Federal Payday Loan Consumer Protection Amendments of 2000

Summary: Amends the Consumer Credit Protection Act to redefine credit to include any payday loan.
Amends the Truth in Lending Act to prohibit a creditor from making a payday loan if the creditor has reasonable cause to believe that: (1) the personal check or share draft received in exchange for such loan is drawn upon either an insured depository institution or insured credit union; or (2) the account debited in exchange for such loan is a transaction or share draft account at an insured depository institution or an insured  credit union.
Sets forth civil liabilities for violations of this Act.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Federal Payday Loan Consumer 
Protection Amendments of 2000''.

SEC. 2. FINDINGS AND PURPOSE.

    (a) Findings.--The Congress makes the following findings:
            (1) Payday lending is a rapidly expanding form of high-
        cost, short-term credit that uses a borrower's personal check 
        as collateral and targets individuals with limited access to 
        affordable credit who are in desperate need of cash to meet 
        immediate obligations.
            (2) Consumer group studies indicate that the average annual 
        percentage rate on payday loans nationally is 474 percent for a 
        two-week loan, and that a typical payday loan is renewed ten or 
        more times before repayment at equivalent annual interest rates 
        that exceed 1000 percent.
            (3) While State law has traditionally prohibited such high 
        cost lending through usury limits, small loan interest caps and 
        other restrictions, these laws have either been revised to 
        exempt payday loan transactions, or payday lenders have 
        affiliated with insured depository institutions to invoke the 
        most favored lender principle under Federal law to circumvent 
        interest rate regulation in State law.
            (4) Lending that fails to assess borrowers ability to 
        repay, that requires consumers to write checks on insufficient 
        funds, that encourages perpetual debt or default on other 
        obligations, and that facilitates violations of State law, is 
        an unacceptable banking practice for insured depository 
        institutions that threatens the safety of the participating 
        institution and the broader banking system.
            (5) While Congress clearly intended for the credit 
        protections of the Truth in Lending Act to apply broadly to all 
        credit transactions, including payday loan transactions, and 
        such application to payday loan transactions has been correctly 
        affirmed in recent court decisions, the provision of Truth in 
        Lending credit disclosures is not standard practice among 
        payday lenders across the country and should be a more explicit 
        requirement in Federal statutes and regulations.
    (b) Purpose.--It is the purpose of this Act to encourage fair 
lending practices by prohibiting insured depository institutions from 
engaging in any form of payday lending, by restricting the use of 
personal checks drawn on, or forms of withdrawals from, accounts at 
insured depository institutions for purposes of making payday loans, 
and by clarifying what the Congress has always intended by explicitly 
stating in the Truth in Lending Act that appropriate interest rate 
disclosure and other consumer protections of the Act do apply to all 
payday loans.

SEC. 3. FEDERAL DEPOSIT INSURANCE ACT AMENDMENT.

    Section 18 of the Federal Deposit Insurance Act (12 U.S.C. 1828) is 
amended by adding at the end the following new subsection:
    ``(v) Prohibition on Certain Unsafe and Unsound Banking 
Practices.--
            ``(1) In general.--An insured depository institution may 
        not--
                    ``(A) make any payday loan, either directly or 
                indirectly; or
                    ``(B) make any loan to any other lender for 
                purposes of financing a payday loan or refinancing or 
                extending any payday loan.
            ``(2) Payday loan defined.--For purposes of this 
        subsection, the term `payday loan' means any transaction in 
        which a short-term cash advance is made to a consumer in 
        exchange for--
                            ``(i) a consumer's personal check or share 
                        draft, in the amount of the advance plus a fee, 
                        where presentment or negotiation of such check 
                        or share draft is deferred by agreement of the 
                        parties until a designated future date; or
                            ``(ii) a consumer's authorization to debit 
                        the consumer's transaction account, in the 
                        amount of the advance plus a fee, where such 
                        account will be debited on or after a 
                        designated future date.''.

