[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[S. 3245 Introduced in Senate (IS)]

111th CONGRESS
  2d Session
                                S. 3245

 To establish rules for small denomination, short-term, unsecured cash 
                  advances, such as ``payday loans''.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             April 22, 2010

 Mrs. Hagan (for herself, Mr. Durbin, and Mr. Schumer) introduced the 
 following bill; which was read twice and referred to the Committee on 
                  Banking, Housing, and Urban Affairs

_______________________________________________________________________

                                 A BILL


 
 To establish rules for small denomination, short-term, unsecured cash 
                  advances, such as ``payday loans''.

    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 Limitation Act of 
2010''.

SEC. 2. REGULATION OF COVERED LOANS.

    Section 128 of the Truth in Lending Act (15 U.S.C. 1638) is amended 
by adding at the end the following:
    ``(e) Terms and Conditions for Covered Loans.--
            ``(1) Definitions.--As used in this subsection--
                    ``(A) the term `covered' loan--
                            ``(i) means a consumer credit transaction 
                        in which the loan amount, or, in the case of a 
                        line of credit, the credit limit, is $3,000 or 
                        less that--
                                    ``(I) in the case of a closed-end 
                                credit transaction, has a term of 91 
                                days or less and an annual percentage 
                                rate exceeding 36 percent (include all 
                                cost elements (other than the minimum 
                                deposit amount necessary to open a 
                                secured card account) associated with 
                                the extension of credit, including 
                                fees, service charges, renewal charges, 
                                credit insurance premiums, and any 
                                other charge or premium with respect to 
                                the extension of consumer credit);
                                    ``(II) in the case of an open-end 
                                credit transaction, has an amortization 
                                period of 91 days or less and the 
                                annual percentage rate exceeds 36 
                                percent (calculated as though the 
                                transaction were a closed-end 
                                transaction pursuant to subclause (I)); 
                                or
                                    ``(III) in the case of an open-end 
                                credit transaction, the cost elements 
                                associated with the extension of credit 
                                and 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 consumer credit, exceed 25 
                                percent of the line of credit; and
                            ``(ii) does not include--
                                    ``(I) a credit transaction that is 
                                secured by an interest in real estate, 
                                a vehicle, or other goods both listed 
                                and valued individually over $3,000;
                                    ``(II) overdraft services that are 
                                not covered by this title; or
                                    ``(III) an extension of credit in 
                                which a consumer sells an item of goods 
                                to a pawn-broker creditor and retains 
                                the right to redeem the item for a 
                                greater sum within a specified time, 
                                provided that the consumer has no 
                                obligation to repay the credit, and the 
                                creditor takes no security other than 
                                the goods and makes no effort to 
                                collect the credit; and
                    ``(B) the term `extended payment plan' means an 
                amendment to the covered 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 covered loan in not fewer than 
                4 equal payments, where the period between each payment 
                may not be less than the duration of the original 
                covered loan.
            ``(2) Limits on borrower indebtedness.--Notwithstanding any 
        other provision of law, no covered loan may be extended to any 
        individual, if such individual, considering all covered loans 
        by the consumer during such time period, in the aggregate, has 
        had--
                    ``(A) 6 covered loans extended during the preceding 
                12-month period; or
                    ``(B) covered loan obligations of 90 days or longer 
                during the preceding 12-month period.
            ``(3) Board rulemaking required.--Not later than 180 days 
        after the date of enactment of this subsection, the Board shall 
        issue final rules with respect to covered loans, which rules 
        shall--
                    ``(A) require each issuer of a covered loan--
                            ``(i) to offer extended repayment plans, if 
                        the borrower is unable to pay under the terms 
                        of the original loan;
                            ``(ii) to accept equal payments over a 
                        series of pay checks or pay periods of the 
                        consumer;
                            ``(iii) to obtain a surety bond, in such 
                        amounts as the Board determines appropriate; 
                        and
                            ``(iv) to comply with appropriate licensing 
                        requirements established by the Board;
                    ``(B) create a mechanism for lenders to determine 
                whether a potential borrower is eligible for a covered 
                loan;
                    ``(C) provide for enforcement by State attorneys 
                general;
                    ``(D) prohibit the purchase or sale, at the same 
                location at which covered loans are offered, of other 
                products or services; and
                    ``(E) prohibit the imposition of any fee or penalty 
                for the early repayment of the obligation, including 
                under any extension described in subparagraph (A)(i).
            ``(4) Nonenforceability of contracts.--No contract made in 
        violation of this Act may be enforced with respect to any 
        consumer.
            ``(5) Other fees.--The Board may impose such fees on 
        issuers of covered loans under this subsection as may be 
        necessary to pay the administrative costs of the Board in 
        carrying out and enforcing this subsection.
            ``(6) Treatment of state law.--Nothing in this subsection 
        may be construed as--
                    ``(A) preempting any provision of State law, to the 
                extent that such State law provides greater protection 
                to consumers than is provided under this subsection;
                    ``(B) preventing any State from enacting any 
                provision of law that provides greater protection to 
                consumers than is provided under this subsection;
                    ``(C) authorizing covered loans to be made in a 
                State where they are otherwise not permitted under 
                State law; or
                    ``(D) authorizing an extension of credit at an 
                annual percentage rate that would be prohibited by 
                applicable State law.''.
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