[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1214 Introduced in House (IH)]

111th CONGRESS
  1st Session
                                H. R. 1214

 To amend the Truth in Lending Act to establish additional payday loan 
 disclosure requirements and other protections for consumers, and for 
                            other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           February 26, 2009

Mr. Gutierrez (for himself, Mr. Towns, Mr. Meeks of New York, Mr. Clay, 
  and Mr. Scott of Georgia) introduced the following bill; which was 
            referred to the Committee on Financial Services

_______________________________________________________________________

                                 A BILL


 
 To amend the Truth in Lending Act to establish additional payday loan 
 disclosure requirements and other protections for consumers, 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 ``Payday Loan Reform Act of 2009''.

SEC. 2. PAYDAY LOAN DISCLOSURES AND CONSUMER PROTECTIONS.

    (a) In General.--Chapter 2 of the Truth in Lending Act (15 U.S.C. 
1631 et seq.) is amended by inserting after section 129A the following 
new section:

``SEC. 129B. MANDATORY DISCLOSURES; EXTENDED REPAYMENT PLAN; AND OTHER 
              PROTECTIONS FOR CONSUMERS.

    ``(a) Mandatory Disclosures for Payday Loans.--No creditor may make 
a payday loan to a consumer unless--
            ``(1) the creditor has first provided the consumer with a 
        copy of a written loan agreement, which shall be signed by the 
        creditor and by the consumer and shall include the following 
        information in English and in the language in which the loan 
        was negotiated:
                    ``(A) A clear and conspicuous description of the 
                terms of the loan, including the total cost of all fees 
                and other charges in connection with the loan stated 
                both as a dollar amount and as an annual percentage 
                rate, and the consumer's payment obligations under the 
                loan;
                    ``(B) The name, address and telephone number of the 
                creditor making the loan, and the name of title of the 
                individual employee of the creditor who signs the loan 
                agreement on behalf of the creditor;
                    ``(C) The following statements, in at least 14-
                point bold face type:
                            ``(i) `WARNING: This loan is not intended 
                        to meet long-term financial needs. This loan 
                        should be used only to meet short-term cash 
                        needs. The cost of this loan may be higher than 
                        loans offered by other lending institutions.'
                            ``(ii) `CREDIT COUNSELING AVAILABILITY: You 
                        should consider contacting an independent, non-
                        profit credit counseling agency approved by the 
                        National Foundation for Credit Counseling 
                        (NFCC) or by a State or Federal government 
                        agency. You may obtain information on how to 
                        contact an approved counselor near you by 
                        calling NFCC at 1-800-388-2227.'
                            ``(iii) `NO CRIMINAL PROSECUTION OR 
                        SECURITY INTEREST: You cannot be prosecuted in 
                        criminal court to collect this loan, and the 
                        creditor may not take or attempt to take an 
                        interest in any of your personal property to 
                        secure his loan.'
                            ``(iv) `INTEREST-FREE EXTENDED REPAYMENT 
                        PLAN:'
                                    ``(I) `If you are unable to repay 
                                your loan when due, you may elect once 
                                every 6 months to repay your loan to 
                                the creditor by using an extended 
                                repayment plan that will allow you to 
                                repay your loan in at least 6 
                                substantially equal installments as 
                                described further below with no 
                                additional finance charges, interest 
                                fees, or other charges of any kind, to 
                                the extent that you repay the loan as 
                                agreed under the repayment plan.'
                                    ``(II) `To obtain an extended 
                                repayment plan, you shall advise the 
                                creditor no later than 7 calendar days 
                                after the loan due date that you wish 
                                to enter into an extended repayment 
                                plan by returning to the office where 
                                you obtained the loan or by using 
                                whatever other method you used to 
                                obtain the loan, such as by Internet, 
                                telephone or fax, and you must promptly 
                                sign an amendment to your loan 
                                agreement reflecting the new payment 
                                schedule.'
