I 

111TH CONGRESS 

1ST SESSION H. R. 1846 

To amend the Truth in Lending Act to establish additional payday loan 

disclosure requirements and preempt certain State laws, and for other 

purposes. 

IN THE HOUSE OF REPRESENTATIVES 

APRIL 1, 2009 

Mr. BACA (for himself and Mrs. SCHMIDT) introduced the following bill; which 

was referred to the Committee on Financial Services 

A BILL 

To amend the Truth in Lending Act to establish additional 

payday loan disclosure requirements and preempt certain 

State laws, 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 ‘‘Consumer Lending 

5 Education And Reform Act’’ and the ‘‘C.L.E.A.R. Act’’. 

6 SEC. 2. PROTECTIONS FOR CONSUMERS. 

7 (a) IN GENERAL.—Chapter 2 of the Truth in Lend8 ing Act (15 U.S.C. 1631 et seq.) is amended by inserting 

9 after section 129A the following new section: 


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1 ‘‘§ 129B Protections for consumers 

2 ‘‘(a) DEFINITIONS.—For purposes of this section, the 

3 following definitions shall apply: 

4 ‘‘(1) AFFILIATE.—The term ‘affiliate’ has the 

5 same meaning as in section 129(k). 

6 ‘‘(2) ELECTRONIC SIGNATURE.—The term ‘elec7 tronic signature’ means a signatures in digital or 

8 other electronic form that meets the validity require9 ments of the Electronic Signatures in Global and 

10 National Commerce Act. 

11 ‘‘(3) EXTENDED PAYMENT PLAN.—The term 

12 ‘extended payment plan’ means an amendment to 

13 the payday loan that is signed in person or electroni14 cally by both the consumer and the creditor reflect15 ing an agreement that the consumer pay the out16 standing balance on a payday loan in 4 equal pay17 ments, where the period between each payment may 

18 not be less than the duration of the original payday 

19 loan. 

20 ‘‘(4) HOME STATE.— 

21 ‘‘(A) IN GENERAL.—The term ‘home 

22 State’ means, with respect to any creditor or 

23 any affiliate of a creditor, the State in which 

24 the primary home office of the creditor or any 

25 affiliate of the creditor is located. 


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1 ‘‘(B) HOME OFFICE.—The term ‘home of2 fice’ means the office that houses a majority of 

3 the applicable party’s day-to-day management 

4 and administrative support functions. 

5 ‘‘(5) INTEREST AND FEES.— 

6 ‘‘(A) IN GENERAL.—Except as provided in 

7 subparagraph (B), the term ‘interest and fees’ 

8 includes any charge payable directly or indi9 rectly by the consumer and imposed directly or 

10 indirectly by the creditor as an incident to or a 

11 condition of the extension of credit. 

12 ‘‘(B) CHARGES NOT INCLUDED.—The term 

13 ‘interest and fees’ does not include— 

14 ‘‘(i) any charge for a default, delin15 quency, or similar occurrence; or 

16 ‘‘(ii) any charge imposed when, if for 

17 any reason, funds are not made available 

18 to pay an item or authorization delivered 

19 to the creditor in the manner described in 

20 subparagraph (A) or (B) of paragraph (1) 

21 to the extent that— 

22 ‘‘(I) the charge does not exceed 

23 the greater of $25 or the amount 

24 charged to the creditor by the credi25 tor’s financial institution; and 


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1 ‘‘(II) the charge is only imposed 

2 once per each item or authorization 

3 regardless of whether the item or au4 thorization is presented for payment 

5 more than once. 

6 ‘‘(6) LOAN STORE.—The term ‘loan store’ 

7 means each location operated by a creditor at which 

8 applications for payday loans are received or the 

9 proceeds of payday loans are disbursed. 

10 ‘‘(7) PAYDAY LOAN; LOAN.—The terms ‘payday 

11 loan’ and ‘loan’ mean a closed-end credit trans12 action, evidenced by a loan agreement signed by the 

13 creditor and the consumer, in person or electroni14 cally, unsecured by any interest in the consumer’s 

15 tangible personal property with a term of at least 7 

16 and not more than 90 days in which the amount fi17 nanced does not exceed $2,000 with a finance charge 

18 exceeding an annual percentage rate of 36 percent, 

19 and the consumer— 

20 ‘‘(A) receives funds from and incurs inter21 est or a fee payable to a creditor, and contem22 poraneously with the receipt of funds, provides 

23 a check or other payment instrument to the 

24 creditor who agrees with the consumer not to 


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1 deposit or present the check or payment instru2 ment for more than 1 day; or 

3 ‘‘(B) receives funds from and incurs inter4 est or a fee payable to a creditor, and contem5 poraneously with the receipt of funds, author6 ized the creditor to initiate a debt or debits to 

7 the consumer’s deposit account (by electronic 

8 fund transfer or remotely created check) after 

9 1 or more days. 

