[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2563 Introduced in House (IH)]

111th CONGRESS
  1st Session
                                H. R. 2563

 To amend the Truth in Lending Act to establish additional protections 
   for consumers with regard to payday loans, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                              May 21, 2009

  Mr. Shuler (for himself, Mr. Minnick, Mr. Heller, and Mr. McHenry) 
 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 protections 
   for consumers with regard to payday loans, 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 Lending Reform Act of 2009''.

SEC. 2. PAYDAY LENDING REFORM.

    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 FOR EXTENDED REPAYMENT PLANS AND 
              OTHER PROTECTIONS FOR CONSUMERS.

    ``(a) Definitions.--For purposes of this section, the following 
definitions shall apply:
            ``(1) Consumer account.--The term `consumer account' or 
        `account' shall have the meaning set forth in section 903 of 
        the Electronic Funds Transfer Act (15 U.S.C. 1693a).
            ``(2) Extended repayment plan; repayment plan.--The term 
        `extended repayment plan' or `repayment plan' means an 
        installment plan under which a consumer who is unable to repay 
        a payday loan on the loan due date and who complies with 
        applicable requirements established under this section may 
        repay the creditor the outstanding balance of the loan in at 
        least 4 substantially equal payments, on or after a date on 
        which the consumer receives regular income, without being 
        charged any additional interest and fees.
            ``(3) Interest and fees.--The term `interest and fees'--
                    ``(A) means all charges payable directly or 
                indirectly by the consumer and imposed directly or 
                indirectly by the creditor as an incident to or as a 
                condition of the extension of a payday loan; and
                    ``(B) does not include--
                            ``(i) any reasonable charge for a default, 
                        delinquency, or similar occurrence;
                            ``(ii) any charge imposed when, if for any 
                        reason, funds are not made available to pay an 
                        item or authorization delivered to the creditor 
                        when presented for payment, to the extent that 
                        the charge does not exceed the greater of $35 
                        or the amount charged to the creditor by the 
                        creditor's financial institution and 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;
                            ``(iii) a document preparation fee of up to 
                        $10; and
                            ``(iv) a loan administrative fee, except 
                        when a loan is being refinanced, of up to 5 
                        percent of the original loan principal amount.
            ``(4) Payday loan; loan.--The term `payday loan' or `loan', 
        for purposes of this section, 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 at least 
        7 and not more than 91 days in which the amount financed does 
        not exceed $2,000, pursuant to which the consumer receives 
        funds from and incurs interest or a fee payable to a creditor, 
        and contemporaneously with the receipt of funds, provides a 
        payment instrument to the creditor who agrees with the consumer 
        not to deposit or present the payment instrument for at least 7 
        days.
            ``(5) Payment instrument.--The term `payment instrument' 
        means a check, automated clearinghouse debit, or remotely 
        created check, or similar payment instrument directing the 
        withdrawal of funds from a consumer account.
            ``(6) Refinancing; refinance.--The term `refinancing' or 
        `refinance' means to refinance, renew, rollover, amend, or 
        extend a loan beyond its original term, by payment of a fee.
    ``(b) Protections for Consumers.--
            ``(1) Mandatory disclosures for payday loans.--No creditor 
        may make a payday loan to a consumer unless the creditor has 
        first provided the consumer with a copy of a written loan 
        agreement, which shall be signed by the consumer and shall 
        include the following information:
                    ``(A) A clear and conspicuous description of the 
                terms of the loan, in at least 18-point bold face type, 
                including the consumer's payment obligations under the 
                loan and the total cost of all fees and other charges 
                in connection with origination of the loan, stated as a 
                dollar amount and as either a percentage of the 
                original loan principal amount or in the form of the 
                corresponding ratio of dollars per hundred dollars.
                    ``(B) The name, address, and telephone number of 
                the creditor making the loan.
                    ``(C) The following statements, in at least 18-
                point bold face type:
                    ```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.
                    ```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.
                    ```NO CRIMINAL PROSECUTION OR SECURITY INTEREST: No 
                criminal prosecution may be commenced against you as a 
                result of your non-payment of this loan, and the 
                creditor may not take or attempt to take an interest in 
                any of your personal property to secure this loan.
                    ```NO-COST EXTENDED REPAYMENT PLAN:
