104TH CONGRESS

1ST SESSION H.R. 2399

AN ACT

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’’.
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1 SEC. 2. CERTAIN CHARGES.

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

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

4 by adding after the 2d sentence the following new sen5 tence: ‘‘The finance charge shall not include fees and

6 amounts imposed by third party closing agents (including

7 settlement agents, attorneys, and escrow and title compa8 nies) if the creditor does not require the imposition of the

9 charges or the services provided and does not retain the

10 charges.’’.

11 (b) BORROWER-PAID MORTGAGE BROKER FEES.—

12 (1) INCLUSION IN FINANCE CHARGE.—Section

13 106(a) of the Truth in Lending Act (15 U.S.C.

14 1605(a)) is amended by adding at the end the fol15 lowing new paragraph:

16 ‘‘(6) Borrower-paid mortgage broker fees, in17 cluding fees paid directly to the broker or the lender

18 (for delivery to the broker) whether such fees are

19 paid in cash or financed.’’.

20 (2) EFFECTIVE DATE.—The amendment made

21 by paragraph (1) shall take effect on the earlier of—

22 (A) 60 days after the date on which the

23 Board of Governors of the Federal Reserve Sys24 tem issues final regulations under paragraph

25 (3); or
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1 (B) the date that is 12 months after the

2 date of the enactment of this Act.

3 (3) REGULATIONS IMPLEMENTING BORROWER4 PAID MORTGAGE BROKER FEES.—The Board of Gov5 ernors of the Federal Reserve System shall promul6 gate regulations implementing the amendment made

7 by paragraph (1) by no later than 6 months after

8 the date of the enactment of this Act.

9 (c) TAXES ON SECURITY INSTRUMENTS OR EVI10 DENCES OF INDEBTEDNESS.—Section 106(d) of the

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

12 by adding at the end the following new paragraph:

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

14 on documents evidencing indebtedness if the pay15 ment of such taxes is a precondition for recording

16 the instrument securing the evidence of indebted17 ness.’’.

18 (d) PREPARATION OF LOAN DOCUMENTS.—Section

19 106(e)(2) of the Truth in Lending Act (15 U.S.C.

20 1605(e)(2)) is amended to read as follows:

21 ‘‘(2) Fees for preparation of loan-related docu22 ments.’’.

23 (e) FEES RELATING TO PEST INFESTATIONS, IN24 SPECTIONS, AND HAZARDS.—Section 106(e)(5) of the

25 Truth in Lending Act (15 U.S.C. 1605(e)(5)) is amended
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1 by inserting ‘‘, including fees related to any pest infesta2 tion or flood hazard inspections conducted prior to clos3 ing’’ before the period.

4 (f) ENSURING FINANCE CHARGES REFLECT COST OF

5 CREDIT.—

6 (1) REPORT.—

7 (A) IN GENERAL.—Not later than 6

8 months after the date of the enactment of this

9 Act, the Board of Governors of the Federal Re10 serve System shall submit to the Congress a re11 port containing recommendations on any regu12 latory or statutory changes necessary—

13 (i) to ensure that finance charges im14 posed in connection with consumer credit

15 transactions more accurately reflect the

16 cost of providing credit; and

17 (ii) to address abusive refinancing

18 practices engaged in for the purpose of

19 avoiding rescission.

20 (B) REPORT REQUIREMENTS.—In prepar21 ing the report under this paragraph, the Board

22 shall—

23 (i) consider the extent to which it is

24 feasible to include in finance charges all

25 charges payable directly or indirectly by
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1 the consumer to whom credit is extended,

2 and imposed directly or indirectly by the

3 creditor as an incident to the extension of

4 credit (especially those charges excluded

5 from finance charges under section 106 of

6 the Truth in Lending Act as of the date of

7 the enactment of this Act), excepting only

8 those charges which are payable in a com9 parable cash transaction; and

10 (ii) consult with and consider the

11 views of affected industries and consumer

12 groups.