10 ‘‘(8) PAYDAY LENDER.—The term ‘payday 

11 lender’ means any creditor with respect to a payday 

12 loan. 

13 ‘‘(9) REFINANCING.—The term ‘refinancing’ 

14 means the use of the proceeds of 1 payday loan ob15 tained from a creditor to pay off any amount due to 

16 that creditor. 

17 ‘‘(b) PROTECTIONS FOR CONSUMERS.— 

18 ‘‘(1) INTEREST AND FEE CAP.—A payday lend19 er may not— 

20 ‘‘(A) require a consumer to pay— 

21 ‘‘(i) in the case of any original payday 

22 loan, interest and other fees and charges 

23 that total more than 15 cents for every 

24 dollar loaned; and 


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1 ‘‘(ii) in the case of an original payday 

2 loan originated over the Internet, an addi3 tional origination fee in excess of 5 percent 

4 of the original principal loan amount; 

5 ‘‘(B) require a consumer to pay interest 

6 and fees that, combined, total more than— 

7 ‘‘(i) in the case of the 1st refinancing 

8 of an outstanding payday loan, 15 cents 

9 for every dollar of the outstanding original 

10 principal loan amount; and 

11 ‘‘(ii) in the case of the 2nd refi12 nancing of an outstanding payday loan, 10 

13 cents for every dollar of the outstanding 

14 original principal loan amount; or 

15 ‘‘(C) require a consumer to pay an origina16 tion fee for a payday loan that is refinanced. 

17 ‘‘(2) MANDATORY DISCLOSURES.—A payday 

18 lender may not make or refinance a payday loan un19 less the creditor has first provided the consumer 

20 with a copy of a written loan agreement, which shall 

21 be signed by the creditor and by the consumer and 

22 shall include the following information in English 

23 and in the language in which the loan was nego24 tiated: 


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1 ‘‘(A) A clear and conspicuous description 

2 of the terms of the loan, including the total cost 

3 of all fees and other charges in connection with 

4 the loan stated as a dollar amount, and the con5 sumer’s payment obligations under the loan. 

6 ‘‘(B) The name, address and telephone 

7 number of the creditor making the loan, and 

8 the name of title of the individual employee of 

9 the creditor who signs the loan agreement on 

10 behalf of the creditor. 

11 ‘‘(C) The following statements, in at least 

12 14-point bold face type: 

13 ‘‘(i) WARNING.—This loan is not in14 tended to meet long-term financial needs. 

15 This loan should be used only to meet 

16 short-term cash needs. 

17 ‘‘(ii) CREDIT COUNSELING AVAIL18 ABILITY.—You should consider contacting 

19 an independent, nonprofit credit counseling 

20 agency approved by the National Founda21 tion for Credit Counseling (NFCC) or by a 

22 State or Federal Government agency. You 

23 may obtain information on how to contact 

24 an approved counselor near you by calling 


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1 the National Foundation for Credit Coun2 seling at 1–800–388–2227. 

3 ‘‘(iii) NO CRIMINAL PROSECUTION OR

4 SECURITY INTEREST.—You cannot be 

5 prosecuted in criminal court to collect this 

6 loan, and the creditor may not take or at7 tempt to take an interest in any of your 

8 personal property to secure his loan. 

9 ‘‘(3) ADDITIONAL PUBLIC DISCLOSURES.—A 

10 payday lender may not make or refinance a payday 

11 loan to any consumer unless the following notices 

12 are posted conspicuously in English and Spanish 

13 and in not less than 1-inch bold print in the credi14 tor’s public lending area in each loan store, or, if the 

15 loan is made using the Internet, fax or other means, 

16 are posted conspicuously on the creditor’s public 

17 internet site relating to any such payday loan: 

18 ‘‘(A) WARNING.—This loan is not intended 

19 to meet long-term financial needs. This loan 

20 should be used only to meet short-term cash 

21 needs. 

22 ‘‘(B) CREDIT COUNSELING AVAIL23 ABILITY.—You should consider contacting an 

24 independent, nonprofit credit counseling agency 

25 approved by the National Foundation for Credit 


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1 Counseling (NFCC) or by a State or Federal 

2 Government agency. You may obtain informa3 tion on how to contact an approved counselor 

4 near you by calling the National Foundation for 

5 Credit Counseling at 1–800–388–2227. 

6 ‘‘(C) NO CRIMINAL PROSECUTION OR SE7 CURITY INTEREST.—You cannot be prosecuted 

8 in criminal court to collect this loan, and the 

9 creditor may not take or attempt to take an in10 terest in any of your personal property to se11 cure his loan. 