                                    ``(III) `The 6-month period during 
                                which you may elect to use an extended 
                                repayment plans is measured from the 
                                date that you fully pay off all amounts 
                                due under 1 extended repayment plan 
                                until the date that you enter into 
                                another extended repayment plan.'
                                    ``(IV) `The creditor must allow you 
                                to repay your loan balance in at least 
                                six substantially equal installment 
                                payments. These installments must be 
                                due on or after a date on which you 
                                receive regular income except that 
                                there shall be at least 13 days between 
                                installments, and the first installment 
                                under the plan shall not be due before 
                                your next pay date that is at least 13 
                                days after the repayment plan amendment 
                                is singed by both you and the 
                                creditor.'
                                    ``(V) `If you enter into an 
                                extended repayment plan and then 
                                default by failing to meet your payment 
                                obligations, the creditor may charge 
                                you a payment plan fee not to exceed 
                                $25.00 and may accelerate payment of 
                                the balance remaining if allowed by 
                                applicable law.'
                                    ``(VI) `You may prepay the amount 
                                due under the extended repayment plan 
                                at any time without charge or penalty.'
                                    ``(VII) `This Federal extended 
                                repayment plan requirement supersedes 
                                any repayment plan requirements under 
                                any State law'.
                    ``(D) Any other disclosures required by Federal 
                law.
    ``(b) Additional Public Disclosures.--No creditor shall make a 
payday loan to any consumer unless the following notices are posted 
conspicuously in English and Spanish and in not less than 1-inch bold 
print in the creditor's public lending area in each physical location, 
or, if the loan is made using the Internet, fax or other means, posted 
conspicuously on the creditor's public internet site relating to any 
such payday loan:
            ``(1) `WARNING: This loan is not intended to meet long-term 
        financial needs. This loan should be used only to meet short-
        term cash needs. The cost of your loan may be higher than loans 
        offered by other lending institutions.'
            ``(2) `CREDIT COUNSELING AVAILABILITY: You should consider 
        contacting an independent, non-profit credit counseling agency 
        approved by the National Foundation for Credit Counseling 
        (NFCC) or by a State or Federal government agency. You may 
        obtain information on how to contact an approved counselor near 
        you by calling the NFCC at 1-800-388-2227'.
            ``(3) `NO CRIMINAL PROSECUTION OR SECURITY INTEREST: You 
        cannot be prosecuted in criminal court to collect this loan, 
        and we may not take or attempt to take an interest in any of 
        your personal property to secure this loan.'
            ``(4) `INTEREST-FREE EXTENDED REPAYMENT PLAN: If you are 
        unable to repay your loan as agreed, we are required by Federal 
        law to allow you to enter into an extended repayment plan, at 
        least once every 6 months, that will allow you to repay the 
        loan in at least 6 equal installments without being charged any 
        additional finance charges, interest fees or other charges of 
        any kinds as long as you notify us of your desire to enter into 
        such a plan no later than seven calendar days after the loan 
        due date. This Federal repayment plan requirement supersedes 
        any repayment plan requirements under any State law.'.
    ``(c) Mandatory Extended Repayment Plan.--
            ``(1) In general.--No creditor may make a payday loan to 
        any consumer unless the creditor offers the consumer an 
        extended repayment plan that meets the following requirements:
                    ``(A) The extended repayment plan is offered at 
                least once in any 6-month period, if the consumer 
                advises the creditor no later than 7 calendar days 
                after the loan due date that the consumer is unable to 
                repay the loan as agreed and wants to enter into an 
                extended repayment plan.
                    ``(B) To qualify for such an extended repayment 
                plan, the consumer may be required to return to the 
                office where the consumer obtained the loan or use 
                whatever method (e.g., Internet, telephone, fax) the 
                consumer used to obtain the loan, and the consumer 