13 (2) REGULATIONS.—The Board of Governors of

14 the Federal Reserve System shall prescribe any ap15 propriate regulation in order to effect any change in16 cluded in the report under paragraph (1), and shall

17 publish the regulation in the Federal Register before

18 the end of the 1-year period beginning on the date

19 of enactment of this Act.

20 SEC. 3. TOLERANCES; BASIS OF DISCLOSURES.

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

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

23 by adding at the end the following new subsection:

24 ‘‘(f) TOLERANCES FOR ACCURACY.—In connection

25 with credit transactions not under an open end credit plan
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1 that are secured by real property or a dwelling, the disclo2 sure of the finance charge and other disclosures affected

3 by any finance charge—

4 ‘‘(1) shall be treated as being accurate for pur5 poses of this title if the amount disclosed as the fi6 nance charge—

7 ‘‘(A) does not vary from the actual finance

8 charge by more than $100; or

9 ‘‘(B) is greater than the amount required

10 to be disclosed under this title; and

11 ‘‘(2) shall be treated as being accurate for pur12 poses of section 125 if—

13 ‘‘(A) except as provided in subparagraph

14 (B), the amount disclosed as the finance charge

15 does not vary from the actual finance charge by

16 more than an amount equal to one-half of one

17 percent of the total amount of credit extended;

18 or

19 ‘‘(B) in the case of a transaction, other

20 than a mortgage referred to in section 103(aa),

21 which—

22 ‘‘(i) is a refinancing of the principal

23 balance then due and any accrued and un24 paid finance charges of a residential mort25 gage transaction as defined in section
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1 103(w), or is any subsequent refinancing

2 of such a transaction; and

3 ‘‘(ii) does not provide any new consoli4 dation or new advance;

5 if the amount disclosed as the finance charge

6 does not vary from the actual finance charge by

7 more than an amount equal to one percent of

8 the total amount of credit extended.’’.

9 (b) BASIS OF DISCLOSURE FOR PER DIEM INTER10 EST.—Section 121(c) of the Truth in Lending Act (15

11 U.S.C. 1631(c)) is amended by adding at the end the fol12 lowing new sentence: ‘‘In the case of any consumer credit

13 transaction a portion of the interest on which is deter14 mined on a per diem basis and is to be collected upon

15 the consummation of such transaction, any disclosure with

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

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

18 on information actually known to the creditor at the time

19 that the disclosure documents are being prepared for the

20 consummation of the transaction.’’.

21 SEC. 4. LIMITATION ON LIABILITY.

22 (a) IN GENERAL.—Chapter 2 of the Truth in Lend23 ing Act (15 U.S.C. 1631 et seq.) is amended by adding

24 at the end the following new section:
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1 ‘‘SEC. 139. CERTAIN LIMITATIONS ON LIABILITY.

2 ‘‘(a) LIMITATIONS ON LIABILITY.—For any

3 consumer credit transaction subject to this title that is

4 consummated before the date of the enactment of the

5 Truth in Lending Act Amendments of 1995, a creditor

6 or any assignee of a creditor shall have no civil, adminis7 trative, or criminal liability under this title for, and a

8 consumer shall have no extended rescission rights under

9 section 125(f) with respect to—

10 ‘‘(1) the creditor’s treatment, for disclosure

11 purposes, of—

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

13 ‘‘(B) fees described in section 106(e)(2)

14 and (5);

15 ‘‘(C) fees and amounts referred to in the

16 3rd sentence of section 106(a); or

17 ‘‘(D) borrower-paid mortgage broker fees

18 referred to in section 106(a)(6);

19 ‘‘(2) the form of written notice used by the

20 creditor to inform the obligor of the rights of the ob21 ligor under section 125 if the creditor provided the

22 obligor with a properly dated form of written notice

23 published and adopted by the Board or a comparable

24 written notice, and otherwise complied with all the

25 requirements of this section regarding notice; or
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1 ‘‘(3) any disclosure relating to the finance

2 charge imposed with respect to the transaction if the

3 amount or percentage actually disclosed—

4 ‘‘(A) may be treated as accurate for pur5 poses of this title if the amount disclosed as the

6 finance charge does not vary from the actual fi7 nance charge by more than $200;

8 ‘‘(B) may, under section 106(f)(2), be

9 treated as accurate for purposes of section 125;

10 or

11 ‘‘(C) is greater than the amount or per12 centage required to be disclosed under this title.