                    ```If you are unable to repay your loan when due, 
                you may elect once every 12 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 4 
                substantially equal installments as described further 
                below without being charged any additional interest and 
                fees, to the extent that you repay the loan as agreed 
                under the repayment plan.
                    ```To obtain an extended repayment plan, you must 
                advise the creditor prior to close of business on the 
                last business day before the original due date of the 
                loan 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.
                    ```The 12-month period during which you may elect 
                to use an extended repayment plan 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.
                    ```The creditor must allow you to repay your loan 
                balance in at least 4 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 you have signed the repayment plan amendment.
                    ```If you enter into an extended repayment plan and 
                then default by failing to meet your payment 
                obligations, the creditor may charge you a reasonable 
                payment plan fee and may accelerate payment of the 
                balance remaining.
                    ```You may prepay the amount due under the extended 
                repayment plan at any time without charge or penalty.'.
                    ``(D) Any other disclosures required by Federal 
                law.
            ``(2) Additional public disclosures.--No creditor shall 
        make a payday loan to any consumer unless the following notices 
        are posted conspicuously 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:
            ```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.
            ```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.
            ```No Criminal Prosecution Or Security Interest: No 
        criminal prosecution may be commenced against you as a result 
        of your non-payment of this loan, and we may not take or 
        attempt to take an interest in any of your personal property to 
        secure this loan.
            ```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 12 months, that will allow you to repay the loan in 
        at least 4 substantially equal installments without being 
        charged any additional interest or fees as long as you notify 
        us of your desire to enter into such a plan prior to close of 
        business on the last business day before the original due date 
        of the loan.'.
            ``(3) Mandatory extended repayment plan.--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 12-month period, if the consumer 
                advises the creditor prior to the close of business on 
                the last business day before the original due date of 
                the loan 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 or 
                facsimile) the consumer used to obtain the loan, and 
                the consumer shall promptly sign an amendment to the 
                loan agreement reflecting the new repayment schedule. 
                For creditors operating over the Internet, the creditor 
                also must obtain authorization to originate recurring 
                debits to the consumer's account in accordance with the 
                new repayment schedule and in compliance with the 
                authorization requirements for preauthorized transfers 
                set forth under the Electronic Funds Transfer Act and 
                Regulation E of the Board.
                    ``(C) The creditor shall allow the consumer to 
                repay the consumer's loan balance in at least 4 
                substantially equal installments generally due 
                coinciding with the consumer's periodic pay dates, but 
                there shall be at least 13 days between installments, 
                and the first installment under the plan shall not be 
                due before the consumer's next pay date that is at 
                least 13 days after the repayment plan amendment is 
                signed by the consumer.
                    ``(D) The creditor may extend the length of time 
                between installments.
                    ``(E) The creditor may, with each payment under the 
                plan by a consumer, provide for the return of the 
                consumer's prior held payment instrument and require a 
                new payment instrument for the remaining balance under 
                the plan. Alternatively, the creditor may require the 
                consumer at the time the consumer enters into the 
                extended payment plan to provide multiple payment 
                instruments, 1 for each of the scheduled payments in 
                the amount of those payments. For purposes of this 
                subparagraph the term `payment instrument' does not 
                include an automated clearinghouse debit.
                    ``(F) The consumer may prepay the amount due under 
                the extended repayment plan at any time without charge 
                or penalty.
                    ``(G) The consumer may not be charged additional 
                interest and fees; however, if the consumer fails to 
                meet such payment obligations, the creditor may charge 
                a repayment plan fee and may accelerate repayment of 
                the balance remaining.
            ``(4) Additional protections for consumers.--It shall be 
        unlawful for a creditor to--
                    ``(A) require a consumer to pay more than the 
