To amend various banking laws to combat predatory lending, particularly in regards to low and moderate income individuals, and for other purposes.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Borrower's Bill of Rights Act''.

SEC. 2. ASSISTANT SECRETARY OF THE TREASURY FOR FINANCIAL EDUCATION.

    Section 301(e) of title 31, United States Code, is amended--
            (1) by striking ``7 Assistant Secretaries'' and inserting 
        ``8 Assistant Secretaries''; and
            (2) by inserting after the 2nd sentence the following new 
        sentence: ``One of the Assistant Secretaries shall be the 
        Assistant Secretary for Financial Education.''

SEC. 3. FINANCIAL LITERACY FOR MIDDLE AND HIGH SCHOOL STUDENTS.

    The Financial Literacy and Education Improvement Act (20 U.S.C. 
9701, et seq.) is amended--
            (1) by redesignating section 519 as section 520; and
            (2) by inserting after section 518 the following new 
        section:

``SEC. 519. FINANCIAL LITERACY FOR MIDDLE AND HIGH SCHOOL STUDENTS.

    ``(a) Pilot Program.--The Assistant Secretary for Financial 
Education (hereafter in this section referred to as the `Assistant 
Secretary' shall establish a 2-year pilot financial literacy pilot 
program for middle and high school students.
    ``(b) Requirements.--The pilot program established by the Assistant 
Secretary shall comply with the following requirements:
            ``(1) The pilot program shall be implemented in 10 middle 
        schools and 10 high schools, selected by the Assistant 
        Secretary based on such criteria as the Assistant Secretary may 
        determine to be appropriate, in 10 different school systems and 
        provided to 8th grade students at the middle schools selected 
        and 12th grade students at the high schools selected.
            ``(2) The program shall use as guidance the financial 
        education program in the secondary schools of the State of 
        Delaware called the `Keys to Financial Success'.
            ``(3) The program shall be funded by the Secretary of the 
        Treasury, out of funds appropriated to the Secretary, and 
        administered by the State and the local school administration 
        of each school selected, based on criteria established by the 
        Assistant Secretary, including an annual update of the 
        materials used in the curriculum.
    ``(c) Report.--Upon the completion of the 2-year pilot program, the 
Assistant Secretary shall submit to the Secretary of the Treasury and 
the Congress a report containing a detailed description of the findings 
and conclusions of the Assistant Secretary with respect to the pilot 
program.''.

SEC. 4. ``PLAIN LANGUAGE'' DISCLOSURES.

    Section 122 of the Truth in Lending Act (15 U.S.C. 1632) is amended 
by adding at the end the following new subsection:
    ``(d) Plain and Simple Language Disclosures Required for All 
Disclosures.--The Board shall take such action as may be necessary to 
ensure that all disclosures that are required to be provided under this 
title with respect to any consumer credit transaction, including all 
the disclosures required under section 129, shall be simple and easy to 
understand and in a language understood by the consumer.''.

SEC. 5. LIMITATION ON USURIOUS INTEREST RATES AND UNFAIR PRACTICES.

    (a) Repeal of Preemption of State Mortgage Usury Laws.--
            (1) In general.--Sections 501, 511, 512, 525, 526, 527, 
        528, and 529 of the Depository Institutions Deregulation and 
        Monetary Control Act of 1980 are hereby repealed.
            (2) Technical and conforming amendments.--
                    (A) Insured depository institutions.--Section 27 of 
                the Federal Deposit Insurance Act (12 U.S.C. 1831d) is 
                amended to read as follows:

``SEC. 27. UNIFORM APPLICABILITY OF STATE LAW.