                shall promptly sign an amendment to the loan agreement 
                reflecting the new repayment schedule.
                    ``(C) Under the extended repayment plan, the 
                creditor allows the consumer to repay the consumer's 
                loan balance in at least 6 equal installments due 
                coinciding on the consumer's periodic pay dates, to the 
                extent that there shall be at least 13 days between 
                installments, and the first installment under the plan 
                is not be due before the consumer's next pay date that 
                is at least 13 days after the repayment plan amendment 
                is signed by both the consumer and the creditor.
                    ``(D) The creditor may extend the length of time 
                between installments.
                    ``(E) The consumer may prepay the amount due under 
                the extended repayment plan at any time without charge 
                or penalty.
                    ``(F) The consumer may not be charged additional 
                finance charges, interest fees, or other charges of any 
                kind; however, if the consumer enters an extended 
                repayment plan and then defaults by failing to meet the 
                consumer's payment obligations, the creditor may charge 
                a repayment plan fee not to exceed $25.00 and may 
                accelerate payment of the balance remaining if allowed 
                by applicable law.
            ``(2) Conflict of laws provision.--The requirements of this 
        subsection regarding extended repayment plans shall supersede 
        any repayment plan requirements under any State law.
    ``(d) Additional Protections for Consumers.--It shall be unlawful 
for a payday lender to--
            ``(1) require a consumer to pay interest and fees that, 
        combined, total more than 15 cents for every dollar loaned in 
        connection with a payday loan;
            ``(2) threaten or seek to have the consumer prosecuted in 
        criminal court to collect the loan;
            ``(3) take or attempt to take an interest in any of the 
        consumer's personal property to secure the loan;
            ``(4) file or initiate a legal proceeding of any kind, 
        including a lawsuit or arbitration, against a consumer to 
        collect on a loan that is the subject of an extended repayment 
        plan, or construe the loan to be in default unless the consumer 
        has failed to repay the loan as agreed under the terms of the 
        repayment plan;
            ``(5) take any power of attorney;
            ``(6) include in the loan documents--
                    ``(A) a confession of judgment clause;
                    ``(B) a waiver of the right to a jury trial, if 
                applicable, in any action brought by or against a 
                consumer, unless the waiver is included in an 
                arbitration clause allowed by subparagraph (C) of this 
                paragraph; and
                    ``(C) a mandatory arbitration clause that is 
                oppressive, unfair, unconscionable, or substantially in 
                derogation of the rights of consumers;
            ``(7) make a payday loan to a consumer who has an 
        outstanding loan obligation to the creditor under an extended 
        repayment plan, or for at least 13 days until after the 
        outstanding loan obligation to the creditor under any such 
        repayment plan is paid in full;
            ``(8) knowingly accept payment in whole or in part for any 
        obligation under an extended repayment plan based on funds 
        obtained from another payday loan;
            ``(9) enter into any agreement with a consumer pursuant to 
        which the consumer seeks or purports to waive the consumer's 
        rights under this section or any claim or defense arising out 
        of the loan contract;
            ``(10) charge or attempt to collect, attorney's fees, court 
        costs, or arbitration costs incurred in connection with the 
        collection of a payday loan;
            ``(11) rollover a payday loan;
            ``(12) make more than 1 payday loan at the same time to a 
        consumer;
            ``(13) fail to give the consumer, after each payment by the 
        consumer, a signed, dated, receipt showing the amount paid and 
        the balance due on the loan; and
            ``(14) sell any insurance of any kind in connection with 
        the making or collecting of a payday loan.
    ``(e) Rescission.--A consumer may cancel future payment obligations 
on a payday loan, without cost or finance charges by informing the 
creditor in writing, no later than the end of the 2nd business day 
following the day on which the payday loan agreement was executed, that 
the consumer wants to rescind the loan and by returning the cash amount 
of the principal of the loan to the creditor.
    ``(f) Definitions.--For purposes of this section, the following 
definitions shall apply:
            ``(1) Check.--The term `check' means a negotiable 
        instrument as defined in Article 3 of the Uniform Commercial 
        Code, which is drawn on a financial institution.
            ``(2) Creditor.--Notwithstanding the definition of the term 
        `creditor' in section 103, the term `creditor'--
                    ``(A) means a person who makes or offers payday 
                loans; and
