I

104TH CONGRESS

1ST SESSION H. R. 1184

To amend the Truth in Lending Act to clarify the intent of such Act

and to reduce burdensome regulatory requirements on creditors.

IN THE HOUSE OF REPRESENTATIVES

MARCH 9, 1995

Mr. MCCOLLUM (for himself, Mr. LEACH, Mrs. ROUKEMA, Mr. BEREUTER,

Mr. ROTH, Mr. BAKER of Louisiana, Mr. LAZIO of New York, Mr.

BACHUS, Mr. CASTLE, Mr. KING, Mr. ROYCE, Mr. WELLER, Mr. EHRLICH, Mr. CHRYSLER, Mr. CREMEANS, Mr. HEINEMAN, and Mr.

LOBIONDO) introduced the following bill; which was referred to the Committee on Banking and Financial Services

A BILL

To amend the Truth in Lending Act to clarify the intent

of such Act and to reduce burdensome regulatory requirements on creditors.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Truth in Lending Act

5 Amendments of 1995’’.

6 SEC. 2. TREATMENT OF CERTAIN CHARGES.

7 (a) THIRD PARTY FEES.—Section 106(a) of the

8 Truth in Lending Act (15 U.S.C. 1605(a)) is amended
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1 by adding after the second sentence the following new sen2 tence: ‘‘The finance charge shall not include fees and

3 amounts imposed by third parties not affiliated with the

4 creditor (including settlement agents, attorneys, and es5 crow and title companies) if the creditor does not expressly

6 require the imposition of the charges and does not retain

7 the charges.’’.

8 (b) TAXES ON SECURITY INSTRUMENTS OR EVI9 DENCES OF INDEBTEDNESS.—Section 106(d) of the

10 Truth in Lending Act (15 U.S.C. 1605(d)) is amended

11 by adding at the end the following new paragraph:

12 ‘‘(3) Any tax levied on security instruments or

13 on documents evidencing indebtedness if the pay14 ment of such taxes is a precondition for recording

15 the instrument securing the evidence of indebted16 ness.’’.

17 (c) PREPARATION OF LOAN DOCUMENTS.—Section

18 106(e)(2) of the Truth in Lending Act (15 U.S.C.

19 1605(e)(2)) is amended to read as follows:

20 ‘‘(2) Fees for preparation of loan-related docu21 ments and attending or conducting settlement.’’.

22 (d) FEES RELATING TO PEST INFESTATIONS, IN23 SPECTIONS, AND HAZARDS.—Section 106(e)(5) of the

24 Truth in Lending Act (15 U.S.C. 1605(e)(5)) is amended

25 by inserting ‘‘, including fees related to pest infestations,
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1 premises and structural inspections, and flood hazards’’

2 before the period.

3 SEC. 3. EXEMPTIONS FROM RESCISSION.

4 (a) CERTAIN REFINANCINGS.—Section 125(e) of the

5 Truth in Lending Act (15 U.S.C. 1635(e)) is amended—

6 (1) by striking ‘‘or’’ at the end of paragraph

7 (3);

8 (2) by striking the period at the end of para9 graph (4) and inserting ‘‘; or’’; and

10 (3) by adding at the end the following new

11 paragraph:

12 ‘‘(5) a transaction, other than a mortgage re13 ferred to in section 103(aa), which—

14 ‘‘(A) is secured by a first lien, in any

15 amount; and

16 ‘‘(B) constitutes a refinancing or consoli17 dation of an existing extension of credit.’’.

18 (b) TECHNICAL AND CONFORMING AMENDMENT.—

19 Section 125(e)(2) of the Truth in Lending Act (15 U.S.C.

20 1635(e)(2)) is amended by inserting ‘‘, other than a trans21 action described in subsection (e)(5),’’ after ‘‘a refinancing

22 or consolidation (with no new advances)’’.
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1 SEC. 4. TOLERANCES; BASIS OF DISCLOSURES.

2 (a) TOLERANCES FOR ACCURACY.—Section 106 of

3 the Truth in Lending Act (15 U.S.C. 1605) is amended

4 by adding at the end the following new subsection:

5 ‘‘(f) TOLERANCE FOR ACCURACY.—In connection

6 with credit transactions not under an open end credit plan

7 that are secured by real property or a dwelling, the disclo8 sure of the finance charge and other disclosures affected

9 by any finance charge shall be treated as being accurate

10 for purposes of this title if the amount disclosed as the

11 finance charge does not vary from the actual finance

charge by more than an amount equal to 1 12 ⁄2 of the numeri13 cal tolerance corresponding to, and generated by, the toler14 ance provided by section 107(c) with respect to the annual

15 percentage rate.’’.