    ``In order to prevent discrimination against State-chartered 
insured depository institutions, including insured savings banks and 
insured branches of foreign banks and notwithstanding any other 
provision of Federal law, the provision of the constitution or the laws 
of any State expressly limiting the rate or amount of interest, 
discount points, finance charges, or other charges which may be 
charged, taken, received, or reserved shall apply to all depository 
institutions that are located in, have any branch in, or do business in 
such State with respect to customers of any such institution which 
reside in or are located in such State.''.
                    (B) Insured credit unions.--Section 205(g) of the 
                Federal Credit Union Act (12 U.S.C. 1785(g)) is amended 
                to read as follows:
    ``(g) Uniform Applicability of State Law.--In order to prevent 
discrimination against State-chartered insured credit unions and 
notwithstanding any other provision of Federal law, the provision of 
the constitution or the laws of any State expressly limiting the rate 
or amount of interest, discount points, finance charges, or other 
charges which may be charged, taken, received, or reserved shall apply 
to all credit unions that are located in, have any branch in, or do 
business in such State with respect to customers of any such credit 
union which reside in or are located in such State.''.
    (b) Prohibition on Loan ``Flipping'' and Mandatory Arbitration.--
            (1) In general.--Chapter 2 of the Truth in Lending Act (15 
        U.S.C. 1631 et seq.) is amended by inserting after section 129 
        the following new section:
``Sec. 129A. Protections for all loans
    ``(a) Flipping.--
            ``(1) In general.--No creditor may knowingly or 
        intentionally engage in the unfair act or practice of flipping.
            ``(2) Flipping defined.--For purposes of this subsection, 
        the term `flipping' means the making of a loan or extension of 
        credit to a consumer which refinances an existing loan or other 
        extension of credit when the new loan or extension of credit 
        does not have reasonable, tangible net benefit to the consumer 
        considering all of the circumstances, including the terms of 
        both the new and the refinanced loans or credit, the cost of 
        the new loan or credit, and the consumer's circumstances.
            ``(3) Tangible net benefit.--The Board may prescribe 
        regulations, in the discretion of the Board, defining the term 
        `tangible net benefit' for purposes of this subsection.
    ``(b) Arbitration.--
            ``(1) In general.--A loan or other extension of credit 
        subject to this title may not include terms which require 
        arbitration or any other nonjudicial procedure as the method 
        for resolving any controversy or settling any claims arising 
        out of the transaction.
            ``(2) Post-controversy agreements.--Subject to paragraph 
        (3), paragraph (1) shall not be construed as limiting the right 
        of the consumer and the creditor to agree to arbitration or any 
        other nonjudicial procedure as the method for resolving any 
        controversy at any time after a dispute or claim under the 
        transaction arises.
            ``(3) No waiver of statutory cause of action.--No provision 
        of any loan or other extension of credit or any agreement 
        between the consumer and the creditor shall be applied or 
        interpreted so as to bar a consumer from bringing an action in 
        an appropriate district court of the United States, or any 
        other court of competent jurisdiction, pursuant to section 130 
        or any other provision of law, for damages or other relief in 
        connection with any alleged violation of this section, any 
        other provision of this title, or any other Federal law.''.
            (2) Clerical amendment.--The table of sections for chapter 
        2 of the Truth in Lending Act is amended by inserting after the 
        item relating to section 129 the following new item:

``129A. Protections for all loans.''.
            (3) Regulations.--The Board of Governors of the Federal 
        Reserve System shall publish regulations implementing the 
        amendments made by this section in final form before the end of 
        the 6-month period beginning on the date of enactment of this 
        Act.
    (c) Amendment to Definition of High Cost Mortgages.--Subparagraph 
(A) of section 103(aa)(1) of the Truth in Lending Act (15 U.S.C. 
1602(aa)(1)(A)) is amended by striking ``10 percentage points'' and 
inserting ``8 percentage points''.
    (d) Pre-Loan Counseling Required for High Cost Mortgages.--Section 
129 of the Truth in Lending Act (15 U.S.C. 1639) is amended by 
inserting after subsection (l) the following new subsection:
    ``(m) Pre-Loan Counseling.--
            ``(1) In general.--A creditor may not extend credit to a 
        consumer under a mortgage referred to in section 103(aa) 
        without first receiving certification from a counselor that is 
        approved by the Secretary of Housing and Urban Development, 
        that the consumer has received--
                    ``(A) and successfully completed counseling, in 
                person or by telephone, on the advisability of the loan 
                transaction; and
                    ``(B) a general range of interest rates that the 
                applicant qualifies for given their credit score.
            ``(2) Nonaffiliation rule for counselors.--A counselor 
        providing a certification to a creditor under paragraph (1) may 
        not be employed by the creditor or an affiliate of the creditor 
        or be affiliated with the creditor in any other manner 
        (including any referral agreement).
            ``(3) Disclosures required prior to counseling.--No 
        counselor may certify that a borrower has received counseling 
        on the advisability of the loan transaction unless the 
        counselor can verify that the consumer has received each 
        statement required (in connection with such loan) by this 
        section, or by the Real Estate Settlement Procedures Act of 
        1974, with respect to the transaction.
            ``(4) Regulations.--The Secretary of Housing and Urban 
        Development may prescribe such regulations as the Secretary 
        determines to be appropriate to carry out the requirements of 
        paragraph (1).''.

SEC. 6. LIMITATION ON ROLLOVERS OF PAYDAY LOANS.

    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) Limitations on Rollovers or Refinancing of Payday Loans With 
the Same Creditor.--
            ``(1) In general.--A payday lender--
                    ``(A) may not refinance or roll over any payday 
                loan made by such lender, or any affiliate or other 
                associate of the payday lender, to any consumer with 
                another payday loan more than 3 times; and
                    ``(B) shall provide a consumer who seeks to 
                refinance or roll over any payday loan made by such 
                lender, or any affiliate or other associate of the 
                payday lender, to the consumer with another payday loan 
                more than 2 times with a disclosure notice, which the 
                Board shall prescribe by regulation, regarding the 
                hazards of payday lending and the benefits of banking 
                traditionally, in prominent format and type-size, that 
                is separate from the disclosures required under 
                subsection (a) with regard to such extension of credit.
            ``(2) Definitions.--
                    ``(A) Check.--The term `check' means any negotiable 
                demand draft drawn on or payable through an office of a 
                depository institution (as defined in section 
                19(b)(1)(A) of the Federal Reserve Act) located in any 
                State.
                    ``(B) Payday lender.--The term `payday lender' 
                means any person who extends credit to any other person 
                through a payday loan.
                    ``(C) Payday loan.--The term `payday loan' means 
                means a transaction in which credit is extended by a 
                payday lender, for a specified period of time, upon 
                receipt by the lender of--
                            ``(i) a check made by the borrower for the 
                        amount of the credit extended, the presentment 
                        or negotiation of which, by mutual agreement of 
                        the lender and borrower, will be deferred for 
                        such specified period; or
                            ``(ii) authorization from the borrower for 
                        the payday lender to initiate an electronic 
                        fund transfer at the end of the specified 
                        period from the account of the borrower for the 
                        amount of the credit extended.''.

SEC. 7. FAIR TREATMENT OF EMPLOYEE BENEFITS.

