[House Report 116-417]
[From the U.S. Government Publishing Office]


116th Congress }                                            { Report
                        HOUSE OF REPRESENTATIVES
 2d Session    }                                            { 116-417

======================================================================



 
                  SMALL BUSINESS LENDING FAIRNESS ACT

                                _______
                                

 March 19, 2020.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

  Ms. Waters, from the Committee on Financial Services, submitted the 
                               following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                        [To accompany H.R. 3490]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Financial Services, to whom was referred 
the bill (H.R. 3490) to amend the Truth in Lending Act to 
prohibit certain unfair credit practices, and for other 
purposes, having considered the same, reports favorably thereon 
with an amendment and recommends that the bill as amended do 
pass.

                                CONTENTS

                                                                   Page
Purpose and Summary..............................................     2
Background and Need for Legislation..............................     2
Section-by-Section Analysis......................................     3
Hearings.........................................................     4
Committee Consideration..........................................     4
Committee Votes..................................................     4
Statement of Oversight Findings and Recommendations of the 
  Committee......................................................     6
Statement of Performance Goals and Objectives....................     6
New Budget Authority and CBO Cost Estimate.......................     6
Committee Cost Estimate..........................................     8
Unfunded Mandate Statement.......................................     8
Advisory Committee...............................................     8
Application of Law to the Legislative Branch.....................     8
Earmark Statement................................................     8
Duplication of Federal Programs..................................     8
Changes to Existing Law..........................................     8

    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Small Business Lending Fairness Act''.

SEC. 2. OBLIGOR TRANSACTIONS.

  (a) In General.--Chapter 2 of the Truth in Lending Act (15 U.S.C. 
1631 et seq.) is amended by adding at the end the following:

``Sec. 140B. Unfair credit practices

  ``(a) In General.--In connection with the extension of credit or 
creation of debt in or affecting commerce, as defined in section 4 of 
the Federal Trade Commission Act (15 U.S.C. 44), including any advance 
of funds or sale or assignment of future income or receivables that may 
or may not be credit, no person may directly or indirectly take or 
receive from another person an obligation that constitutes or contains 
a cognovit or confession of judgment (for purposes other than executory 
process in the State of Louisiana), warrant of attorney, or other 
waiver of the right to notice and the opportunity to be heard in the 
event of suit or process thereon.
  ``(b) Exemption.--The exemption in section 104(1) shall not apply to 
this section.''.
  (b) Technical and Conforming Amendments.--
          (1) Section 103 of the Truth in Lending Act (15 U.S.C. 1602) 
        is amended by adding at the end the following:
  ``(ff) The term `debt' means any obligation of a person to pay to 
another person money--
          ``(1) regardless of whether such obligation is absolute or 
        contingent if the understanding between the parties is that any 
        part of the money shall be or may be returned;
          ``(2) that includes the right of the person providing the 
        money to an equitable remedy for breach of performance if the 
        breach gives rise to a right to payment; and
          ``(3) regardless of whether the obligation or right to an 
        equitable remedy described in paragraph (2) has been reduced to 
        judgment, fixed, contingent, matured, unmatured, disputed, 
        undisputed, secured, or unsecured.''.
          (2) Section 130(a) of the Truth in Lending Act (15 U.S.C. 
        1640) is amended by striking ``creditor'' each place the term 
        appears and inserting ``person''.
          (3) The table of sections in chapter 2 of the Truth in 
        Lending Act (15 U.S.C. 1631 et seq.) is amended by adding at 
        the end the following:

``140B. Unfair credit practices.''.

                          Purpose and Summary

    On June 25, 2019, Representative Nydia Velazquez introduced 
H.R. 3490, the ``Small Business Lending Fairness Act,'' which 
amends the Truth in Lending Act (TILA) to restrict the use of 
confessions of judgment for small business owners.

                  Background and Need for Legislation

    A ``confession of judgment'' is defined as ``a person's 
agreeing to the entry of judgment upon the occurrence or non-
occurrence of an event, such as making a payment.'' It is 
essentially an agreement by which a borrower agrees to an 
eventual judgment of liability against them, without normal due 
process protections such as notice, a hearing, and judicial 
review. For instance, merchant cash advance companies may 
require borrowers to sign a confession of judgment as a 
condition of receiving the cash advance. These cash advances 
can often cost the equivalent of 400 percent or more in 
annualized interest. Once a borrower misses a payment or some 
other dispute arises between the borrower and lender, the 
lender sends the signed confession of judgment to a county 
clerk, who enters judgment against the borrower. The lender 
then takes the judgment to the local marshal, who demands the 
money allegedly owed to the lender from the borrower's bank. 
The lender then takes the money from the borrower's bank, with 
interest and fees added. At this point, a borrower's account 
will usually be frozen, and in some cases despite a borrower's 
compliance with daily debt payments.
    Some states outlawed these instruments in the middle of the 
20th century, and the Federal Trade Commission (FTC) banned 
them for consumer loans in 1985 as part of a regulation known 
as the ``Credit Practices Rule.'' However, courts in numerous 
states, including New York, continue to recognize them for 
commercial loans. This type of recognition has effectively 
turned New York into a hub of processing confessions of 
judgment. In the first five months of 2019, merchant cash 
advance companies obtained more than 5,500 New York court 
judgments against borrowers, about the same monthly pace as in 
2018.
    As discussed at a September 2019 Committee hearing, small 
business loan borrowers do not enjoy the same protections 
individual consumers have under federal law. Furthermore, some 
small business loan terms include a confession of judgment. As 
a result of these agreements, the debt holder may collect on 
such a contract, plus damages, immediately after the borrower 
falls behind in their payments. Confessions of judgment often 
force a borrower to relinquish defenses that could be used in 
court, allowing the debt holders to receive a court order to 
force the financial institution of the debtor to withdraw 
funds, access the debtor's wages, or seize goods or property, 
all without the debtor's knowledge or consent.