13 ‘‘(b) EXCEPTIONS.—Subsection (a) shall not apply

14 to—

15 ‘‘(1) any individual action or counterclaim

16 brought under this title which was filed before June

17 1, 1995;

18 ‘‘(2) any class action brought under this title

19 for which a final order certifying a class was entered

20 before January 1, 1995;

21 ‘‘(3) the named individual plaintiffs in any class

22 action brought under this title which was filed before

23 June 1, 1995; or
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1 ‘‘(4) any consumer credit transaction with re2 spect to which a timely notice of rescission was sent

3 to the creditor before June 1, 1995.’’.

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

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

6 by inserting after the item relating to section 138 the fol7 lowing new item:

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

8 SEC. 5. LIMITATION ON RESCISSION LIABILITY.

9 Section 125 of the Truth in Lending Act (15 U.S.C.

10 1635) is further amended by adding at the end the follow11 ing new subsection:

12 ‘‘(h) LIMITATION ON RESCISSION.—An obligor shall

13 have no rescission rights arising solely from the form of

14 written notice used by the creditor to inform the obligor

15 of the rights of the obligor under this section, if the credi16 tor provided the obligor the appropriate form of written

17 notice published and adopted by the Board, or a com18 parable written notice of the rights of the obligor, that

19 was properly completed by the creditor, and otherwise

20 complied with all other requirements of this section re21 garding notice.’’.

22 SEC. 6. CALCULATION OF DAMAGES.

23 Section 130(a)(2)(A) of the Truth in Lending Act

24 (15 U.S.C. 1640(a)(2)(A)) is amended—
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1 (1) by striking ‘‘or (ii)’’ and inserting ‘‘(ii)’’;

2 and

3 (2) by inserting before the semicolon at the end

4 the following: ‘‘, or (iii) in the case of an individual

5 action relating to a credit transaction not under an

6 open end credit plan that is secured by real property

7 or a dwelling, not less than $200 or greater than

8 $2,000’’.

9 SEC. 7. ASSIGNEE LIABILITY.

10 (a) VIOLATIONS APPARENT ON THE FACE OF TRANS11 ACTION DOCUMENTS.—Section 131 of the Truth in Lend12 ing Act (15 U.S.C. 1641) is amended by adding at the

13 end the following new subsection:

14 ‘‘(e) LIABILITY OF ASSIGNEE FOR CONSUMER CRED15 IT TRANSACTIONS SECURED BY REAL PROPERTY.—

16 ‘‘(1) IN GENERAL.—Except as otherwise specifi17 cally provided in this title, any civil action against

18 a creditor for a violation of this title, and any pro19 ceeding under section 108 against a creditor, with

20 respect to a consumer credit transaction secured by

21 real property may be maintained against any as22 signee of such creditor only if—

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

24 proceeding is brought is apparent on the face of
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1 the disclosure statement provided in connection

2 with such transaction pursuant to this title; and

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

4 voluntary.

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

6 THE DISCLOSURE DESCRIBED.—For the purpose of

7 this section, a violation is apparent on the face of

8 the disclosure statement if—

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

10 be incomplete or inaccurate by a comparison

11 among the disclosure statement, any itemization

12 of the amount financed, the note, or any other

13 disclosure of disbursement; or

14 ‘‘(B) the disclosure statement does not use

15 the terms or format required to be used by this

16 title.’’.