    (a) Definition of Claim.--Section 101(5) of title 11, United States 
Code, is amended--
            (1) in subparagraph (A), by striking ``or'' at the end;
            (2) in subparagraph (B), by inserting ``or'' after the 
        semicolon; and
            (3) by adding at the end the following:
                    ``(C) right or interest in equity securities of the 
                debtor, or an affiliate of the debtor, held in a 
                pension plan (within the meaning of section 3(2) of the 
                Employee Retirement Income Security Act of 1974 (29 
                U.S.C. 1002(2))) for the benefit of an individual who 
                is not an officer or director of the debtor, if such 
                securities were attributable to--
                            ``(i) employer contributions by the debtor 
                        or an affiliate of the debtor other than 
                        elective deferrals (within the meaning of 
                        section 402(g) of the Internal Revenue Code of 
                        1986), and any earnings thereon; and
                            ``(ii) elective deferrals (and any earnings 
                        thereon) that are required to be invested in 
                        such securities under the terms of the plan or 
                        at the direction of a person other than the 
                        individual or any beneficiary,
                except that this subparagraph shall not apply to any 
                such securities during any period during which the 
                individual or any beneficiary has the right to direct 
                the plan to divest such securities and to reinvest an 
                equivalent amount in other investment options of the 
                plan;''.
    (b) Priorities.--Section 507(a)(4) of title 11, United States Code, 
is amended--
            (1) in subparagraph (B), by indenting the left margin of 
        clauses (i) and (ii) 2 ems to the right and redesignating such 
        clauses as subclauses (I) and (II), respectively;
            (2) by indenting the left margin of subparagraphs (A) and 
        (B) 2 ems to the right and redesignating such subparagraphs as 
        clauses (i) and (ii), respectively;
            (3) in the matter preceding clause (i), as so redesignated, 
        by striking ``Fourth'' and all that follows through ``plan--'' 
        and inserting the following: ``Fourth--
                    ``(A) allowed unsecured claims for contributions to 
                an employee benefit plan--''.
            (4) by striking the period at the end and inserting the 
        following: ``or''; and
            (5) by adding at the end the following:
                    ``(B) allowed unsecured claims with respect to 
                rights or interests in equity securities of the debtor, 
                or an affiliate of the debtor, that are held in a 
                pension plan (within the meaning of section 3(2) of the 
                Employee Retirement Income Security Act of 1974), 
                without regard to when services were rendered or 
                limitation in amount, and measured by the market value 
                of the stock at the time the stock was contributed to, 
                or purchased by, the plan.''.

SEC. 8. WAGE PRIORITY AND EMPLOYEE BENEFIT CAP.

    Section 507(a) of title 11, United States Code, is amended--
            (1) in paragraph (3), by striking ``$4,000'' and inserting 
        ``$13,500''; and
            (2) in paragraph (4)(B)(i), by striking ``$4,000'' and 
        inserting ``$13,500''.

SEC. 9. SUBORDINATION.

    Section 510(b) of title 11, United States Code, is amended by 
inserting ``, other than a claim described in section 105(5)(C).'' 
after ``claim'' the 1st place it appears.

Summary: Borrower's Bill of Rights Act - Amends Federal law to create the position of Assistant Secretary for Financial Education in the Department of the Treasury. Amends the Financial Literacy and Education Improvement Act to direct such Secretary to establish a two-year financial literacy pilot program for middle and high school students. Amends the Truth in Lending Act to require that mandatory disclosures governing a consumer credit transaction be simple, easy to understand, and in a language understood by the consumer. Amends the Depository Institutions Deregulation and Monetary Control Act of 1980 to repeal the preemption of state mortgage usury laws. Amends the Federal Deposit Insurance Act and the Federal Credit Union Act to provide that the constitution or the laws of any state expressly limiting the rate or amount of interest, discount points, finance charges, or other charges shall apply to all depository institutions and credit unions, respectively, that are located in, have any branch in, or do business in such state with respect to customers which reside in or are located in such state. Amends the Truth in Lending Act to: (1) prohibit flipping practices and mandatory arbitration, (2) lower the interest rate threshold for high-cost mortgages. And (3) require creditors to receive certification that a consumer has successfully completed pre-loan counseling before extending the consumer credit under a high-cost mortgage. Sets limits governing rollovers or refinancing of payday loans with the same creditor. Amends the Federal bankruptcy code to: (1) include within the fourth order of priority of claims against the estate the rights or interests in debtor's equity securities that are held in a pension plan. (2) increase the employee earnings and benefits included within such fourth order of priority. And (3) exempt such employee pension benefits from subordination agreement constraints.