                following authorized charges, each of which a creditor 
                may charge and collect in connection with a payday 
                loan:
                            ``(i) interest and fees of 20 cents for 
                        every dollar of the original loan principal 
                        amount;
                            ``(ii) a loan administrative fee of 5 
                        percent of the original loan principal amount; 
                        and
                            ``(iii) a document preparation fee of $10;
                    ``(B) in connection with a refinancing, require a 
                consumer to pay more than interest and fees of 20 cents 
                for every dollar of the refinanced amount, or to 
                require a consumer to pay any loan administrative fee 
                or document preparation fee;
                    ``(C) threaten or seek to have the consumer 
                prosecuted criminally to collect the loan;
                    ``(D) take or attempt to take an interest in any of 
                the consumer's personal property to secure the loan;
                    ``(E) 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;
                    ``(F) take any power of attorney;
                    ``(G) include in the loan documents--
                            ``(i) a confession of judgment clause;
                            ``(ii) 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 (iii) of this paragraph; and
                            ``(iii) a mandatory arbitration clause that 
                        is oppressive, unfair, unconscionable, or 
                        substantially in derogation of the rights of 
                        consumers;
                    ``(H) 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;
                    ``(I) make a payday loan with a term of less than 7 
                days;
                    ``(J) knowingly accept payment in whole or in part 
                for any obligation under an extended repayment plan 
                based on funds obtained from another payday loan;
                    ``(K) 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;
                    ``(L) charge or attempt to collect attorney's fees, 
                court costs, or arbitration costs incurred in 
                connection with the collection of a payday loan, in 
                excess of 20 percent of the loan balance;
                    ``(M) refinance a payday loan more than 4 
                consecutive times;
                    ``(N) make more than 1 payday loan at the same time 
                to a consumer;
                    ``(O) 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
                    ``(P) sell any insurance of any kind in connection 
                with the making or collecting of a payday loan.
    ``(c) Rescission.--A consumer may cancel future payment obligations 
on a payday loan, without cost or finance charges, by informing the 
creditor in writing that the consumer wants to rescind the loan and by 
returning the cash amount of the principal of the loan to the creditor 
no later than the end of the business day following the day on which 
the payday loan agreement was executed.
    ``(d) Penalties; Defense; Civil Liability.--
            ``(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 $5,000.
            ``(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 
        applicable law to the person claiming relief under any such 
        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 setoff to an 
        action to collect any payday loan.
            ``(4) Civil liability.--In determining the amount of the 
        award in any class action, no minimum recovery as to each 
        member of the class shall be applicable, and the total recovery 
        in any class action or series of class actions arising out of 
        the same failure to comply with the requirements of this 
        section by the same creditor shall not be more than the lesser 
        of $500,000 or 1 percent of the net worth of the creditor.
    ``(e) Inflation Adjustments.--The dollar amounts specified in 
subsections (a), (b), and (c) shall be adjusted annually on January 1 
by the annual percentage change in the Consumer Price Index, as 
reported on June of the year preceding such adjustment, but in no event 
may such dollars amounts be adjusted below the amounts stated in such 
subsections, as enacted.
    ``(f) Regulations.--The Board of Governors of the Federal Reserve 
System shall prescribe regulations to the extent necessary to implement 
this section.
    ``(g) Effect on State Laws.--No provision of this section may be 
construed as preventing a State from regulating a payday loan, except 
that any State regulation shall not significantly interfere with the 
ability of a payday lender to offer a payday loan that meets the 
consumer protection standards in this section.''.

SEC. 3. TECHNICAL AND CONFORMING AMENDMENTS.

    (a) Disclosures.--Section 128(a)(4) of the Truth in Lending Act (15 
U.S.C. 1638(a)(4)) is amended--
            (1) by striking ``or'' after ``does not exceed $5,'' and
            (2) by inserting `` , or if the loan is subject to section 
        129B and the finance charge is expressed as required by section 
        129B'' after ``does not exceed $7.50''.
    (b) 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. Mandatory disclosures for extended repayment plans and other 
                            protections for consumers''.
    (c) Effective Date.--The amendments made by this Act shall take 
effect 1 year from the date of the enactment of this Act and shall 
apply to all payday loans originated on or after such date.
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