                      Section-by-Section Analysis


Section 1. Short title

    This section provides that H.R. 3490 may be cited as the 
``Small Business Lending Fairness Act''

Section 2. Consumer protections related to debt collection practices

    Subsection (a) amends Chapter 2 of the Truth in Lending Act 
(15 U.S.C. 1631 et seq.) by adding a new section 140B. The new 
section 140B prohibits any person from directly or indirectly 
taking or receiving from another person an obligation that 
constitutes or contains a cognovit or confession of judgment, 
warrant of attorney, or other waiver of the right to notice and 
the opportunity to be heard in the event of a lawsuit or 
judicial process. The new section 140B by its terms excludes 
the executory process in the State of Louisiana. The new 
section 140B also provides that the exemption in section 104(1) 
of the Truth in Lending Act (relating to certain forms of 
credit transactions including extension of credit primarily for 
business, commercial or agricultural purposes) shall not apply 
to this section.
    Subsection (b) amends section 103 of the Truth in Lending 
Act (15 U.S.C. 1602) by clarifying the definition of ``debt'' 
as ``any obligation of a person to pay to another person 
money''. This definition holds true regardless of whether the 
obligation is absolute or contingent if the understanding 
between the parties is that any part of the money shall be or 
may be returned. The definition includes the right of the 
person providing the money to an equitable remedy for breach of 
performance if the breach gives rise to a right to payment. The 
definition also holds true regardless of whether the obligation 
or right to an equitable remedy has been reduced to judgment, 
fixed, contingent, matured, unmatured, disputed, undisputed, 
secured, or unsecured.
    Subsection (b) also amends section 130(a) of the Truth in 
Lending Act (15 U.S.C. 1640) by replacing the word ``creditor'' 
with ``person'' and makes other conforming amendments.

                                Hearings

    For the purposes of section 103(i) of H. Res. 6 for the 
116th Congress, on September 26, 2019, the Committee on 
Financial Services held a hearing entitled, ``Examining 
Legislation to Protect Consumers and Small Business Owners from 
Abusive Debt Collection Practices'' to discuss three bills and 
seven discussion drafts, and a discussion draft of H.R. 3490, 
the ``Small Business Lending Fairness Act'', was considered. 
This single-panel hearing consisted of witnesses from the 
Federal Trade Commission, consumer advocates, consumer law 
centers, and debt collection attorneys. The hearing allowed 
members to hear from witnesses about predatory debt collection 
practices.

                        Committee Consideration

    The Committee on Financial Services met in open session on 
November 13, 2019, and ordered H.R. 3490 to be reported 
favorably to the House as amended in the nature of a substitute 
by a recorded vote of 31 yeas and 23 neas, a quorum being 
present.

                            Committee Votes

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the Committee advises that the 
following roll call votes occurred during the Committee's 
consideration of H.R. 3490:


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


          Statement of Oversight Findings and Recommendations 
                            of the Committee

    In compliance with clause 3(c)(1) of rule XIII and clause 
2(b)(1) of rule X of the Rules of the House of Representatives, 
the Committee's oversight findings and recommendations are 
reflected in the descriptive portions of this report.

             Statement of Performance Goals and Objectives

    Pursuant to clause (3)(c) of rule XIII of the Rules of the 
House of Representatives, the goals of H.R. 3490 are to ensure 
that government employees, contractors, and other consumers 
affected by a Federal government shutdown.

               New Budget Authority and CBO Cost Estimate

    Pursuant to clause 3(c)(2) of rule XIII of the Rules of the 
House of Representatives and section 308(a) of the 
Congressional Budget Act of 1974, and pursuant to clause 
3(c)(3) of rule XIII of the Rules of the House of 
Representatives and section 402 of the Congressional Budget Act 
of 1974, the Committee has received the following estimate for 
H.R. 3490 from the Director of the Congressional Budget Office:

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, March 3, 2020.
Hon. Maxine Waters,
Chairwoman, Committee on Financial Services,
House of Representatives, Washington, DC.
    Dear Madam Chairwoman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 3490, the Small 
Business Lending Fairness Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is David Hughes.
            Sincerely,
                                         Phillip L. Swagel,
                                                          Director.
    Enclosure.


    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    

    H.R. 3490 would prohibit creditors and debtors from 
entering into contracts that contain confessions of judgement, 
or similar legal mechanisms in which a debtor waives their 
right to mount a legal defense in the event of a breach of 
contract.
    CBO assumes that the bill will be enacted in fiscal year 
2020. Using information from the Consumer Financial Protection 
Bureau (CFPB), CBO estimates that it would cost the bureau less 
than $500,000 to amend regulations to implement the bill. The 
CFPB has permanent authority, not subject to annual 
appropriation, to spend amounts transferred from the Federal 
Reserve.
    The bill contains private-sector mandates as defined in the 
Unfunded Mandates Reform Act (UMRA), but CBO cannot determine 
whether the aggregate cost of the mandates would exceed the 
threshold established in UMRA ($168 million in 2020, adjusted 
annually for inflation).
    Although H.R. 3490 would prohibit creditors and debtors 
from using confessions of judgment and similar tools when 
extending credit or creating debt in commercial settings, the 
bill would not prohibit other litigation practices to collect 
outstanding debt. The cost of the mandate, then, would be the 
difference in debt collections using methods that would be 
prohibited under the bill compared to other litigation 
practices allowed under the bill.
    The bill also would exempt private and public entities from 
civil liability in instances when consumer credit information 
has been disclosed, thus removing a private right of action. 
The cost of the mandate would be the foregone net value of 
awards and settlements that would have been granted for such 
claims in the absence of the bill.
    CBO cannot estimate the number of claims or lawsuits that 
would have been successful in the absence of the bill, or the 
value of collections or court awards stemming from those claims 
that would be forgone. Therefore, we cannot determine the cost 
of the private-sector mandates in the bill.
    H.R. 3490 contains no intergovernmental mandates as defined 
in UMRA.
    The CBO staff contacts for this estimate are David Hughes 
(for federal costs) and Rachel Austin (for mandates). The 
estimate was reviewed by H. Samuel Papenfuss, Deputy Director 
of Budget Analysis.

                        Committee Cost Estimate

    Clause 3(d)(1) of rule XIII of the Rules of the House of 
Representatives requires an estimate and a comparison of the 
costs that would be incurred in carrying out H.R. 3490. 
However, clause 3(d)(2)(B) of that rule provides that this 
requirement does not apply when the committee has included in 
its report a timely submitted cost estimate of the bill 
prepared by the Director of the Congressional Budget Office 
under section 402 of the Congressional Budget Act, which is 
attached.

                       Unfunded Mandate Statement

    Pursuant to Section 423 of the Congressional Budget and 
Impoundment Control Act (as amended The Committee adopts as its 
own the estimate of federal mandates regarding H.R. 3490, as 
amended, prepared by the Director of the Congressional Budget 
Office.

                           Advisory Committee

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

              Application of Law to the Legislative Branch

    Pursuant to section 102(b)(3) of the Congressional 
Accountability Act, Pub. L. No. 104-1 H.R. 3490, as amended, 
does not apply to terms and conditions of employment or to 
access to public services or accommodations within the 
legislative branch.

                           Earmark Statement

    In accordance with clause 9 of rule XXI of the Rules of the 
House of Representatives, H.R. 3490 does not contain any 
congressional earmarks, limited tax benefits, or limited tariff 
benefits as described in clauses 9(e), 9(f), and 9(g) of rule 
XXI.