SEC. 4. TRUTH IN LENDING ACT AMENDMENTS.

    (a) Clarification of Application to Payday Loans.--For purposes of 
clarifying that payday loans have always been within the definition of 
credit, section 103(e) of the Consumer Credit Protection Act (15 U.S.C. 
1602(e)) is amended, effective as of the date of the enactment of this 
Act, by inserting before the period at the end ``, including any payday 
loan (as defined in section 18(v)(2) of the Federal Deposit Insurance 
Act)''.
    (b) Prohibition on Certain Unsafe and Unsound Lending Practices.--
Section 128 of the Truth in Lending Act (15 U.S.C. 1638) is amended by 
adding at the end the following new subsection:
    ``(e) Prohibition on Payday Loans Based on Checks Drawn On, or 
Authorized Withdrawals From, Insured Depository Institutions.--
            ``(1) In general.--A creditor may not make a payday loan to 
        any person if the creditor knows or has reasonable cause to 
        believe that--
                    ``(A) the personal check or share draft the 
                creditor receives from the person, in exchange for the 
                loan, is drawn on an insured depository institution or 
                insured credit union; or
                    ``(B) the account the creditor receives permission 
                from the person to debit, in exchange for the loan, is 
                a transaction account or share draft account at an 
                insured depository institution or an insured credit 
                union.
            ``(2) Definitions.--For purposes of this subsection, the 
        following definitions shall apply:
                    ``(A) Insured credit union.--The term `insured 
                credit union' has the meaning given the term in section 
                101 of the Federal Credit Union Act.
                    ``(B) Insured depository institution.--The term 
                `insured depository institution' has the meaning given 
                the term in section 3 of the Federal Deposit Insurance 
                Act.
                    ``(C) Payday loan defined.--The term `payday loan' 
                means any transaction in which a short-term cash 
                advance is made to a consumer in exchange for--
                            ``(i) a consumer's personal check or share 
                        draft, in the amount of the advance plus a fee, 
                        where presentment or negotiation of such check 
                        or share draft is deferred by agreement of the 
                        parties until a designated future date; or
                            ``(ii) a consumer's authorization to debit 
                        the consumer's transaction or share draft 
                        account, in the amount of the advance plus a 
                        fee, where such account will be debited on or 
                        after a designated future date.''.
    (c) Civil Liability.--
            (1) In general.--Section 130(a)(2) of the Truth in Lending 
        Act (15 U.S.C. 1640(a)(2)) is amended--
                    (A) in subparagraph (A)--
                            (i) by inserting ``clauses (i) and (ii) 
                        of'' after ``except that the liability under'';
                            (ii) by striking ``$100'' and inserting 
                        ``$200''; and
                            (iii) by striking ``$1,000'' and inserting 
                        ``$10,000''; and
                    (B) in subparagraph (B), by striking `` lesser of 
                $500,000 or'' and inserting ``greater of (i) the 
                maximum amount of liability determined under 
                subparagraph (A) for each member of the class 
                multiplied by the number of members of the class or 
                (ii)''.
            (2) Technical and conforming amendments.--Section 130(a) of 
        the Truth in Lending Act is amended--
                    (A) in the matter preceding paragraph (1), by 
                striking ``equal to the sum of--'' and inserting 
                ``equal to the sum of amounts determined under the 
                following paragraphs, whichever apply:''; and
                    (B) in the 4th sentence which begins after the end 
                of paragraph (4) by striking ``disclosures referred to 
                in section 128'' and inserting ``disclosures referred 
                to in section 128(a)''.

SEC. 5. EFFECTIVE DATE.

    Except as provided in section 4(a), which is a clarification of 
existing law, the requirements of this Act and the amendments made by 
this Act shall take effect at the end of the 90-day period beginning on 
the date of the enactment of this Act and shall apply to payday loans 
initiated on or after such date and to an extension or renewal of a 
payday loan made on or after such date.