                 A BILL


 
To combat predatory lending practices and to provide access to capital 
      to those living in low-income and traditionally underserved 
                  communities, 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 ``Fostering American Independence from 
Regressive and Abusive Credit Transactions Act of 2008'' or the ``FAIR 
Act''.

SEC. 2. MAXIMUM INTEREST RATES; PROHIBITION ON PAYDAY LENDING.

    Chapter 2 of the Truth in Lending Act (15 U.S.C. 1631 et seq.) is 
amended by adding at the end the following:

``SEC. 140. MAXIMUM RATE OF INTEREST; PROHIBITION ON PAYDAY LENDING.

    ``(a) Interest Limit.--No covered creditor may make an extension of 
credit to a consumer with respect to which the annual percentage rate, 
as defined in subsection (b), exceeds 36 percent, or such lower limit 
as is provided under otherwise applicable State or Federal law, 
including section 207 of the Servicemembers Civil Relief Act (50 U.S.C. 
App. 527).
    ``(b) Payday Loan Prohibition.--Notwithstanding any other provision 
of law, no covered creditor may--
            ``(1) cash or advance money for a post-dated check in 
        exchange for a fee or other payment of interest, other than as 
        otherwise authorized for the payment of a preexisting debt; or
            ``(2) hold a check, require electronic access to an account 
        at a financial institution, or hold title to personal property 
        (except in connection with the purchase or rental of such 
        personal property) as collateral for a loan or other extension 
        of credit.
    ``(c) Definition of Annual Percentage Credit Rate and Covered 
Creditor.--For purposes of this section--
            ``(1) the `annual percentage rate' includes all charges 
        payable directly or indirectly incident to, ancillary to, or as 
        a condition of the extension of credit, including--
                    ``(A) any payment compensating a creditor or 
                prospective creditor for an extension of credit or 
                making available a line of credit, or any default or 
                breach by a borrower of a condition upon which credit 
                was extended, including fees connected with credit 
                extension or availability, such as numerical periodic 
                rates, late fees, creditor-imposed not sufficient funds 
                fees charged when a borrower tenders payment on a debt 
                with a check drawn on insufficient funds, over limit 
                fees, annual fees, cash advance fees, and membership 
                fees;
                    ``(B) all fees which constitute a finance charge, 
                as defined by rules of the Board in accordance with 
                this title;
                    ``(C) credit insurance premiums, whether optional 
                or required; and
                    ``(D) all charges and costs for ancillary products 
                sold in connection with or incidental to the credit 
                transaction; and
            ``(2) the term `covered creditor' means a creditor other 
        than an insured depository institution (as defined in section 3 
        of the Federal Deposit Insurance Act (12 U.S.C. 1813)) or an 
        insured credit union (as defined in section 101 of the Federal 
        Credit Union Act (12 U.S.C. 1752)).
    ``(d) Mandatory Disclosures.--In addition to any other disclosures 
required by this title, a covered creditor shall, with respect to an 
extension of consumer credit, provide to the consumer in writing, at or 
before the issuance of such credit--
            ``(1) a statement of the annual percentage rate applicable 
        to the extension of credit; and
            ``(2) a clear description of the payment obligations of the 
        consumer.
    ``(e) Relation to State Law.--Nothing in this section may be 
construed to preempt any provision of State law that provides greater 
protection to consumers than is provided in this section.
    ``(f) Civil Liability and Enforcement.--In addition to remedies 
available to the consumer under section 130(a), any consumer credit 
transaction made in violation of this section shall be null and void, 
and not enforceable by any party in any court or alternative dispute 
resolution forum, and the creditor or any subsequent holder shall 
promptly return to the consumer any principal, interest, charges, and 
fees, and any security interest associated with such transaction. 
Notwithstanding any statute of limitations or repose, a violation of 
this section may be raised as a matter of defense by recoupment or set 
off to an action to collect such debt or repossess related security at 
any time.
    ``(g) Violations.--Any person that violates this section, or seeks 
to enforce an agreement made in violation of this section, shall be 
subject to, for each such violation, 1 year in prison and a fine in an 
amount equal to the greater of--
            ``(1) 3 times the amount of the total accrued debt 
        associated with the subject transaction; or
            ``(2) $50,000.
    ``(h) State Attorneys General.--An action to enforce this section 
may be brought by the appropriate State attorney general in any United 
States district court or any other court of competent jurisdiction, not 
later than 3 years after the date of the violation, and may obtain 
injunctive relief.''.

SEC. 3. SMALL-DOLLAR LOAN PROGRAM.

    (a) Establishment.--The Federal Deposit Insurance Corporation (in 
this Act referred to as the ``Corporation'') shall establish, by rule, 
a program to encourage insured depository institutions to incorporate 
small consumer loans into their regular banking services.
    (b) Program Components.--The loan program established under this 
section shall--
            (1) be voluntary in nature;
            (2) allow for loan amounts of $1,000 or less;
            (3) provide for--
                    (A) amortization periods of not longer than 36 
                months, in the case of closed end credit plans; and
                    (B) minimum regular payments that are designed to 
                reduce outstanding principal amounts, in the case of 
                loans under an open end credit plan;
            (4) prohibit the imposition of--
                    (A) prepayment penalties; and
                    (B) origination or maintenance fees that exceed the 
                true cost of the loan to the financial institution; and
            (5) provide for an automatic savings component.
    (c) Community Reinvestment Act Treatment.--Participation in the 
loan program established under this Act shall be a factor in the 
determination by the appropriate Federal financial supervisory agency 
of whether an insured depository institution is meeting the credit 
needs of its community for purposes of the Community Reinvestment Act 
of 1977.
    (d) Definitions.--As used in this section--
            (1) the term ``appropriate Federal financial supervisory 
        agency'' has the same meaning as in section 803 of the 
        Community Reinvestment Act of 1977 (12 U.S.C. 2902);
            (2) the term ``closed end credit plan'' means an extension 
        of credit for a fixed period of time, other than an extension 
        of credit that is secured by a dwelling or other real property;
            (3) the term ``insured depository institution'' has the 
        same meaning as in section 3 of the Federal Deposit Insurance 
        Act (12 U.S.C. 1813); and
            (4) the term `` open end credit plan'' has the same meaning 
        as in section 103 of the Truth in Lending Act (15 U.S.C. 1602).
    (e) Regulatory Actions.--The Corporation shall issue such 
regulations as may be necessary to carry out this section, including 
with respect to the definition of terms (other than as provided in 
subsection (d)).

SEC. 4. STUDY AND REPORT ON BEST PRACTICES.

    (a) Study.--The Federal Deposit Insurance Corporation and the 
National Credit Union Administration shall each conduct a study of best 
practices to provide incentives for mainstream financial institutions 
to provide small dollar amount loans to consumers, including innovative 
State and local programs, private sector, and not-for-profit 
initiatives.
    (b) Report to Congress.--Not later than 180 days after the date of 
enactment of this Act, the Federal Deposit Insurance Corporation and 
the National Credit Union Administration shall each submit a report to 
Congress on the results of the study conducted under subsection (a).
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