I 

111TH CONGRESS 

1ST SESSION H. R. 1608 

To amend the Truth in Lending Act to establish a national usury rate 

for consumer credit transactions, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

MARCH 19, 2009 

Ms. SPEIER (for herself and Mr. DELAHUNT) introduced the following bill; 

which was referred to the Committee on Financial Services 

A BILL 

To amend the Truth in Lending Act to establish a national 

usury rate for consumer credit transactions, and for 

other purposes. 

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 ‘‘Protecting Consumers 

5 from Unreasonable Credit Rates Act of 2009’’. 

6 SEC. 2. FINDINGS. 

7 The Congress finds as follows: 

8 (1) Attempts have been made to prohibit usu9 rious interest rates in America since colonial times. 


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1 (2) At the State level, 15 States and the Dis2 trict of Columbia have enacted broadly applicable 

3 usury laws that protect borrowers from high-cost 

4 payday loans and many other forms of credit, while 

5 34 States and the District of Columbia have limited 

6 annual interest rates to 36 percent or less for 1 or 

7 more types of consumer credit. 

8 (3) At the Federal level, in 2006, the Congress 

9 enacted a Federal 36 percent annualized usury cap 

10 for service members and their families for covered 

11 credit products, as defined by the Department of 

12 Defense, which curbed payday, car title, and tax re13 fund lending around military bases. 

14 (4) Notwithstanding such attempts to curb 

15 predatory lending, high-cost lending persists in all 

16 50 States due to loopholes in State laws, safe harbor 

17 laws for specific forms of credit, and the exportation 

18 of unregulated interest rates permitted by preemp19 tion. 

20 (5) Due to the lack of a comprehensive Federal 

21 usury cap, consumers annually pay approximately 

22 $17,500,000,000 for high-cost overdraft loans, as 

23 much as $8,600,000,000 for storefront and online 

24 payday loans, and nearly $900,000,000 for tax re25 fund anticipation loans. 


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1 (6) Cash-strapped consumers pay on average 

2 400 percent annual interest for payday loans, 300 

3 percent annual interest for car title loans, up to 

4 3,500 percent for bank overdraft loans, 50 to 500 

5 percent annual interest for loans secured by ex6 pected tax refunds, and higher than 50 percent an7 nual percentage interest for credit cards that charge 

8 junk fees. 

9 (7) A national maximum interest rate that in10 cludes all forms of fees and closes all loopholes is 

11 necessary to eliminate such predatory lending. 

12 (8) Alternatives to predatory lending that en13 courage small dollar loans with minimal or no fees, 

14 installment payment schedules, and affordable re15 payment periods should be encouraged. 

16 SEC. 3. NATIONAL MAXIMUM INTEREST RATE. 

17 (a) IN GENERAL.—Chapter 2 of the Truth in Lend18 ing Act (15 U.S.C. 1631 et seq.) is amended by adding 

19 at the end the following new section: 

20 ‘‘SEC. 140A. MAXIMUM RATES OF INTEREST. 

21 ‘‘(a) IN GENERAL.—Notwithstanding any other pro22 vision of law, no creditor may extend of credit to a con23 sumer for which the fee and interest rate, as defined in 

24 subsection (b), exceeds 36 percent. 

25 ‘‘(b) FEE AND INTEREST RATE DEFINED.— 


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1 ‘‘(1) IN GENERAL.—For purposes of this sec2 tion, the term ‘fee and interest rate’ includes all 

3 charges payable, directly or indirectly, incident to, 

4 ancillary to, or as a condition of the extension of 

5 credit, including— 

6 ‘‘(A) any payment compensating a creditor 

7 or prospective creditor for— 

8 ‘‘(i) an extension of credit or making 

9 available a line of credit, such as fees con10 nected with credit extension or availability 

11 such as numerical periodic rates, annual 

12 fees, cash advance fees, and membership 

13 fees; or 

14 ‘‘(ii) any fees for default or breach by 

15 a borrower of a condition upon which cred16 it was extended, such as late fees, creditor17 imposed not sufficient funds fees charged 

18 when a borrower tenders payment on a 

19 debt with a check drawn on insufficient 

20 funds, overdraft fees, and over limit fees; 

21 ‘‘(B) all fees which constitute a finance 

22 charge, as defined by rules of the Board in ac23 cordance with this title; 

24 ‘‘(C) credit insurance premiums, whether 

25 optional or required; and 


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1 ‘‘(D) all charges and costs for ancillary 

2 products sold in connection with or incidental to 

3 the credit transaction. 

4 ‘‘(2) TOLERANCES.— 

5 ‘‘(A) IN GENERAL.—With respect to a 

6 credit obligation that is payable in at least 3 

7 fully amortizing installments over at least 90 

8 days, the term ‘fee and interest rate’ does not 

9 include— 

10 ‘‘(i) application or participation fees 

11 that in total do not exceed the greater of 

12 $30 or, if there is a limit to the credit line, 

13 5 percent of the credit limit, up to $120, 

14 if— 

15 ‘‘(I) such fees are excludable 

16 from the finance charge pursuant to 

17 section 106 and regulations issued 

18 under such section; 

19 ‘‘(II) such fees cover all credit 

20 extended or renewed by the creditor 

21 for 12 months; and 

22 ‘‘(III) the minimum amount of 

23 credit extended or available on a cred24 it line is equal to $300 or more; 


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1 ‘‘(ii) a late fee charged as authorized 

2 by State law and by the agreement that 

3 does not exceed either $20 per late pay4 ment or $20 per month; or 

5 ‘‘(iii) a creditor-imposed not sufficient 

6 funds fee charged when a borrower tenders 

7 payment on a debt with a check drawn on 

8 insufficient funds that does not exceed 

9 $15. 

