I 111th CONGRESS 1st Session H. R. 1846 IN THE HOUSE OF REPRESENTATIVES April 1, 2009 Mr. Baca (for himself and Mrs. Schmidt) 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 preempt certain State laws, and for other purposes.

1.

Short title

This Act may be cited as the Consumer Lending Education And Reform Act and the C.L.E.A.R. Act.

2.

Protections for consumers

(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

Protections for consumers

(a)

Definitions

For purposes of this section, the following definitions shall apply: (1)

Affiliate

The term affiliate has the same meaning as in section 129(k). (2)

Electronic signature

The term electronic signature means a signatures in digital or other electronic form that meets the validity requirements of the Electronic Signatures in Global and National Commerce Act. (3)

Extended payment plan

The term extended payment plan means an amendment to the payday loan that is signed in person or electronically by both the consumer and the creditor reflecting an agreement that the consumer pay the outstanding balance on a payday loan in 4 equal payments, where the period between each payment may not be less than the duration of the original payday loan. (4)

Home state

(A)

In general

The term home State means, with respect to any creditor or any affiliate of a creditor, the State in which the primary home office of the creditor or any affiliate of the creditor is located. (B)

Home office

The term home office means the office that houses a majority of the applicable party's day-to-day management and administrative support functions. (5)

Interest and fees

(A)

In general

Except as provided in subparagraph (B), the term interest and fees includes any charge payable directly or indirectly by the consumer and imposed directly or indirectly by the creditor as an incident to or a condition of the extension of credit. (B)

Charges not included

The term interest and fees does not include— (i)any charge for a default, delinquency, or similar occurrence; or (ii)any charge imposed when, if for any reason, funds are not made available to pay an item or authorization delivered to the creditor in the manner described in subparagraph (A) or (B) of paragraph (1) to the extent that— (I)the charge does not exceed the greater of $25 or the amount charged to the creditor by the creditor's financial institution; and (II)the charge is only imposed once per each item or authorization regardless of whether the item or authorization is presented for payment more than once. (6)

Loan store

The term loan store means each location operated by a creditor at which applications for payday loans are received or the proceeds of payday loans are disbursed. (7)

Payday Loan; Loan

The terms payday loan and loan mean a closed-end credit transaction, evidenced by a loan agreement signed by the creditor and the consumer, in person or electronically, unsecured by any interest in the consumer's tangible personal property with a term of at least 7 and not more than 90 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, authorized the creditor to initiate a debt or debits to the consumer's deposit account (by electronic fund transfer or remotely created check) after 1 or more days. (8)

Payday lender

The term payday lender means any creditor with respect to a payday loan. (9)

Refinancing

The term refinancing means the use of the proceeds of 1 payday loan obtained from a creditor to pay off any amount due to that creditor. (b)

Protections for consumers

(1)

Interest and fee cap

A payday lender may not— (A)require a consumer to pay— (i)in the case of any original payday loan, interest and other fees and charges that total more than 15 cents for every dollar loaned; and (ii)in the case of an original payday loan originated over the Internet, an additional origination fee in excess of 5 percent of the original principal loan amount; (B)require a consumer to pay interest and fees that, combined, total more than— (i)in the case of the 1st refinancing of an outstanding payday loan, 15 cents for every dollar of the outstanding original principal loan amount; and (ii)in the case of the 2nd refinancing of an outstanding payday loan, 10 cents for every dollar of the outstanding original principal loan amount; or (C)require a consumer to pay an origination fee for a payday loan that is refinanced. (2)

Mandatory disclosures

A payday lender may not make or refinance a payday loan unless 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 as a dollar amount, 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. (ii)

Credit counseling availability

You should consider contacting an independent, nonprofit 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 National Foundation for Credit Counseling 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. (3)

Additional public disclosures

A payday lender may not make or refinance 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 loan store, or, if the loan is made using the Internet, fax or other means, are posted conspicuously on the creditor's public internet site relating to any such payday loan: (A)

Warning

This loan is not intended to meet long-term financial needs. This loan should be used only to meet short-term cash needs. (B)

Credit counseling availability

You should consider contacting an independent, nonprofit 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 National Foundation for Credit Counseling at 1–800–388–2227. (C)

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. (4)

Creditor surety bond requirements

(A)

In general

A payday lender may not make or refinance a payday loan unless the creditor has obtained and filed, in accordance with subparagraph (B), a surety bond in the following amount: (i)A surety bond in the amount of $100,000 for each loan store operated by the creditor, if the creditor operates fewer than 10 loan stores and does not offer any payday loans over the Internet. (ii)A surety bond in the amount of $1,000,000, if the creditor operates 10 or more loan stores or offers loans over the Internet. (iii)Such greater amount as may be required by applicable State law. (B)

Bond requirements

The surety bond obtained by a payday lender to meet the requirements of subparagraph (A) shall be filed with, and for the benefit of, the State attorney general in the creditor’s home state. (C)

Aggregation of lender and affiliate under certain circumstances

For purposes of this paragraph, a creditor and each affiliate of a creditor which has the same home State as the creditor may aggregate the loan stores operated by such creditor and any such affiliate for purposes of determining the amount of the surety bond required to be filed under subparagraph (A). (5)

Extended payment plan

(A)

In general

A payday lender may not make or refinance a payday loan unless the terms of the loan require the creditor, upon receiving notice from the consumer of an inability to repay prior to close of business on the last business day before the original due date of the loan, provides the consumer with notice of and the right to opt into an extended payment plan, without charge, 1 time in any 12 month period. (B)

Limitation during extended payment plan

A creditor may not engage in any collection activity (or procure the services of any other for such purpose) during the term of any extended payment plan. (6)

Refinancing

A payday lender may not— (A)refinance a payday loan for less than 7 days; (B)refinance a payday loan more than 2 consecutive times; refinance a payday loan without terminating the previous agreement and entering into a new agreement that the creditor and consumer each sign in person or with an electronic signature; or (C)require a consumer to pay interest and fees in connection with a refinancing that, combined, total more than the amount permitted under paragraph (1)(B).

. (b)

Technical and conforming amendments

(1)

Disclosures

Section 128(a)(4) of the Truth in Lending Act (U.S.C. 1638(a)(4)) is amended— (A)by striking or after does not exceed $5, and (B)by inserting , or if the loan is subject to section 129B. (2)

Effect on other laws

Section 111 of the Truth in Lending Act (U.S.C. 1610) is amended— (A)in subsection (b), by inserting subsection (f) of this section and after Except as provided in; and (B)by adding at the end the following new subsection: (f)

Payday loans

(1)

In general

The following provisions of the law of any State shall not apply to any payday loan, or any refinancing of a payday loan, that is subject to section 129B: (A)Any provision requiring minimum loan terms. (B)Any provision prohibiting, defining or limiting any refinancing. (C)Any provision prohibiting or limiting the use of a check or debit authorization to originate a payday loan. (D)Any provision prohibiting or mandating extended payment plans. (E)Any provision limiting the rate or amount of interest and fees or default, delinquency or not sufficient fund fees or other charges which may be taken, received or reserved by creditors for payday loans or any refinancing of a payday loan. (2)

Enforcement

Notwithstanding paragraph (1), any State may employ or establish State laws for the purpose of enforcing the requirements of section 129B. . (c)

Clerical amendment

The table of sections for chapter 2 of the Truth in Lending Act is amended by inserting after the item relating to section 129 the following new items: 129A. Fiduciary duty of servicers of pooled residential mortgages. 129B. Protections for consumers. .