Covered lending

(a)

In general

Chapter 2 of the Truth in Lending Act (15 U.S.C. 1631 et seq.) is amended— (1)by redesignating the second section 129 (as so designated by section 201(b) of the Helping Families Save Their Homes Act of 2009) as section 129A; and (2)by inserting after section 129A, as so redesignated, the following new section:

129B.

Covered lending

(a)

Maximum interest rate

The maximum interest rate a creditor may charge on a covered loan shall be the rate equal to an annual percentage rate of 36 percent. (b)

Prohibition on using certain means of access for security

It shall be unlawful for any creditor to extend a covered loan with respect to which the creditor uses, as security for the obligation or as a condition of extending the credit— (1)a check or other method of access to a deposit, savings, or other financial account maintained by the borrower; or (2)the title of a vehicle. (c)

Definitions

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

Annual percentage rate

Notwithstanding the manner described in section 107 for determining the annual percentage rate, the term annual percentage rate means all charges payable directly or indirectly incident to, ancillary to, or as a condition of the extension of a covered loan, including— (A)all fees which constitute a finance charge; and (B)any other payments, fees or charges, including but not limited to application, membership and administrative fees, compensating a creditor for making the covered loan. (2)

Covered loan

The term covered loan— (A)means a consumer credit transaction that— (i)is unsecured by any interest in the consumer’s personal property; (ii)is in an amount that does not exceed $3,000 or, in the case of a line of credit, a credit limit that does not exceed $3,000; (iii)in the case of a closed end credit transaction, has a term of 91 days or less; and (iv)in the case of an open end credit transaction— (I)has an amortization period of 91 days or less; or (II)in the case of a line of credit, the amount due in the first 91 days, including finance charges, fees, service charges, renewals, credit insurance premiums, and any other charge or premium with respect to the extension of credit, exceed 25 percent of the credit limit of the line of credit; and (B)does not include a non-recourse extension of credit— (i)extended by a pawn broker creditor; and (ii)secured by a possessory security interest in tangible goods physically delivered by the consumer to the pawn broker creditor, for which the consumer does not provide a written or electronic promise, order, or authorization to pay, or in any other manner authorize a debit of a deposit account, prior to or contemporaneously with the disbursement of the original proceeds and the creditor takes no security other than the goods and makes no effort to collect the credit. (3)

Creditor

Notwithstanding the definition of the term creditor in section 103, the term creditor— (A)means a person who makes or offers covered loans; and (B)includes— (i)any affiliate of a creditor that offers or makes a covered loan, buys a whole or partial interest in a covered loan, arranges a covered loan for a third party, or acts as an agent for a third party in making a covered 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 covered loan or a subterfuge for the purpose of avoiding the requirements of this section.

(b)

Closing the single payment loophole

Section 903(9) of the Electronic Fund Transfer Act (15 U.S.C. 1693a(9)) is amended by striking to recur at substantially regular intervals. (c)

Remotely created checks prohibited

Section 905 of the Electronic Fund Transfer Act (15 U.S.C. 1693c) is amended by adding at the end the following new subsection:

(d)

Remotely created checks prohibited

(1)

In general

No person shall deposit, pay, obtain payment with respect to, or otherwise negotiate a remotely created check. (2)

Remotely created check defined

For purposes of this subsection, the term remotely created check means a check that— (A)is not created by the financial institution that holds the customer account from which the check is to be paid; and (B)does not bear a signature applied, or purported to be applied, by the person from whose account the check is to be paid.

(d)

Treatment of State law

No provision of this Act or any amendment made by this Act shall be construed as— (1)preempting any provision of State law, to the extent that such State law provides greater protection to consumers than is provided under such provision; (2)preventing any State from enacting any provision of law that provides greater protection to consumers than is provided under such provision; (3)authorizing covered loans to be made in a State where they are otherwise not permitted under State law; or (4)authorizing an extension of credit at an annual percentage rate that would be prohibited by applicable State law. (e)

Unenforceability of contracts

No contract made in violation of this Act or any amendment made by this Act may be enforced with respect to any consumer. (f)

Definitions

For purposes of this Act, the terms consumer and covered loan shall have the meaning given those terms under the Truth in Lending Act. (g)

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. Duty of servicers of residential mortgages.

129B. Covered lending.

(h)

Effective date

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 covered loans initiated on or after such date.