I 

111TH CONGRESS 

1ST SESSION H. R. 2563 

To amend the Truth in Lending Act to establish additional protections for 

consumers with regard to payday loans, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

MAY 21, 2009 

Mr. SHULER (for himself, Mr. MINNICK, Mr. HELLER, and Mr. MCHENRY) 

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 

protections for consumers with regard to payday loans, 

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 ‘‘Payday Lending Re5 form Act of 2009’’. 

6 SEC. 2. PAYDAY LENDING REFORM. 

7 Chapter 2 of the Truth in Lending Act (15 U.S.C. 

8 1631 et seq.) is amended by inserting after section 129A 

9 the following new section: 


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1 ‘‘SEC. 129B. MANDATORY DISCLOSURES FOR EXTENDED RE2 PAYMENT PLANS AND OTHER PROTECTIONS 

3 FOR CONSUMERS. 

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

5 following definitions shall apply: 

6 ‘‘(1) CONSUMER ACCOUNT.—The term ‘con7 sumer account’ or ‘account’ shall have the meaning 

8 set forth in section 903 of the Electronic Funds 

9 Transfer Act (15 U.S.C. 1693a). 

10 ‘‘(2) EXTENDED REPAYMENT PLAN; REPAY11 MENT PLAN.—The term ‘extended repayment plan’ 

12 or ‘repayment plan’ means an installment plan 

13 under which a consumer who is unable to repay a 

14 payday loan on the loan due date and who complies 

15 with applicable requirements established under this 

16 section may repay the creditor the outstanding bal17 ance of the loan in at least 4 substantially equal 

18 payments, on or after a date on which the consumer 

19 receives regular income, without being charged any 

20 additional interest and fees. 

21 ‘‘(3) INTEREST AND FEES.—The term ‘interest 

22 and fees’— 

23 ‘‘(A) means all charges payable directly or 

24 indirectly by the consumer and imposed directly 

25 or indirectly by the creditor as an incident to or 


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1 as a condition of the extension of a payday 

2 loan; and 

3 ‘‘(B) does not include— 

4 ‘‘(i) any reasonable charge for a de5 fault, delinquency, or similar occurrence; 

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

7 any reason, funds are not made available 

8 to pay an item or authorization delivered 

9 to the creditor when presented for pay10 ment, to the extent that the charge does 

11 not exceed the greater of $35 or the 

12 amount charged to the creditor by the 

13 creditor’s financial institution and the 

14 charge is only imposed once per each item 

15 or authorization regardless of whether the 

16 item or authorization is presented for pay17 ment more than once; 

18 ‘‘(iii) a document preparation fee of 

19 up to $10; and 

20 ‘‘(iv) a loan administrative fee, except 

21 when a loan is being refinanced, of up to 

22 5 percent of the original loan principal 

23 amount. 

24 ‘‘(4) PAYDAY LOAN; LOAN.—The term ‘payday 

25 loan’ or ‘loan’, for purposes of this section, means a 


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1 closed end credit transaction, unsecured by any in2 terest in the consumer’s personal property and ex3 cluding any credit card transaction under an open4 end consumer credit plan, with a term of at least 7 

5 and not more than 91 days in which the amount fi6 nanced does not exceed $2,000, pursuant to which 

7 the consumer receives funds from and incurs interest 

8 or a fee payable to a creditor, and contempora9 neously with the receipt of funds, provides a pay10 ment instrument to the creditor who agrees with the 

11 consumer not to deposit or present the payment in12 strument for at least 7 days. 

13 ‘‘(5) PAYMENT INSTRUMENT.—The term ‘pay14 ment instrument’ means a check, automated clear15 inghouse debit, or remotely created check, or similar 

16 payment instrument directing the withdrawal of 

17 funds from a consumer account. 

18 ‘‘(6) REFINANCING; REFINANCE.—The term 

19 ‘refinancing’ or ‘refinance’ means to refinance, 

20 renew, rollover, amend, or extend a loan beyond its 

21 original term, by payment of a fee. 