16 (b) BASIS OF DISCLOSURE FOR PER DIEM INTER17 EST.—Section 121(c) of the Truth in Lending Act (15

18 U.S.C. 1631(c)) is amended by adding at the end the fol19 lowing new sentence: ‘‘In the case of any consumer credit

20 transaction a portion of the interest on which is deter21 mined on a per diem basis and is to be collected upon

22 the consummation of such transaction, any disclosure with

23 respect to such portion of interest shall be deemed to be

24 accurate for purposes of this title if the disclosure is based

25 on information actually known to the creditor at the time
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1 that the disclosure documents are being prepared for the

2 consummation of the transaction.’’.

3 SEC. 5. LIMITATION ON LIABILITY.

4 (a) IN GENERAL.—Chapter 2 of the Truth in Lend5 ing Act (15 U.S.C. 1631 et seq.) is amended by adding

6 at the end the following new section:

7 ‘‘SEC. 139. CERTAIN LIMITATIONS ON LIABILITY.

8 ‘‘(a) LIMITATIONS ON LIABILITY FOR DISCLOSURES

9 RELATING TO CERTAIN FEES AND CHARGES OTHER

10 THAN FINANCE CHARGES.—

11 ‘‘(1) IN GENERAL.—For transactions con12 summated before the date of the enactment of the

13 Truth in Lending Act Amendments of 1995, a credi14 tor or any assignee of a creditor shall have no civil,

15 administrative, or criminal liability under this title

16 for, and a consumer shall have no extended rescis17 sion rights under section 125(f) with respect to, the

18 creditor’s treatment, for disclosure purposes, of—

19 ‘‘(A) taxes described in section 106(d)(3);

20 ‘‘(B) fees and amounts described in section

21 106(e) (2) and (5) and third party fees and

22 amounts described in section 106(a); and

23 ‘‘(C) delivery charges imposed by a credi24 tor.
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1 ‘‘(2) EXCEPTIONS.—Subsection (a) shall not

2 apply to—

3 ‘‘(A) any individual action or counterclaim

4 brought under this title—

5 ‘‘(i) which was filed before October 1,

6 1994; and

7 ‘‘(ii) the pleadings in which (as filed

8 before such date) allege improper disclo9 sure of charges described in paragraph (1),

10 (2), or (3) of subsection (a);

11 ‘‘(B) any class action brought under this

12 title—

13 ‘‘(i) for which a class was certified be14 fore October 1, 1994; and

15 ‘‘(ii) the pleadings in which (as filed

16 before such date) allege improper disclo17 sure of charges described in paragraph (1),

18 (2), or (3) of subsection (a);

19 ‘‘(C) the named individual plaintiffs in any

20 class action brought under this title—

21 ‘‘(i) which was filed before October 1,

22 1994; and

23 ‘‘(ii) the pleadings in which (as filed

24 before such date) allege improper disclo-
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1 sure of charges described in paragraph (1),

2 (2), or (3) of subsection (a); or

3 ‘‘(D) any consumer credit transaction with

4 respect to which a timely notice of rescission

5 was sent to the creditor before October 1, 1994.

6 ‘‘(b) EXEMPTION FROM LIABILITY FOR FINANCE

7 CHARGE DISCLOSURES WITHIN TOLERANCE LIMITS.—

8 ‘‘(1) IN GENERAL.—In the case of any

9 consumer credit transaction subject to this title, in10 cluding a transaction consummated before the date

11 of the enactment of the Truth in Lending Act

12 Amendments of 1995, no creditor or assignee with

13 respect to such transaction shall have any civil, ad14 ministrative, or criminal liability under this title for,

15 and no consumer shall have extended rescission

16 rights under section 125 by reason of, any disclosure

17 relating to the finance charge imposed with respect

18 to such transaction if the amount or percentage ac19 tually disclosed—

20 ‘‘(A) may be treated as accurate pursuant

21 to section 106(f), or

22 ‘‘(B) is greater than the amount or per23 centage required to be disclosed under this title.

24 ‘‘(2) EXCEPTIONS.—Paragraph (1) shall not

25 apply to—
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1 ‘‘(A) any individual action or counterclaim

2 brought under this title which was filed before

3 October 1, 1994;

4 ‘‘(B) any class action brought under this

5 title for which a class was certified before Octo6 ber 1, 1994;

7 ‘‘(C) the named individual plaintiffs in any

8 class action brought under this title which was

9 filed before October 1, 1994; or

10 ‘‘(D) any consumer credit transaction with

11 respect to which a timely notice of rescission

12 was sent to the creditor before October 1,

13 1994.’’.