12 ‘‘(4) CREDITOR SURETY BOND REQUIRE13 MENTS.— 

14 ‘‘(A) IN GENERAL.—A payday lender may 

15 not make or refinance a payday loan unless the 

16 creditor has obtained and filed, in accordance 

17 with subparagraph (B), a surety bond in the 

18 following amount: 

19 ‘‘(i) A surety bond in the amount of 

20 $100,000 for each loan store operated by 

21 the creditor, if the creditor operates fewer 

22 than 10 loan stores and does not offer any 

23 payday loans over the Internet. 

24 ‘‘(ii) A surety bond in the amount of 

25 $1,000,000, if the creditor operates 10 or 


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1 more loan stores or offers loans over the 

2 Internet. 

3 ‘‘(iii) Such greater amount as may be 

4 required by applicable State law. 

5 ‘‘(B) BOND REQUIREMENTS.—The surety 

6 bond obtained by a payday lender to meet the 

7 requirements of subparagraph (A) shall be filed 

8 with, and for the benefit of, the State attorney 

9 general in the creditor’s home state. 

10 ‘‘(C) AGGREGATION OF LENDER AND AF11 FILIATE UNDER CERTAIN CIRCUMSTANCES.— 

12 For purposes of this paragraph, a creditor and 

13 each affiliate of a creditor which has the same 

14 home State as the creditor may aggregate the 

15 loan stores operated by such creditor and any 

16 such affiliate for purposes of determining the 

17 amount of the surety bond required to be filed 

18 under subparagraph (A). 

19 ‘‘(5) EXTENDED PAYMENT PLAN.— 

20 ‘‘(A) IN GENERAL.—A payday lender may 

21 not make or refinance a payday loan unless the 

22 terms of the loan require the creditor, upon re23 ceiving notice from the consumer of an inability 

24 to repay prior to close of business on the last 

25 business day before the original due date of the 


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1 loan, provides the consumer with notice of and 

2 the right to opt into an extended payment plan, 

3 without charge, 1 time in any 12 month period. 

4 ‘‘(B) LIMITATION DURING EXTENDED PAY5 MENT PLAN.—A creditor may not engage in 

6 any collection activity (or procure the services 

7 of any other for such purpose) during the term 

8 of any extended payment plan. 

9 ‘‘(6) REFINANCING.—A payday lender may 

10 not— 

11 ‘‘(A) refinance a payday loan for less than 

12 7 days; 

13 ‘‘(B) refinance a payday loan more than 2 

14 consecutive times; refinance a payday loan with15 out terminating the previous agreement and en16 tering into a new agreement that the creditor 

17 and consumer each sign in person or with an 

18 electronic signature; or 

19 ‘‘(C) require a consumer to pay interest 

20 and fees in connection with a refinancing that, 

21 combined, total more than the amount per22 mitted under paragraph (1)(B).’’. 

23 (b) TECHNICAL AND CONFORMING AMENDMENTS.— 


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1 (1) DISCLOSURES.—Section 128(a)(4) of the 

2 Truth in Lending Act (U.S.C. 1638(a)(4)) is amend3 ed— 

4 (A) by striking ‘‘or’’ after ‘‘does not exceed 

5 $5,’’ and 

6 (B) by inserting ‘‘, or if the loan is subject 

7 to section 129B’’. 

8 (2) EFFECT ON OTHER LAWS.—Section 111 of 

9 the Truth in Lending Act (U.S.C. 1610) is amend10 ed— 

11 (A) in subsection (b), by inserting ‘‘sub12 section (f) of this section and’’ after ‘‘Except as 

13 provided in’’; and 

14 (B) by adding at the end the following new 

15 subsection: 

16 ‘‘(f) PAYDAY LOANS.— 

17 ‘‘(1) IN GENERAL.—The following provisions of 

18 the law of any State shall not apply to any payday 

19 loan, or any refinancing of a payday loan, that is 

20 subject to section 129B: 

21 ‘‘(A) Any provision requiring minimum 

22 loan terms. 

23 ‘‘(B) Any provision prohibiting, defining or 

24 limiting any refinancing. 


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1 ‘‘(C) Any provision prohibiting or limiting 

2 the use of a check or debit authorization to 

3 originate a payday loan. 

4 ‘‘(D) Any provision prohibiting or man5 dating extended payment plans. 

6 ‘‘(E) Any provision limiting the rate or 

7 amount of interest and fees or default, delin8 quency or not sufficient fund fees or other 

9 charges which may be taken, received or re10 served by creditors for payday loans or any refi11 nancing of a payday loan. 

12 ‘‘(2) ENFORCEMENT.—Notwithstanding para13 graph (1), any State may employ or establish State 

14 laws for the purpose of enforcing the requirements 

15 of section 129B.’’. 

16 (c) CLERICAL AMENDMENT.—The table of sections 

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

18 by inserting after the item relating to section 129 the fol19 lowing new items: 

‘‘129A. Fiduciary duty of servicers of pooled residential mortgages. 

‘‘129B. Protections for consumers.’’. 

Æ 


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