22 ‘‘(b) PROTECTIONS FOR CONSUMERS.— 

23 ‘‘(1) MANDATORY DISCLOSURES FOR PAYDAY

24 LOANS.—No creditor may make a payday loan to a 

25 consumer unless the creditor has first provided the 


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1 consumer with a copy of a written loan agreement, 

2 which shall be signed by the consumer and shall in3 clude the following information: 

4 ‘‘(A) A clear and conspicuous description 

5 of the terms of the loan, in at least 18-point 

6 bold face type, including the consumer’s pay7 ment obligations under the loan and the total 

8 cost of all fees and other charges in connection 

9 with origination of the loan, stated as a dollar 

10 amount and as either a percentage of the origi11 nal loan principal amount or in the form of the 

12 corresponding ratio of dollars per hundred dol13 lars. 

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

15 number of the creditor making the loan. 

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

17 18-point bold face type: 

18 ‘‘ ‘WARNING: This loan is not intended to 

19 meet long-term financial needs. This loan 

20 should be used only to meet short-term cash 

21 needs. The cost of this loan may be higher than 

22 loans offered by other lending institutions. 

23 ‘‘ ‘CREDIT COUNSELING AVAIL24 ABILITY: You should consider contacting an 

25 independent, non-profit credit counseling agenVerDate Nov 24 2008 23:07 May 27, 2009 Jkt 079200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H2563.IH H2563

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1 cy approved by the National Foundation for 

2 Credit Counseling (NFCC) or by a state or fed3 eral government agency. You may obtain infor4 mation on how to contact an approved coun5 selor near you by calling NFCC at 1–800–388– 

6 2227. 

7 ‘‘ ‘NO CRIMINAL PROSECUTION OR 

8 SECURITY INTEREST: No criminal prosecu9 tion may be commenced against you as a result 

10 of your non-payment of this loan, and the cred11 itor may not take or attempt to take an interest 

12 in any of your personal property to secure this 

13 loan. 

14 ‘‘ ‘NO-COST EXTENDED REPAYMENT 

15 PLAN: 

16 ‘‘ ‘If you are unable to repay your loan 

17 when due, you may elect once every 12 months 

18 to repay your loan to the creditor by using an 

19 extended repayment plan that will allow you to 

20 repay your loan in at least 4 substantially equal 

21 installments as described further below without 

22 being charged any additional interest and fees, 

23 to the extent that you repay the loan as agreed 

24 under the repayment plan. 


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1 ‘‘ ‘To obtain an extended repayment plan, 

2 you must advise the creditor prior to close of 

3 business on the last business day before the 

4 original due date of the loan that you wish to 

5 enter into an extended repayment plan by re6 turning to the office where you obtained the 

7 loan or by using whatever other method you 

8 used to obtain the loan, such as by Internet, 

9 telephone or fax, and you must promptly sign 

10 an amendment to your loan agreement reflect11 ing the new payment schedule. 

12 ‘‘ ‘The 12-month period during which you 

13 may elect to use an extended repayment plan is 

14 measured from the date that you fully pay off 

15 all amounts due under 1 extended repayment 

16 plan until the date that you enter into another 

17 extended repayment plan. 

18 ‘‘ ‘The creditor must allow you to repay 

19 your loan balance in at least 4 substantially 

20 equal installment payments. These installments 

21 must be due on or after a date on which you 

22 receive regular income except that there shall 

23 be at least 13 days between installments, and 

24 the first installment under the plan shall not be 

25 due before your next pay date that is at least 


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1 13 days after you have signed the repayment 

2 plan amendment. 

3 ‘‘ ‘If you enter into an extended repayment 

4 plan and then default by failing to meet your 

5 payment obligations, the creditor may charge 

6 you a reasonable payment plan fee and may ac7 celerate payment of the balance remaining. 

8 ‘‘ ‘You may prepay the amount due under 

9 the extended repayment plan at any time with10 out charge or penalty.’. 