14 (b) CLERICAL AMENDMENT.—The table of sections

15 for chapter 2 of the Truth in Lending Act is amended

16 by inserting after the item relating to section 138 the fol17 lowing new item:

‘‘Sec. 139. Certain limitations on liability.’’.

18 SEC. 6. APPLICABILITY.

19 Except as otherwise provided in section 5, the amend20 ments made by this Act shall apply to all consumer credit

21 transactions consummated on or after the date of enact22 ment of this Act, except that the amendments made by

23 subsections (a) and (b) of section 3 shall apply to all ex24 tensions of credit with respect to which rescission rights

25 have not been asserted as of January 1, 1995.
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1 SEC. 7. LIMITATION ON RESCISSION PERIOD.

2 Section 125(f) of the Truth in Lending Act (15

3 U.S.C. 1635(f)) is amended by adding at the end the fol4 lowing sentences: ‘‘The expiration of the right of rescission

5 pursuant to this subsection shall be absolute and no

6 consumer may assert rescission, affirmatively or as a de7 fense, in any action in any State or Federal court after

8 the earlier of the end of the 3-year period beginning on

9 the date of the consummation of the transaction or the

10 sale of the property securing the loan or other extension

11 of credit, except as otherwise provided in the preceding

12 sentence. This subsection shall supersede any State law

13 which is inconsistent with any provision of this sub14 section.’’.

15 SEC. 8. CALCULATION OF ACTUAL DAMAGES.

16 Paragraph (1) of section 130(a) of the Truth in

17 Lending Act (15 U.S.C. 1640(a)) is amended to read as

18 follows:

19 ‘‘(1) Any actual damages sustained by such

20 person as a result of the failure (to the extent the

21 person demonstrates reliance on the inaccurate dis22 closure which prevented the person from accepting

23 better credit terms actually available to the person

24 from another creditor) and the amount of such dam25 ages shall be the difference between the finance

26 charges actually paid and the finance charges that
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1 would have been paid over the same period under

2 credit terms applicable with respect to credit actu3 ally available to the person from another creditor.’’.

4 SEC. 9. ASSIGNEE LIABILITY.

5 (a) VIOLATIONS APPARENT ON THE FACE OF TRANS6 ACTION DOCUMENTS.—Section 131(a) of the Truth in

7 Lending Act (15 U.S.C. 1641(a)) is amended to read as

8 follows:

9 ‘‘(a) LIABILITY OF ASSIGNEE FOR APPARENT VIOLA10 TIONS.—

11 ‘‘(1) IN GENERAL.—Except as otherwise specifi12 cally provided in this title, any civil action against

13 a creditor for a violation of this title, and any pro14 ceeding under section 108 against a creditor, with

15 respect to a consumer credit transaction may be

16 maintained against any assignee of such creditor

17 only if—

18 ‘‘(A) the violation for which such action or

19 proceeding is brought is apparent on the face of

20 the disclosure statement provided in connection

21 with such transaction pursuant to this title; and

22 ‘‘(B) the assignment to the assignee was

23 voluntary.

24 ‘‘(2) VIOLATION APPARENT ON THE FACE OF

25 THE DISCLOSURE DESCRIBED.—For the purpose of
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1 this section, a violation is apparent on the face of

2 the disclosure statement if—

3 ‘‘(A) the disclosure can be determined to

4 be incomplete or inaccurate from the face of the

5 disclosure statement; or

6 ‘‘(B) the disclosure does not use the terms

7 or format required to be used by this title.’’.

8 (b) SERVICER NOT TREATED AS ASSIGNEE.—Section

9 131 of the Truth in Lending Act (15 U.S.C. 1641) is

10 amended by adding at the end the following new sub11 section:

12 ‘‘(d) TREATMENT OF SERVICER.—

13 ‘‘(1) IN GENERAL.—A servicer of a consumer

14 obligation arising from a consumer credit trans15 action shall not be treated as an assignee of such ob16 ligation for purposes of this section unless the

17 servicer is the owner of the obligation.

18 ‘‘(2) SERVICER NOT TREATED AS OWNER ON

19 BASIS OF ASSIGNMENT FOR ADMINISTRATIVE CON20 VENIENCE.—A servicer of a consumer obligation

21 arising from a consumer credit transaction shall not

22 be treated as the owner of the obligation for pur23 poses of this section on the basis of an assignment

24 of the obligation from the creditor or another as25 signee to the servicer solely for the administrative
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1 convenience of the servicer in servicing the obliga2 tion.

3 ‘‘(3) SERVICER DEFINED.—For purposes of this

4 subsection, the term ‘servicer’ has the same meaning

5 as in section 6(i)(2) of the Real Estate Settlement

6 Procedures Act of 1974.’’.

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