                    ``(B) includes--
                            ``(i) any affiliate of a creditor that 
                        offers or makes a payday loan, buys a whole or 
                        partial interest in a payday loan, arranges a 
                        payday loan for a third party, or acts as an 
                        agent for a third party in making a payday 
                        loan, regardless of whether approval, 
                        acceptance, or ratification by the third party 
                        is necessary to create a legal obligation for 
                        the third party; and
                            ``(ii) any other person or entity that is 
                        engaged in a transaction that is in substance a 
                        disguised payday loan or a subterfuge for the 
                        purpose of avoiding the requirements of this 
                        section.
            ``(3) Payday loan; loan.--The term `payday loan' or `loan' 
        means a closed-end credit transaction, unsecured by any 
        interest in the consumer's personal property and excluding any 
        credit card transaction under an open end consumer credit plan, 
        with a term of 91 or fewer days in which the amount financed 
        does not exceed $2,000 with a finance charge exceeding an 
        annual percentage rate of 36 percent, and the consumer--
                    ``(A) receives funds from and incurs interest or a 
                fee payable to a creditor, and contemporaneously with 
                the receipt of funds, provides a check or other payment 
                instrument to the creditor who agrees with the consumer 
                not to deposit or present the check or payment 
                instrument for more than 1 day; or
                    ``(B) receives funds from and incurs interest or a 
                fee payable to a creditor, and contemporaneously with 
                the receipt of funds, authorizes the creditor to 
                initiate a debit or debits to the consumer's deposit 
                account (by electronic fund transfer or remotely 
                created check) after 1 or more days.
            ``(4) Rollover.--The term `rollover' means the extension of 
        an outstanding loan by the payment of only a fee.
            ``(5) Extended repayment plan.--The term `extended 
        repayment plan' means an installment plan under which a 
        consumer who is unable to repay a payday loan on the loan date 
        due and who complies with applicable requirements established 
        under this section may repay the creditor the outstanding 
        balance of the loan in at least 6 substantially equal payments, 
        on or after a date on which the consumer receives regular 
        income, without being charged any additional finance charges, 
        interest fees or other charges of any kind.
            ``(6) The term `repayment plan requirements under any State 
        law' means any installment plan required by any State that 
        allows the consumer to repay a payday loan over an extended 
        period in several installments instead of on the due date 
        specified in the original loan agreement.
    ``(g) Civil Liability; Remedies; Applicability.--
            ``(1) Civil money penalty.--Notwithstanding the provisions 
        of section 130(a), 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, a civil 
        money penalty not to exceed $10,000.00.
            ``(2) Penalties not exclusive of other penalties.--The 
        remedies and rights provided under this section are in addition 
        to and do not preclude any remedy otherwise available under law 
        to the person claiming relief under any other provision of law, 
        other than section 130(a).
            ``(3) Availability as defense.--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 any payday loan.
            ``(4) Scope of application.--The provisions of the section 
        apply to any person or entity that seeks to evade its 
        applicability by any device, subterfuge, or pretense 
        whatsoever.
    ``(h) State Attorneys General Enforcement.--The appropriate State 
attorney general may bring an action to enforce this section and to 
obtain injunctive relief in any United States district court or any 
other court of competent jurisdiction, not later than 3 years after the 
date of the violation.''.
    (b) Clerical Amendment.--The table of sections for chapter 2 of the 
Truth in Lending Act is amended by inserting after section 129 the 
follow new items:

``129A. Fiduciary duty of servicers of pooled residential mortgages.
``129B. Mandatory disclosures; extended repayment plan; and other 
                            protections for consumers.''.
    (c) Effective Date.--
            (1) In general.--The amendments made by this Act shall take 
        effect at the end of the 180-day period beginning on the date 
        of the enactment of this Act and shall apply to all loans 
        initiated on or after such date.
            (2) Regulations.--The Board of Governors of the Federal 
        Reserve System may prescribe regulations before the end of the 
        180-day period referred to in paragraph (1) to the extent 
        necessary to implement the amendments made by this Act to the 
        extent such regulations become effective as of the end of such 
        period.
                                 <all>