                    Duplication of Federal Programs

    Pursuant to clause 3(c)(5) of rule XIII of the Rules of the 
House of Representatives, the Committee states that no 
provision of H.R. 3490 establishes or reauthorizes a program of 
the Federal Government known to be duplicative of another 
federal program, a program that was included in any report from 
the Government Accountability Office to Congress pursuant to 
section 21 of Public Law 111-139, or a program related to a 
program identified in the most recent Catalog of Federal 
Domestic Assistance.

         Changes in Existing Law Made by the Bill, as Reported

    In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, H.R. 3490, as reported, are shown as follows:

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italics, and existing law in which no 
change is proposed is shown in roman):

                          TRUTH IN LENDING ACT



           *       *       *       *       *       *       *
TITLE I--CONSUMER CREDIT COST DISCLOSURE

           *       *       *       *       *       *       *


CHAPTER 1--GENERAL PROVISIONS

           *       *       *       *       *       *       *


Sec. 103. Definitions and rules of construction

  (a) The definitions and rules of construction set forth in 
this section are applicable for the purposes of this title.
  (b) Bureau.--The term ``Bureau'' means the Bureau of Consumer 
Financial Protection.
  (c) The term ``Bureau'' refers to the Bureau of Governors of 
the Federal Reserve System.
  (d) The term ``organization'' means a corporation, government 
or governmental subdivision or agency, trust, estate, 
partnership, cooperative, or association.
  (e) The term ``person'' means a natural person or an 
organization.
  (f) The term ``credit'' means the right granted by a creditor 
to a debtor to defer payment of debt or to incur debt and defer 
its payment.
  (g) The term ``creditor'' refers only to a person who both 
(1) regularly extends, whether in connection with loans, sales 
of property or services, or otherwise, consumer credit which is 
payable by agreement in more than four installments or for 
which the payment of a finance charge is or may be required, 
and (2) is the person to whom the debt arising from the 
consumer credit transaction is initially payable on the face of 
the evidence of indebtedness or, if there is no such evidence 
of indebtedness, by agreement. Notwithstanding the preceding 
sentence, in the case of an open-end credit plan involving a 
credit card, the card issuer and any person who honors the 
credit card and offers a discount which is a finance charge are 
creditors. For the purpose of the requirements imposed under 
chapter 4 and sections 127(a)(5), 127(a)(6), 127(a)(7), 
127(b)(1), 127(b)(2), 127(b)(3), 127(b)(8), and 127(b)(10) of 
chapter 2 of this title, the term ``creditor'' shall also 
include card issuers whether or not the amount due is payable 
by agreement in more than four installments or the payment of a 
finance charge is or may be required, and the Bureau shall, by 
regulation, apply these requirements to such card issuers, to 
the extent appropriate, even though the requirements are by 
their terms applicable only to creditors offering open-end 
credit plans. Any person who originates 2 or more mortgages 
referred to in subsection (aa) in any 12-month period or any 
person who originates 1 or more such mortgages through a 
mortgage broker shall be considered to be a creditor for 
purposes of this title. The term ``creditor'' includes a 
private educational lender (as that term is defined in section 
140) for purposes of this title.
  (h) The term ``credit sale'' refers to any sale in which the 
seller is a creditor. The term includes any contract in the 
form of a bailment or lease if the bailee or lessee contracts 
to pay as compensation for use a sum substantially equivalent 
to or in excess of the aggregate value of the property and 
services involved and it is agreed that the bailee or lessee 
will become, or for no other or a nominal consideration has the 
option to become, the owner of the property upon full 
compliance with his obligations under the contract.
  (i) The adjective ``consumer'', used with reference to a 
credit transaction, characterizes the transaction as one in 
which the party to whom credit is offered or extended is a 
natural person, and the money, property, or services which are 
the subject of the transaction are primarily for personal, 
family, or household purposes.
  (j) The terms ``open end credit plan'' and ``open end 
consumer credit plan'' mean a plan under which the creditor 
reasonably contemplates repeated transactions, which prescribes 
the terms of such transactions, and which provides for a 
finance charge which may be computed from time to time on the 
outstanding unpaid balance. A credit plan or open end consumer 
credit plan which is an open end credit plan or open end 
consumer credit plan within the meaning of the preceding 
sentence is an open end credit plan or open end consumer credit 
plan even if credit information is verified from time to time.
  (k) The term ``adequate notice'', as used in section 133, 
means a printed notice to a cardholder which sets forth the 
pertinent facts clearly and conspicuously so that a person 
against whom it is to operate could reasonably be expected to 
have noticed it and understood its meaning. Such notice may be 
given to a cardholder by printing the notice on any credit 
card, or on each periodic statement of account, issued to the 
cardholder, or by any other means reasonably assuring the 
receipt thereof by the cardholder.
  (l) The term ``credit card'' means any card, plate, coupon 
book or other credit device existing for the purpose of 
obtaining money, property, labor, or services on credit.
  (m) The term ``accepted credit card'' means any credit card 
which the cardholder has requested and received or has signed 
or has used, or authorized another to use, for the purpose of 
obtaining money, property, labor, or services on credit.
  (n) The term ``cardholder'' means any person to whom a credit 
card is issued or any person who has agreed with the card 
issuer to pay obligations arising from the issuance of a credit 
card to another person.
  (o) The term ``card issuer'' means any person who issues a 
credit card, or the agent of such person with respect to such 
card.
  (p) The term ``unauthorized use'', as used in section 133, 
means a use of a credit card by a person other than the 
cardholder who does not have actual, implied, or apparent 
authority for such use and from which the cardholder receives 
no benefit.
  (q) The term ``discount'' as used in section 167 means a 
reduction made from the regular price. The term ``discount'' as 
used in section 167 shall not mean a surcharge.
  (r) The term ``surcharge'' as used in section 103 and section 
167 means any means of increasing the regular price to a 
cardholder which is not imposed upon customers paying by cash, 
check, or similar means.
  (s) The term ``State'' refers to any State, the Commonwealth 
of Puerto Rico, the District of Columbia, and any territory or 
possession of the United States.
  (t) The term ``agricultural purposes'' includes the 
production, harvest, exhibition, marketing, transportation, 
processing, or manufacture of agricultural products by a 
natural person who cultivates, plants, propagates, or nurtures 
those agricultural products, including but not limited to the 
acquisition of farmland, real property with a farm residence, 
and personal property and services used primarily in farming.
  (u) The term ``agricultural products'' includes agricultural, 
horticultural, viticultural, and dairy products, livestock, 
wildlife, poultry, bees, forest products, fish and shellfish, 
and any products thereof, including processed and manufactured 
products, and any and all products raised or produced on farms 
and any processed or manufactured products thereof.
  (v) The term ``material disclosures'' means the disclosure, 
as required by this title, of the annual percentage rate, the 
method of determining the finance charge and the balance upon 
which a finance charge will be imposed, the amount of the 
finance charge, the amount to be financed, the total of 
payments, the number and amount of payments, the due dates or 
periods of payments scheduled to repay the indebtedness, and 
the disclosures required by section 129(a).
  (w) The term ``dwelling'' means a residential structure or 
mobile home which contains one to four family housing units, or 
individual units of condominiums or cooperatives.
  (x) The term ``residential mortgage transaction'' means a 
transaction in which a mortgage, deed of trust, purchase money 
security interest arising under an installment sales contract, 
or equivalent consensual security interest is created or 
retained against the consumer's dwelling to finance the 
acquisition or initial construction of such dwelling.
  (y) As used in this section and section 167, the term 
``regular price'' means the tag or posted price charged for the 
property or service if a single price is tagged or posted, or 
the price charged for the property or service when payment is 
made by use of an open-end credit plan or a credit card if 
either (1) no price is tagged or posted, or (2) two prices are 
tagged or posted, one of which is charged when payment is made 
by use of an open-end credit plan or a credit card and the 
other when payment is made by use of cash, check, or similar 
means. For purposes of this definition, payment by check, 
draft, or other negotiable instrument which may result in the 
debiting of an open-end credit plan or a credit cardholder's 
open-end account shall not be considered payment made by use of 
the plan or the account.
  (z) Any reference to any requirement imposed under this title 
or any provision thereof includes reference to the regulations 
of the Bureau under this title or the provision thereof in 
question.
  (aa) The disclosure of an amount or percentage which is 
greater than the amount or percentage required to be disclosed 
under this title does not in itself constitute a violation of 
this title.
  (bb) High-cost Mortgage.--
          (1) Definition.--
                  (A) In general.--The term ``high-cost 
                mortgage'', and a mortgage referred to in this 
                subsection, means a consumer credit transaction 
                that is secured by the consumer's principal 
                dwelling, other than a reverse mortgage 
                transaction, if--
                          (i) in the case of a credit 
                        transaction secured--
                                  (I) by a first mortgage on 
                                the consumer's principal 