11 ‘‘(D) Any other disclosures required by 

12 Federal law. 

13 ‘‘(2) ADDITIONAL PUBLIC DISCLOSURES.—No 

14 creditor shall make a payday loan to any consumer 

15 unless the following notices are posted conspicuously 

16 and in not less than 1-inch bold print in the credi17 tor’s public lending area in each physical location, 

18 or, if the loan is made using the Internet, fax or 

19 other means, posted conspicuously on the creditor’s 

20 public Internet site relating to any such payday loan: 

21 ‘‘ ‘Warning: This loan is not intended to meet 

22 long-term financial needs. This loan should be used 

23 only to meet short-term cash needs. The cost of your 

24 loan may be higher than loans offered by other lend25 ing institutions. 


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1 ‘‘ ‘Credit Counseling Availability: You should 

2 consider contacting an independent, non-profit credit 

3 counseling agency approved by the National Founda4 tion for Credit Counseling (NFCC) or by a state or 

5 federal government agency. You may obtain infor6 mation on how to contact an approved counselor 

7 near you by calling the NFCC at 1–800–388–2227. 

8 ‘‘ ‘No Criminal Prosecution Or Security Inter9 est: No criminal prosecution may be commenced 

10 against you as a result of your non-payment of this 

11 loan, and we may not take or attempt to take an in12 terest in any of your personal property to secure this 

13 loan. 

14 ‘‘ ‘Interest-Free Extended Repayment Plan: If 

15 you are unable to repay your loan as agreed, we are 

16 required by federal law to allow you to enter into an 

17 extended repayment plan, at least once every 12 

18 months, that will allow you to repay the loan in at 

19 least 4 substantially equal installments without 

20 being charged any additional interest or fees as long 

21 as you notify us of your desire to enter into such a 

22 plan prior to close of business on the last business 

23 day before the original due date of the loan.’. 

24 ‘‘(3) MANDATORY EXTENDED REPAYMENT

25 PLAN.—No creditor may make a payday loan to any 


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1 consumer unless the creditor offers the consumer an 

2 extended repayment plan that meets the following 

3 requirements: 

4 ‘‘(A) The extended repayment plan is of5 fered at least once in any 12-month period, if 

6 the consumer advises the creditor prior to the 

7 close of business on the last business day before 

8 the original due date of the loan that the con9 sumer is unable to repay the loan as agreed and 

10 wants to enter into an extended repayment 

11 plan. 

12 ‘‘(B) To qualify for such an extended re13 payment plan, the consumer may be required to 

14 return to the office where the consumer ob15 tained the loan or use whatever method (e.g., 

16 Internet, telephone or facsimile) the consumer 

17 used to obtain the loan, and the consumer shall 

18 promptly sign an amendment to the loan agree19 ment reflecting the new repayment schedule. 

20 For creditors operating over the Internet, the 

21 creditor also must obtain authorization to origi22 nate recurring debits to the consumer’s account 

23 in accordance with the new repayment schedule 

24 and in compliance with the authorization re25 quirements for preauthorized transfers set forth 


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1 under the Electronic Funds Transfer Act and 

2 Regulation E of the Board. 

3 ‘‘(C) The creditor shall allow the consumer 

4 to repay the consumer’s loan balance in at least 

5 4 substantially equal installments generally due 

6 coinciding with the consumer’s periodic pay 

7 dates, but there shall be at least 13 days be8 tween installments, and the first installment 

9 under the plan shall not be due before the con10 sumer’s next pay date that is at least 13 days 

11 after the repayment plan amendment is signed 

12 by the consumer. 

13 ‘‘(D) The creditor may extend the length 

14 of time between installments. 

15 ‘‘(E) The creditor may, with each payment 

16 under the plan by a consumer, provide for the 

17 return of the consumer’s prior held payment in18 strument and require a new payment instru19 ment for the remaining balance under the plan. 

20 Alternatively, the creditor may require the con21 sumer at the time the consumer enters into the 

22 extended payment plan to provide multiple pay23 ment instruments, 1 for each of the scheduled 

24 payments in the amount of those payments. For 

25 purposes of this subparagraph the term ‘payVerDate Nov 24 2008 23:07 May 27, 2009 Jkt 079200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H2563.IH H2563

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1 ment instrument’ does not include an auto2 mated clearinghouse debit. 