10 ‘‘(B) ADJUSTMENTS FOR INFLATION.— 

11 The Board may adjust the amounts of the tol12 erances established under this paragraph for in13 flation over time, consistent with the primary 

14 goals of protecting consumers and ensuring 

15 that the 25 percent fee and interest rate limita16 tion is not circumvented. 

17 ‘‘(c) CALCULATIONS.— 

18 ‘‘(1) OPEN END CREDIT PLANS.—For an open 

19 end consumer credit plan— 

20 ‘‘(A) the fee and interest rate shall be cal21 culated each month, based upon the sum of all 

22 fees and finance charges described in subsection 

23 (b) charged by the creditor during the pre24 ceding 1-year period, divided by the average 

25 daily balance; and 


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1 ‘‘(B) if the credit account has been open 

2 less than 1 year, the fee and interest rate shall 

3 be calculated based upon the total of all fees 

4 and finance charges described in subsection 

5 (b)(1) charged by the creditor since the plan 

6 was opened, divided by the average daily bal7 ance, and multiplied by the quotient of 12 di8 vided by the number of full months that the 

9 credit plan has been in existence. 

10 ‘‘(2) OTHER CREDIT PLANS.—For purposes of 

11 this section, in calculating the fee and interest rate, 

12 the Board shall require the method of calculation of 

13 annual percentage rate specified in section 

14 107(a)(1), except that the amount referred to in 

15 that section 107(a)(1) as the ‘finance charge’ shall 

16 include all fees, charges, and payments described in 

17 subsection (b)(1). 

18 ‘‘(3) ADJUSTMENTS AUTHORIZED.—The Board 

19 may make adjustments to the calculations in para20 graphs (1) and (2), but the primary goals of such 

21 adjustment shall be to protect consumers and to en22 sure that the 25 percent fee and interest rate limita23 tion is not circumvented. 

24 ‘‘(d) DEFINITION OF CREDITOR.—As used in this 

25 section, the term ‘creditor’ has the same meaning as in 


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1 section 702(e) of the Equal Credit Opportunity Act and 

2 the definition in section 103 shall not apply. 

3 ‘‘(e) NO EXEMPTIONS PERMITTED.—The exemption 

4 authority of the Board under section 105 shall not apply 

5 to the rates established under this section or the disclosure 

6 requirements under section 127(b)(6). 

7 ‘‘(f) DISCLOSURE OF FEE AND INTEREST RATE FOR

8 CREDIT OTHER THAN OPEN END CREDIT PLANS.—In 

9 addition to the disclosure requirements under section 

10 127(b)(6), the Board may prescribe regulations requiring 

11 disclosure of the fee and interest rate established under 

12 this section in addition to or instead of annual percentage 

13 rate disclosures otherwise required under this title. 

14 ‘‘(g) RELATION TO STATE LAW.—No of this section 

15 may be construed as preempting any provision of State 

16 law that provides greater protection to consumers than is 

17 provided in this section. 

18 ‘‘(h) CIVIL LIABILITY AND ENFORCEMENT.— 

19 ‘‘(1) IN GENERAL.—In addition to remedies 

20 available to the consumer under section 130(a)— 

21 ‘‘(A) any payment compensating a creditor 

22 or prospective creditor, to the extent that such 

23 payment is a transaction made in violation of 

24 this section, shall be null and void, and not enVerDate Nov 24 2008 05:59 Mar 20, 2009 Jkt 079200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H1608.IH H1608

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1 forceable by any party in any court or alter2 native dispute resolution forum; and 

3 ‘‘(B) the creditor or any subsequent holder 

4 of the obligation shall promptly return to the 

5 consumer any principal, interest, charges, and 

6 fees, and any security interest associated with 

7 such transaction. 

8 ‘‘(2) DEFENSE TO ACTION.—Notwithstanding 

9 any statute of limitations or repose, a violation of 

10 this section may be raised as a matter of defense by 

11 recoupment or setoff to an action to collect any debt 

12 resulting from a transaction made in violation of 

13 this section or to repossess related security at any 

14 time. 

15 ‘‘(i) VIOLATIONS.—Any person that violates this sec16 tion, or seeks to enforce an agreement made in violation 

17 of this section, shall be subject to, for each such violation, 

18 1 year in prison, or a fine in an amount equal to the great19 er of— 

20 ‘‘(1) 3 times the amount of the total accrued 

21 debt associated with the subject transaction; or 

22 ‘‘(2) $50,000, 

23 or both. 

24 ‘‘(j) STATE ATTORNEYS GENERAL.—An action to en25 force this section may be brought by the appropriate State 


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1 attorney general in any United States district court or any 

2 other court of competent jurisdiction within 3 years from 

3 the date of the violation, and such attorney general may 

4 obtain injunctive relief.’’. 

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

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

7 by inserting after the item relating to section 140 the fol8 lowing new item: 

‘‘140A. Maximum rates of interest.’’. 

9 SEC. 4. DISCLOSURE OF FEE AND INTEREST RATE FOR 

10 OPEN END CREDIT PLANS. 

11 Section 127(b)(6) of the Truth in Lending Act (15 

12 U.S.C. 1637(b)(6)) is amended by striking ‘‘the total fi13 nance charge expressed’’ and all that follows through the 

14 end of the paragraph and inserting ‘‘the fee and interest 

15 rate, displayed as ‘FAIR’, established in accordance with 

16 section 140A.’’. 

Æ 


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