                                dwelling, the annual percentage 
                                rate at consummation of the 
                                transaction will exceed by more 
                                than 6.5 percentage points (8.5 
                                percentage points, if the 
                                dwelling is personal property 
                                and the transaction is for less 
                                than $50,000) the average prime 
                                offer rate, as defined in 
                                section 129C(b)(2)(B), for a 
                                comparable transaction; or
                                  (II) by a subordinate or 
                                junior mortgage on the 
                                consumer's principal dwelling, 
                                the annual percentage rate at 
                                consummation of the transaction 
                                will exceed by more than 8.5 
                                percentage points the average 
                                prime offer rate, as defined in 
                                section 129C(b)(2)(B), for a 
                                comparable transaction;
                          (ii) the total points and fees 
                        payable in connection with the 
                        transaction, other than bona fide third 
                        party charges not retained by the 
                        mortgage originator, creditor, or an 
                        affiliate of the creditor or mortgage 
                        originator, exceed--
                                  (I) in the case of a 
                                transaction for $20,000 or 
                                more, 5 percent of the total 
                                transaction amount; or
                                  (II) in the case of a 
                                transaction for less than 
                                $20,000, the lesser of 8 
                                percent of the total 
                                transaction amount or $1,000 
                                (or such other dollar amount as 
                                the Bureau shall prescribe by 
                                regulation); or
                          (iii) the credit transaction 
                        documents permit the creditor to charge 
                        or collect prepayment fees or penalties 
                        more than 36 months after the 
                        transaction closing or such fees or 
                        penalties exceed, in the aggregate, 
                        more than 2 percent of the amount 
                        prepaid.
                  (B) Introductory rates taken into account.--
                For purposes of subparagraph (A)(i), the annual 
                percentage rate of interest shall be determined 
                based on the following interest rate:
                          (i) In the case of a fixed-rate 
                        transaction in which the annual 
                        percentage rate will not vary during 
                        the term of the loan, the interest rate 
                        in effect on the date of consummation 
                        of the transaction.
                          (ii) In the case of a transaction in 
                        which the rate of interest varies 
                        solely in accordance with an index, the 
                        interest rate determined by adding the 
                        index rate in effect on the date of 
                        consummation of the transaction to the 
                        maximum margin permitted at any time 
                        during the loan agreement.
                          (iii) In the case of any other 
                        transaction in which the rate may vary 
                        at any time during the term of the loan 
                        for any reason, the interest charged on 
                        the transaction at the maximum rate 
                        that may be charged during the term of 
                        the loan.
                  (C) Mortgage insurance.--For the purposes of 
                computing the total points and fees under 
                paragraph (4), the total points and fees shall 
                exclude--
                          (i) any premium provided by an agency 
                        of the Federal Government or an agency 
                        of a State;
                          (ii) any amount that is not in excess 
                        of the amount payable under policies in 
                        effect at the time of origination under 
                        section 203(c)(2)(A) of the National 
                        Housing Act (12 U.S.C. 1709(c)(2)(A)), 
                        provided that the premium, charge, or 
                        fee is required to be refundable on a 
                        pro-rated basis and the refund is 
                        automatically issued upon notification 
                        of the satisfaction of the underlying 
                        mortgage loan; and
                          (iii) any premium paid by the 
                        consumer after closing.
  (2)(A) After the 2-year period beginning on the effective 
date of the regulations promulgated under section 155 of the 
Riegle Community Development and Regulatory Improvement Act of 
1994, and no more frequently than biennially after the first 
increase or decrease under this subparagraph, the Bureau may by 
regulation increase or decrease the number of percentage points 
specified in paragraph (1)(A), if the Bureau determines that 
the increase or decrease is--
          (i) consistent with the consumer protections against 
        abusive lending provided by the amendments made by 
        subtitle B of title I of the Riegle Community 
        Development and Regulatory Improvement Act of 1994; and
          (ii) warranted by the need for credit.
          (B) An increase or decrease under subparagraph (A)--
                  (i) may not result in the number of 
                percentage points referred to in paragraph 
                (1)(A)(i)(I) being less than 6 percentage 
                points or greater than 10 percentage points; 
                and
                  (ii) may not result in the number of 
                percentage points referred to in paragraph 
                (1)(A)(i)(II) being less than 8 percentage 
                points or greater than 12 percentage points.
  (C) In determining whether to increase or decrease the number 
of percentage points referred to in subparagraph (A), the 
Bureau shall consult with representatives of consumers, 
including low-income consumers, and lenders.
  (3) The amount specified in paragraph (1)(B)(ii) shall be 
adjusted annually on January 1 by the annual percentage change 
in the Consumer Price Index, as reported on June 1 of the year 
preceding such adjustment.
  (4) For purposes of paragraph (1)(B), points and fees shall 
include--
          (A) all items included in the finance charge, except 
        interest or the time-price differential;
          (B) all compensation paid directly or indirectly by a 
        consumer or creditor to a mortgage originator from any 
        source, including a mortgage originator that is also 
        the creditor in a table-funded transaction;
          (C) each of the charges listed in section 106(e) 
        (except an escrow for future payment of taxes), 
        unless--
                  (i) the charge is reasonable;
                  (ii) the creditor receives no direct or 
                indirect compensation; and
                  (iii) the charge is paid to a third party 
                unaffiliated with the creditor; and
          (D) premiums or other charges payable at or before 
        closing for any credit life, credit disability, credit 
        unemployment, or credit property insurance, or any 
        other accident, loss-of-income, life or health 
        insurance, or any payments directly or indirectly for 
        any debt cancellation or suspension agreement or 
        contract, except that insurance premiums or debt 
        cancellation or suspension fees calculated and paid in 
        full on a monthly basis shall not be considered 
        financed by the creditor;
          (E) the maximum prepayment fees and penalties which 
        may be charged or collected under the terms of the 
        credit transaction;
          (F) all prepayment fees or penalties that are 
        incurred by the consumer if the loan refinances a 
        previous loan made or currently held by the same 
        creditor or an affiliate of the creditor; and
          (G) such other charges as the Bureau determines to be 
        appropriate.
          (5) Calculation of points and fees for open-end 
        consumer credit plans.--In the case of open-end 
        consumer credit plans, points and fees shall be 
        calculated, for purposes of this section and section 
        129, by adding the total points and fees known at or 
        before closing, including the maximum prepayment 
        penalties which may be charged or collected under the 
        terms of the credit transaction, plus the minimum 
        additional fees the consumer would be required to pay 
        to draw down an amount equal to the total credit line.
  (6) This subsection shall not be construed to limit the rate 
of interest or the finance charge that a person may charge a 
consumer for any extension of credit.
  (cc) The term ``reverse mortgage transaction'' means a 
nonrecourse transaction in which a mortgage, deed of trust, or 
equivalent consensual security interest is created against the 
consumer's principal dwelling--
          (1) securing one or more advances; and
          (2) with respect to which the payment of any 
        principal, interest, and shared appreciation or equity 
        is due and payable (other than in the case of default) 
        only after--
                  (A) the transfer of the dwelling;
                  (B) the consumer ceases to occupy the 
                dwelling as a principal dwelling; or
                  (C) the death of the consumer.
  (dd) Definitions Relating to Mortgage Origination and 
Residential Mortgage Loans.--
          (1) Commission.--Unless otherwise specified, the term 
        ``Commission'' means the Federal Trade Commission.
          (2) Mortgage originator.--The term ``mortgage 
        originator''--
                  (A) means any person who, for direct or 
