[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.
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