3 ‘‘(F) The consumer may prepay the 

4 amount due under the extended repayment plan 

5 at any time without charge or penalty. 

6 ‘‘(G) The consumer may not be charged 

7 additional interest and fees; however, if the con8 sumer fails to meet such payment obligations, 

9 the creditor may charge a repayment plan fee 

10 and may accelerate repayment of the balance 

11 remaining. 

12 ‘‘(4) ADDITIONAL PROTECTIONS FOR CON13 SUMERS.—It shall be unlawful for a creditor to— 

14 ‘‘(A) require a consumer to pay more than 

15 the following authorized charges, each of which 

16 a creditor may charge and collect in connection 

17 with a payday loan: 

18 ‘‘(i) interest and fees of 20 cents for 

19 every dollar of the original loan principal 

20 amount; 

21 ‘‘(ii) a loan administrative fee of 5 

22 percent of the original loan principal 

23 amount; and 

24 ‘‘(iii) a document preparation fee of 

25 $10; 


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1 ‘‘(B) in connection with a refinancing, re2 quire a consumer to pay more than interest and 

3 fees of 20 cents for every dollar of the refi4 nanced amount, or to require a consumer to 

5 pay any loan administrative fee or document 

6 preparation fee; 

7 ‘‘(C) threaten or seek to have the con8 sumer prosecuted criminally to collect the loan; 

9 ‘‘(D) take or attempt to take an interest in 

10 any of the consumer’s personal property to se11 cure the loan; 

12 ‘‘(E) file or initiate a legal proceeding of 

13 any kind, including a lawsuit or arbitration, 

14 against a consumer to collect on a loan that is 

15 the subject of an extended repayment plan, or 

16 construe the loan to be in default unless the 

17 consumer has failed to repay the loan as agreed 

18 under the terms of the repayment plan; 

19 ‘‘(F) take any power of attorney; 

20 ‘‘(G) include in the loan documents— 

21 ‘‘(i) a confession of judgment clause; 

22 ‘‘(ii) a waiver of the right to a jury 

23 trial, if applicable, in any action brought 

24 by or against a consumer, unless the waiv25 er is included in an arbitration clause alVerDate Nov 24 2008 23:07 May 27, 2009 Jkt 079200 PO 00000 Frm 00013 Fmt 6652 Sfmt 6201 E:\BILLS\H2563.IH H2563

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1 lowed by subparagraph (iii) of this para2 graph; and 

3 ‘‘(iii) a mandatory arbitration clause 

4 that is oppressive, unfair, unconscionable, 

5 or substantially in derogation of the rights 

6 of consumers; 

7 ‘‘(H) make a payday loan to a consumer 

8 who has an outstanding loan obligation to the 

9 creditor under an extended repayment plan, or 

10 for at least 13 days until after the outstanding 

11 loan obligation to the creditor under any such 

12 repayment plan is paid in full; 

13 ‘‘(I) make a payday loan with a term of 

14 less than 7 days; 

15 ‘‘(J) knowingly accept payment in whole or 

16 in part for any obligation under an extended re17 payment plan based on funds obtained from an18 other payday loan; 

19 ‘‘(K) enter into any agreement with a con20 sumer pursuant to which the consumer seeks or 

21 purports to waive the consumer’s rights under 

22 this section or any claim or defense arising out 

23 of the loan contract; 

24 ‘‘(L) charge or attempt to collect attor25 ney’s fees, court costs, or arbitration costs inVerDate Nov 24 2008 23:07 May 27, 2009 Jkt 079200 PO 00000 Frm 00014 Fmt 6652 Sfmt 6201 E:\BILLS\H2563.IH H2563

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1 curred in connection with the collection of a 

2 payday loan, in excess of 20 percent of the loan 

3 balance; 

4 ‘‘(M) refinance a payday loan more than 4 

5 consecutive times; 

6 ‘‘(N) make more than 1 payday loan at the 

7 same time to a consumer; 

8 ‘‘(O) fail to give the consumer, after each 

9 payment by the consumer, a signed, dated, re10 ceipt showing the amount paid and the balance 

11 due on the loan; and 

12 ‘‘(P) sell any insurance of any kind in con13 nection with the making or collecting of a pay14 day loan. 