                indirect compensation or gain, or in the 
                expectation of direct or indirect compensation 
                or gain--
                          (i) takes a residential mortgage loan 
                        application;
                          (ii) assists a consumer in obtaining 
                        or applying to obtain a residential 
                        mortgage loan; or
                          (iii) offers or negotiates terms of a 
                        residential mortgage loan;
                  (B) includes any person who represents to the 
                public, through advertising or other means of 
                communicating or providing information 
                (including the use of business cards, 
                stationery, brochures, signs, rate lists, or 
                other promotional items), that such person can 
                or will provide any of the services or perform 
                any of the activities described in subparagraph 
                (A);
                  (C) does not include any person who is--
                          (i) not otherwise described in 
                        subparagraph (A) or (B) and who 
                        performs purely administrative or 
                        clerical tasks on behalf of a person 
                        who is described in any such 
                        subparagraph; or
                          (ii) a retailer of manufactured or 
                        modular homes or an employee of the 
                        retailer if the retailer or employee, 
                        as applicable--
                                  (I) does not receive 
                                compensation or gain for 
                                engaging in activities 
                                described in subparagraph (A) 
                                that is in excess of any 
                                compensation or gain received 
                                in a comparable cash 
                                transaction;
                                  (II) discloses to the 
                                consumer--
                                          (aa) in writing any 
                                        corporate affiliation 
                                        with any creditor; and
                                          (bb) if the retailer 
                                        has a corporate 
                                        affiliation with any 
                                        creditor, at least 1 
                                        unaffiliated creditor; 
                                        and
                                  (III) does not directly 
                                negotiate with the consumer or 
                                lender on loan terms (including 
                                rates, fees, and other costs).
                  (D) does not include a person or entity that 
                only performs real estate brokerage activities 
                and is licensed or registered in accordance 
                with applicable State law, unless such person 
                or entity is compensated by a lender, a 
                mortgage broker, or other mortgage originator 
                or by any agent of such lender, mortgage 
                broker, or other mortgage originator;
                  (E) does not include, with respect to a 
                residential mortgage loan, a person, estate, or 
                trust that provides mortgage financing for the 
                sale of 3 properties in any 12-month period to 
                purchasers of such properties, each of which is 
                owned by such person, estate, or trust and 
                serves as security for the loan, provided that 
                such loan--
                          (i) is not made by a person, estate, 
                        or trust that has constructed, or acted 
                        as a contractor for the construction 
                        of, a residence on the property in the 
                        ordinary course of business of such 
                        person, estate, or trust;
                          (ii) is fully amortizing;
                          (iii) is with respect to a sale for 
                        which the seller determines in good 
                        faith and documents that the buyer has 
                        a reasonable ability to repay the loan;
                          (iv) has a fixed rate or an 
                        adjustable rate that is adjustable 
                        after 5 or more years, subject to 
                        reasonable annual and lifetime 
                        limitations on interest rate increases; 
                        and
                          (v) meets any other criteria the 
                        Bureau may prescribe;
                  (F) does not include the creditor (except the 
                creditor in a table-funded transaction) under 
                paragraph (1), (2), or (4) of section 129B(c); 
                and
                  (G) does not include a servicer or servicer 
                employees, agents and contractors, including 
                but not limited to those who offer or negotiate 
                terms of a residential mortgage loan for 
                purposes of renegotiating, modifying, replacing 
                and subordinating principal of existing 
                mortgages where borrowers are behind in their 
                payments, in default or have a reasonable 
                likelihood of being in default or falling 
                behind.
          (3) Nationwide mortgage licensing system and 
        registry.--The term ``Nationwide Mortgage Licensing 
        System and Registry'' has the same meaning as in the 
        Secure and Fair Enforcement for Mortgage Licensing Act 
        of 2008.
          (4) Other definitions relating to mortgage 
        originator.--For purposes of this subsection, a person 
        ``assists a consumer in obtaining or applying to obtain 
        a residential mortgage loan'' by, among other things, 
        advising on residential mortgage loan terms (including 
        rates, fees, and other costs), preparing residential 
        mortgage loan packages, or collecting information on 
        behalf of the consumer with regard to a residential 
        mortgage loan.
          (5) Residential mortgage loan.--The term 
        ``residential mortgage loan'' means any consumer credit 
        transaction that is secured by a mortgage, deed of 
        trust, or other equivalent consensual security interest 
        on a dwelling or on residential real property that 
        includes a dwelling, other than a consumer credit 
        transaction under an open end credit plan or, for 
        purposes of sections 129B and 129C and section 128(a) 
        (16), (17), (18), and (19), and sections 128(f) and 
        130(k), and any regulations promulgated thereunder, an 
        extension of credit relating to a plan described in 
        section 101(53D) of title 11, United States Code.
          (6) Secretary.--The term ``Secretary'', when used in 
        connection with any transaction or person involved with 
        a residential mortgage loan, means the Secretary of 
        Housing and Urban Development.
          (7) Servicer.--The term ``servicer'' has the same 
        meaning as in section 6(i)(2) of the Real Estate 
        Settlement Procedures Act of 1974 (12 U.S.C. 
        2605(i)(2)).
  (ee) Bona Fide Discount Points and Prepayment Penalties.--For 
the purposes of determining the amount of points and fees for 
purposes of subsection (aa), either the amounts described in 
paragraph (1) or (2) of the following paragraphs, but not both, 
shall be excluded:
          (1) Up to and including 2 bona fide discount points 
        payable by the consumer in connection with the 
        mortgage, but only if the interest rate from which the 
        mortgage's interest rate will be discounted does not 
        exceed by more than 1 percentage point--
                  (A) the average prime offer rate, as defined 
                in section 129C; or
                  (B) if secured by a personal property loan, 
                the average rate on a loan in connection with 
                which insurance is provided under title I of 
                the National Housing Act (12 U.S.C. 1702 et 
                seq.).
          (2) Unless 2 bona fide discount points have been 
        excluded under paragraph (1), up to and including 1 
        bona fide discount point payable by the consumer in 
        connection with the mortgage, but only if the interest 
        rate from which the mortgage's interest rate will be 
        discounted does not exceed by more than 2 percentage 
        points--
                  (A) the average prime offer rate, as defined 
                in section 129C; or
                  (B) if secured by a personal property loan, 
                the average rate on a loan in connection with 
                which insurance is provided under title I of 
                the National Housing Act (12 U.S.C. 1702 et 
                seq.).
          (3) For purposes of paragraph (1), the term ``bona 
        fide discount points'' means loan discount points which 
        are knowingly paid by the consumer for the purpose of 
        reducing, and which in fact result in a bona fide 
        reduction of, the interest rate or time-price 
        differential applicable to the mortgage.
          (4) Paragraphs (1) and (2) shall not apply to 
        discount points used to purchase an interest rate 
        reduction unless the amount of the interest rate 
        reduction purchased is reasonably consistent with 
        established industry norms and practices for secondary 
        mortgage market transactions.
  (ff) The term ``debt'' means any obligation of a person to 
pay to another person money--
          (1) regardless of whether such obligation is absolute 
        or contingent if the understanding between the parties 
        is that any part of the money shall be or may be 
        returned;
          (2) that includes the right of the person providing 
        the money to an equitable remedy for breach of 
        performance if the breach gives rise to a right to 
        payment; and
          (3) regardless of whether the obligation or right to 
        an equitable remedy described in paragraph (2) has been 
        reduced to judgment, fixed, contingent, matured, 
        unmatured, disputed, undisputed, secured, or unsecured.

