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:

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.