Predatory Lending Sunset Act - Amends the Truth in Lending Act to limit the maximum interest rate which a creditor may charge on a covered consumer credit loan of up to $3,000 to an annual percentage rate (APR) of 36%.
Prohibits a creditor from extending a covered loan with respect to which the creditor uses as security either: (1) access to a borrower's financial account; or (2) the title of a vehicle.
Amends the Electronic Fund Transfer Act to prohibit a remotely created check that: (1) is not created by the financial institution that holds the customer account from which the check is to be paid; and (2) does not bear a signature applied by the person from whose account the check is to be paid.
Declares unenforceable, with respect to any consumer, any contract made in violation of this Act.
[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5689 Introduced in House (IH)]
111th CONGRESS
2d Session
H. R. 5689
To amend the Truth in Lending Act to provide an interest rate cap and
other requirements for creditors making covered loans, and for other
purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
July 1, 2010
Ms. Giffords (for herself and Mr. Polis of Colorado) introduced the
following bill; which was referred to the Committee on Financial
Services
_______________________________________________________________________
A BILL
To amend the Truth in Lending Act to provide an interest rate cap and
other requirements for creditors making covered 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 ``Predatory Lending Sunset Act''.
SEC. 2. 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:
``SEC. 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.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Financial Services.
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