           *       *       *       *       *       *       *


                     CHAPTER 2--CREDIT TRANSACTIONS

Sec.
121. General requirement of disclosure.
     * * * * * * *
140B.Unfair credit practices.

           *       *       *       *       *       *       *


Sec. 130. Civil liability

  (a) Except as otherwise provided in this section, any 
[creditor] person who fails to comply with any requirement 
imposed under this chapter, including any requirement under 
section 125, subsection (f) or (g) of section 131, or chapter 4 
or 5 of this title with respect to any person is liable to such 
person in an amount equal to the sum of--
          (1) any actual damage sustained by such person as a 
        result of the failure;
          (2)(A)(i) in the case of an individual action twice 
        the amount of any finance charge in connection with the 
        transaction, (ii) in the case of an individual action 
        relating to a consumer lease under chapter 5 of this 
        title, 25 per centum of the total amount of monthly 
        payments under the lease, except that the liability 
        under this subparagraph shall not be less than $200 nor 
        greater than $2,000, (iii) in the case of an individual 
        action relating to an open end consumer credit plan 
        that is not secured by real property or a dwelling, 
        twice the amount of any finance charge in connection 
        with the transaction, with a minimum of $500 and a 
        maximum of $5,000, or such higher amount as may be 
        appropriate in the case of an established pattern or 
        practice of such failures; or (iv) in the case of an 
        individual action relating to a credit transaction not 
        under an open end credit plan that is secured by real 
        property or a dwelling, not less than $400 or greater 
        than $4,000; or
          (B) in the case of a class action, such amount as the 
        court may allow, except that as to each member of the 
        class no minimum recovery shall be applicable, and the 
        total recovery under this subparagraph in any class 
        action or series of class actions arising out of the 
        same failure to comply by the same [creditor] person 
        shall not be more than the lesser of $1,000,000 or 1 
        per centum of the net worth of the [creditor] person;
          (3) in the case of any successful action to enforce 
        the foregoing liability or in any action in which a 
        person is determined to have a right of rescission 
        under section 125 or 128(e)(7), the costs of the 
        action, together with a reasonable attorney's fee as 
        determined by the court; and
          (4) in the case of a failure to comply with any 
        requirement under section 129, paragraph (1) or (2) of 
        section 129B(c), or section 129C(a), an amount equal to 
        the sum of all finance charges and fees paid by the 
        consumer, unless the [creditor] person demonstrates 
        that the failure to comply is not material.
In determining the amount of award in any class action, the 
court shall consider, among other relevant factors, the amount 
of any actual damages awarded, the frequency and persistence of 
failures of compliance by the [creditor] person, the resources 
of the [creditor] person, the number of persons adversely 
affected, and the extent to which the creditor's failure of 
compliance was intentional. In connection with the disclosures 
referred to in subsections (a) and (b) of section 127, a 
[creditor] person shall have a liability determined under 
paragraph (2) only for failing to comply with the requirements 
of section 125, 127(a), or any of paragraphs (4) through (13) 
of section 127(b), or for failing to comply with disclosure 
requirements under State law for any term or item that the 
Bureau has determined to be substantially the same in meaning 
under section 111(a)(2) as any of the terms or items referred 
to in section 127(a), or any of paragraphs (4) through (13) of 
section 127(b). In connection with the disclosures referred to 
in subsection (c) or (d) of section 127, a card issuer shall 
have a liability under this section only to a cardholder who 
pays a fee described in section 127(c)(1)(A)(ii)(I) or section 
127(c)(4)(A)(i) or who uses the credit card or charge card. In 
connection with the disclosures referred to in section 128, a 
[creditor] person shall have a liability determined under 
paragraph (2) only for failing to comply with the requirements 
of section 125, of paragraph (2) (insofar as it requires a 
disclosure of the ``amount financed''), (3), (4), (5), (6), or 
(9) of section 128(a), or section 128(b)(2)(C)(ii), of 
subparagraphs (A), (B), (D), (F), or (J) of section 128(e)(2) 
(for purposes of paragraph (2) or (4) of section 128(e)), or 
paragraph (4)(C), (6), (7), or (8) of section 128(e), or for 
failing to comply with disclosure requirements under State law 
for any term which the Bureau has determined to be 
substantially the same in meaning under section 111(a)(2) as 
any of the terms referred to in any of those paragraphs of 
section 128(a) or section 128(b)(2)(C)(ii). With respect to any 
failure to make disclosures required under this chapter or 
chapter 4 or 5 of this title, liability shall be imposed only 
upon the [creditor] person required to make disclosure, except 
as provided in section 131.
  (b) A creditor or assignee has no liability under this 
section or section 108 or section 112 for any failure to comply 
with any requirement imposed under this chapter or chapter 5, 
if within sixty days after discovering an error, whether 
pursuant to a final written examination report or notice issued 
under section 108(e)(1) or through the creditor's or assignee's 
own procedures, and prior to the institution of an action under 
this section or the receipt of written notice of the error from 
the obligor, the creditor or assignee notifies the person 
concerned of the error and makes whatever adjustments in the 
appropriate account are necessary to assure that the person 
will not be required to pay an amount in excess of the charge 
actually disclosed, or the dollar equivalent of the annual 
percentage rate actually disclosed, whichever is lower.
  (c) A creditor or assignee may not be held liable in any 
action brought under this section or section 125 for a 
violation of this title if the creditor or assignee shows by a 
preponderance of evidence that the violation was not 
intentional and resulted from a bona fide error notwithstanding 
the maintenance of procedures reasonably adapted to avoid any 
such error. Examples of a bona fide error include, but are not 
limited to, clerical, calculation, computer malfunction and 
programing, and printing errors, except that an error of legal 
judgment with respect to a person's obligations under this 
title is not a bona fide error.
  (d) When there are multiple obligors in a consumer credit 
transaction or consumer lease, there shall be no more than one 
recovery of damages under subsection (a)(2) for a violation of 
this title.
  (e) Except as provided in the subsequent sentence, any action 
under this section may be brought in any United States district 
court, or in any other court of competent jurisdiction, within 
one year from the date of the occurrence of the violation or, 
in the case of a violation involving a private education loan 
(as that term is defined in section 140(a)), 1 year from the 
date on which the first regular payment of principal is due 
under the loan. Any action under this section with respect to 
any violation of section 129, 129B, or 129C may be brought in 
any United States district court, or in any other court of 
competent jurisdiction, before the end of the 3-year period 
beginning on the date of the occurrence of the violation. This 
subsection does not bar a person from asserting a violation of 
this title in an action to collect the debt which was brought 