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

18 131 of the Truth in Lending Act (15 U.S.C. 1641) is fur19 ther amended by adding after subsection (e) (as added by

20 subsection (a) of this section) the following new sub21 section:

22 ‘‘(f) TREATMENT OF SERVICER.—

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

24 obligation arising from a consumer credit trans25 action shall not be treated as an assignee of such ob-
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1 ligation for purposes of this section unless the

2 servicer is or was the owner of the obligation.

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

4 BASIS OF ASSIGNMENT FOR ADMINISTRATIVE CON5 VENIENCE.—A servicer of a consumer obligation

6 arising from a consumer credit transaction shall not

7 be treated as the owner of the obligation for pur8 poses of this section on the basis of an assignment

9 of the obligation from the creditor or another as10 signee to the servicer solely for the administrative

11 convenience of the servicer in servicing the obliga12 tion. Upon written request by the obligor, the

13 servicer shall provide the obligor, to the best knowl14 edge of the servicer, with the name, address, and

15 telephone number of the owner of the obligation or

16 the master servicer of the obligation.

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

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

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

20 Procedures Act of 1974.

21 ‘‘(4) APPLICABILITY.—This subsection shall

22 apply to all consumer credit transactions in existence

23 or consummated on or after the date of the enact24 ment of the Truth in Lending Act Amendments of

25 1995.’’.
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1 SEC. 8. RESCISSION RIGHTS IN FORECLOSURE.

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

3 1635) is amended by inserting after subsection (h) (as

4 added by section 5 of this Act) the following new sub5 section:

6 ‘‘(i) RESCISSION RIGHTS IN FORECLOSURE.—

7 ‘‘(1) IN GENERAL.—Notwithstanding section

8 139, and subject to the time period provided in sub9 section (f), in addition to any other right of rescis10 sion available under this section for a transaction,

11 after the initiation of any judicial or nonjudicial

12 foreclosure process on the primary dwelling of an ob13 ligor securing an extension of credit, the obligor

14 shall have a right to rescind the transaction equiva15 lent to other rescission rights provided by this sec16 tion, if—

17 ‘‘(A) a mortgage broker fee is not included

18 in the finance charge in accordance with the

19 laws and regulations in effect at the time the

20 consumer credit transaction was consummated;

21 or

22 ‘‘(B) the form of notice of rescission for

23 the transaction is not the appropriate form of

24 written notice published and adopted by the

25 Board or a comparable written notice, and oth-
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1 erwise complied with all the requirements of

2 this section regarding notice.

3 ‘‘(2) TOLERANCE FOR DISCLOSURES.—Notwith4 standing section 106(f), and subject to the time pe5 riod provided in subsection (f), for the purposes of

6 exercising any rescission rights after the initiation of

7 any judicial or nonjudicial foreclosure process on the

8 principal dwelling of the obligor securing an exten9 sion of credit, the disclosure of the finance charge

10 and other disclosures affected by any finance charge

11 shall be treated as being accurate for purposes of

12 this section if the amount disclosed as the finance

13 charge does not vary from the actual finance charge

14 by more than $35 or is greater than the amount re15 quired to be disclosed under this title.

16 ‘‘(3) RIGHT OF RECOUPMENT UNDER STATE

17 LAW.—Nothing in this subsection affects a consum18 er’s right of rescission in recoupment under State

19 law.

20 ‘‘(4) APPLICABILITY.—This subsection shall

21 apply to all consumer credit transactions in existence

22 or consummated on or after the date of the enact-
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1 ment of the Truth in Lending Act Amendments of

2 1995.’’.

Passed the House of Representatives September 27,

1995.

Attest:

Clerk.
104TH CONGRESS

1ST SESSION H. R. 2399

AN ACT

To amend the Truth in Lending Act to clarify the

ulatory requirements on creditors.intent of such Act and to reduce burdensome reg-