15 ‘‘(c) RESCISSION.—A consumer may cancel future 

16 payment obligations on a payday loan, without cost or fi17 nance charges, by informing the creditor in writing that 

18 the consumer wants to rescind the loan and by returning 

19 the cash amount of the principal of the loan to the creditor 

20 no later than the end of the business day following the 

21 day on which the payday loan agreement was executed. 

22 ‘‘(d) PENALTIES; DEFENSE; CIVIL LIABILITY.— 

23 ‘‘(1) CIVIL MONEY PENALTY.—Notwithstanding 

24 the provisions of section 130(a), any person that vio25 lates this section, or seeks to enforce an agreement 


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1 made in violation of this section, shall be subject to, 

2 for each such violation, a civil money penalty not to 

3 exceed $5,000. 

4 ‘‘(2) PENALTIES NOT EXCLUSIVE OF OTHER

5 PENALTIES.—The remedies and rights provided 

6 under this section are in addition to and do not pre7 clude any remedy otherwise available under applica8 ble law to the person claiming relief under any such 

9 provision of law, other than section 130(a). 

10 ‘‘(3) AVAILABILITY AS DEFENSE.—Notwith11 standing any statute of limitations or repose, a viola12 tion of this section may be raised as a matter of de13 fense by recoupment or setoff to an action to collect 

14 any payday loan. 

15 ‘‘(4) CIVIL LIABILITY.—In determining the 

16 amount of the award in any class action, no min17 imum recovery as to each member of the class shall 

18 be applicable, and the total recovery in any class ac19 tion or series of class actions arising out of the same 

20 failure to comply with the requirements of this sec21 tion by the same creditor shall not be more than the 

22 lesser of $500,000 or 1 percent of the net worth of 

23 the creditor. 

24 ‘‘(e) INFLATION ADJUSTMENTS.—The dollar 

25 amounts specified in subsections (a), (b), and (c) shall be 


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1 adjusted annually on January 1 by the annual percentage 

2 change in the Consumer Price Index, as reported on June 

3 of the year preceding such adjustment, but in no event 

4 may such dollars amounts be adjusted below the amounts 

5 stated in such subsections, as enacted. 

6 ‘‘(f) REGULATIONS.—The Board of Governors of the 

7 Federal Reserve System shall prescribe regulations to the 

8 extent necessary to implement this section. 

9 ‘‘(g) EFFECT ON STATE LAWS.—No provision of this 

10 section may be construed as preventing a State from regu11 lating a payday loan, except that any State regulation 

12 shall not significantly interfere with the ability of a payday 

13 lender to offer a payday loan that meets the consumer pro14 tection standards in this section.’’. 

15 SEC. 3. TECHNICAL AND CONFORMING AMENDMENTS. 

16 (a) DISCLOSURES.—Section 128(a)(4) of the Truth 

17 in Lending Act (15 U.S.C. 1638(a)(4)) is amended— 

18 (1) by striking ‘‘or’’ after ‘‘does not exceed $5,’’ 

19 and 

20 (2) by inserting ‘‘ , or if the loan is subject to 

21 section 129B and the finance charge is expressed as 

22 required by section 129B’’ after ‘‘does not exceed 

23 $7.50’’. 

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

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


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1 by inserting after the item relating to section 129 the fol2 lowing new items: 

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

‘‘129B. Mandatory disclosures for extended repayment plans and other protections for consumers’’. 

3 (c) EFFECTIVE DATE.—The amendments made by 

4 this Act shall take effect 1 year from the date of the enact5 ment of this Act and shall apply to all payday loans origi6 nated on or after such date. 

Æ 


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