more than one year from the date of the occurrence of the 
violation as a matter of defense by recoupment or set-off in 
such action, except as otherwise provided by State law. An 
action to enforce a violation of section 129, 129B, 129C, 129D, 
129E, 129F, 129G, or 129H of this Act may also be brought by 
the appropriate State attorney general in any appropriate 
United States district court, or any other court of competent 
jurisdiction, not later than 3 years after the date on which 
the violation occurs. The State attorney general shall provide 
prior written notice of any such civil action to the Federal 
agency responsible for enforcement under section 108 and shall 
provide the agency with a copy of the complaint. If prior 
notice is not feasible, the State attorney general shall 
provide notice to such agency immediately upon instituting the 
action. The Federal agency may--
          (1) intervene in the action;
          (2) upon intervening--
                  (A) remove the action to the appropriate 
                United States district court, if it was not 
                originally brought there; and
                  (B) be heard on all matters arising in the 
                action; and
          (3) file a petition for appeal.
  (f) No provision of this section, section 108(b), section 
108(c), section 108(e), or section 112 imposing any liability 
shall apply to any act done or omitted in good faith in 
conformity with any rule, regulation, or interpretation thereof 
by the Bureau or in conformity with any interpretation or 
approval by an official or employee of the Federal Reserve 
System duly authorized by the Bureau to issue such 
interpretations or approvals under such procedures as the 
Bureau may prescribe therefor, notwithstanding that after such 
act or omission has occurred, such rule, regulation, 
interpretation, or approval is amended, rescinded, or 
determined by judicial or other authority to be invalid for any 
reason.
  (g) The multiple failure to disclose to any person any 
information required under this chapter or chapter 4 or 5 of 
this title to be disclosed in connection with a single account 
under an open end consumer credit plan, other single consumer 
credit sale, consumer loan, consumer lease, or other extension 
of consumer credit, shall entitle the person to a single 
recovery under this section but continued failure to disclose 
after a recovery has been granted shall give rise to rights to 
additional recoveries. This subsection does not bar any remedy 
permitted by section 125.
  (h) A person may not take any action to offset any amount for 
which a creditor or assignee is potentially liable to such 
person under subsection (a)(2) against any amount owed by such 
person, unless the amount of the creditor's or assignee's 
liability under this title has been determined by judgment of a 
court of competent jurisdiction in an action of which such 
person was a party. This subsection does not bar a consumer 
then in default on the obligation from asserting a violation of 
this title as an original action, or as a defense or 
counterclaim to an action to collect amounts owed by the 
consumer brought by a person liable under this title.
  (i) Class Action Moratorium.--
          (1) In general.--During the period beginning on the 
        date of the enactment of the Truth in Lending Class 
        Action Relief Act of 1995 and ending on October 1, 
        1995, no court may enter any order certifying any class 
        in any action under this title--
                  (A) which is brought in connection with any 
                credit transaction not under an open end credit 
                plan which is secured by a first lien on real 
                property or a dwelling and constitutes a 
                refinancing or consolidation of an existing 
                extension of credit; and
                  (B) which is based on the alleged failure of 
                a creditor--
                          (i) to include a charge actually 
                        incurred (in connection with the 
                        transaction) in the finance charge 
                        disclosed pursuant to section 128;
                          (ii) to properly make any other 
                        disclosure required under section 128 
                        as a result of the failure described in 
                        clause (i); or
                          (iii) to provide proper notice of 
                        rescission rights under section 125(a) 
                        due to the selection by the creditor of 
                        the incorrect form from among the model 
                        forms prescribed by the Bureau or from 
                        among forms based on such model forms.
          (2) Exceptions for certain alleged violations.--
        Paragraph (1) shall not apply with respect to any 
        action--
                  (A) described in clause (i) or (ii) of 
                paragraph (1)(B), if the amount disclosed as 
                the finance charge results in an annual 
                percentage rate that exceeds the tolerance 
                provided in section 107(c); or
                  (B) described in paragraph (1)(B)(iii), if--
                          (i) no notice relating to rescission 
                        rights under section 125(a) was 
                        provided in any form; or
                          (ii) proper notice was not provided 
                        for any reason other than the reason 
                        described in such paragraph.
  (j) Private Educational Lender.--A private educational lender 
(as that term is defined in section 140(a)) has no liability 
under this section for failure to comply with section 
128(e)(3)).
  (k) Defense to Foreclosure.--
          (1) In general.--Notwithstanding any other provision 
        of law, when a creditor, assignee, or other holder of a 
        residential mortgage loan or anyone acting on behalf of 
        such creditor, assignee, or holder, initiates a 
        judicial or nonjudicial foreclosure of the residential 
        mortgage loan, or any other action to collect the debt 
        in connection with such loan, a consumer may assert a 
        violation by a creditor of paragraph (1) or (2) of 
        section 129B(c), or of section 129C(a), as a matter of 
        defense by recoupment or set off without regard for the 
        time limit on a private action for damages under 
        subsection (e).
          (2) Amount of recoupment or setoff.--
                  (A) In general.--The amount of recoupment or 
                set-off under paragraph (1) shall equal the 
                amount to which the consumer would be entitled 
                under subsection (a) for damages for a valid 
                claim brought in an original action against the 
                creditor, plus the costs to the consumer of the 
                action, including a reasonable attorney's fee.
                  (B) Special rule.--Where such judgment is 
                rendered after the expiration of the applicable 
                time limit on a private action for damages 
                under subsection (e), the amount of recoupment 
                or set-off under paragraph (1) derived from 
                damages under subsection (a)(4) shall not 
                exceed the amount to which the consumer would 
                have been entitled under subsection (a)(4) for 
                damages computed up to the day preceding the 
                expiration of the applicable time limit.
  (l) Exemption From Liability and Rescission in Case of 
Borrower Fraud or Deception.--In addition to any other remedy 
available by law or contract, no creditor or assignee shall be 
liable to an obligor under this section, if such obligor, or 
co-obligor has been convicted of obtaining by actual fraud such 
residential mortgage loan.

           *       *       *       *       *       *       *


Sec. 140B. Unfair credit practices

  (a) In General.--In connection with the extension of credit 
or creation of debt in or affecting commerce, as defined in 
section 4 of the Federal Trade Commission Act (15 U.S.C. 44), 
including any advance of funds or sale or assignment of future 
income or receivables that may or may not be credit, no person 
may directly or indirectly take or receive from another person 
an obligation that constitutes or contains a cognovit or 
confession of judgment (for purposes other than executory 
process in the State of Louisiana), warrant of attorney, or 
other waiver of the right to notice and the opportunity to be 
heard in the event of suit or process thereon.
  (b) Exemption.--The exemption in section 104(1) shall not 
apply to this section.

           *       *       *       *       *       *       *


                             MINORITY VIEWS

    Committee Republicans believe lenders should be transparent 
with respect to the terms and conditions associated with 
extending credit to small businesses. Unfortunately, House 
Democrats are passing a sweeping prohibition that could yield 
unintended consequences and put small businesses and lenders at 
risk. H.R. 3490 would prohibit the use of confessions of 
judgment provisions in all loan contracts including all 
extensions of credit, regardless of the nature of the loan or 
borrower.
    Recouping a monetary debt is necessary for a credit-based 
economy to function, and confessions of judgment are a tool 
available to lenders and debt collectors to collect from 
delinquent borrowers. Many community banks include confessions 
of judgment as a contract term in a commercial loan, but rarely 
enforce the provision. Additionally, federal government 
agencies, including the Department of Justice (DOJ) and the 
Environmental Protection Agency (EPA), use confessions of 
judgment in contracts. For example, the DOJ enforced a 
confession of judgment to retrieve assets from Bernie Madoff.
    Committee Republicans believe borrowers deserve more 
clarity and disclosure relating to the use of confessions of 
judgment. Rep. Warren Davidson (R-OH) offered a substitute 
amendment that would have required lenders to provide a 
separate disclosure describing the confession of judgment 
included in the loan contract. Democrats rejected the amendment 
on a party line vote of 31-23. Rep. Ted Budd (R-NC) also 
offered an amendment that would have required lenders to obtain 
a written affidavit from the borrower containing the date and 
nature of a borrower's default in order to execute a confession 
of judgment. The Budd amendment was also rejected by a party 
line vote of 31-23.
    Committee Republicans believe the blanket prohibition 
contained in H.R. 3490 will limit borrowing options. By 
removing a critical option for lenders to recover money owed, 
if enacted, the bill may ultimately drive up the cost of credit 
for the smallest businesses. Committee Republicans support 
protecting small businesses and ensuring transparency in the 
lending process, but this bill does not achieve this goal. 
Intended or not this bill jeopardizes access to credit for 
millions of qualified small businesses, which could slow 
economic growth and job creation. For these reasons, Committee 
Republicans oppose H.R. 3490.
                                   Alexander X. Mooney.
                                   David Kustoff.
                                   Lance Gooden.
                                   William R. Timmons, IV.
                                   Ted Budd.
                                   J. French Hill.
                                   John W. Rose.
                                   Anthony Gonzalez.
                                   Andy Barr.
                                   Ann Wagner.
                                   Blaine Luetkemeyer.
                                   Steve Stivers.
                                   Patrick T. McHenry.
                                   Warren Davidson.
                                   Barry Loudermilk.
                                   Tom Emmer.
                                   Scott R. Tipton.
                                   Roger Williams.
                                   Bryan Steil.
                                   Trey Hollingsworth.
                                   Denver Riggleman.
                                   Lee M. Zeldin.
                                   Frank D. Lucas.
                                   Bill Huizenga.
                                   Bill Posey.