II 

109TH CONGRESS 

1ST SESSION S. 1878 

To prohibit predatory payday loans, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

OCTOBER 17, 2005 

Mr. AKAKA introduced the following bill; which was read twice and referred 

to the Committee on Banking, Housing, and Urban Affairs 

A BILL 

To prohibit predatory 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 ‘‘Predatory Payday 

5 Loan Prohibition Act of 2005’’. 

6 SEC. 2. PROHIBITION ON CREDITORS MAKING PAYDAY 

7 LOANS. 

8 The Truth in Lending Act (15 U.S.C. 1601 et seq.) 

9 is amended by inserting after section 109 the following: 
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•S 1878 IS

1 ‘‘SEC. 110. PROHIBITION ON PAYDAY LOANS. 

2 ‘‘(a) IN GENERAL.—A creditor may not make a pay3 day loan to any person, if the creditor knows or has rea4 sonable cause to believe that— 

5 ‘‘(1) the personal check or share draft that the 

6 creditor receives from the person in exchange for the 

7 loan is drawn on an insured depository institution or 

8 an insured credit union; or 

9 ‘‘(2) the account that will be debited in ex10 change for the loan is a transaction account or share 

11 draft account at an insured depository institution or 

12 an insured credit union. 

13 ‘‘(b) DEFINITIONS.—In this section, the following 

14 definitions shall apply: 

15 ‘‘(1) INSURED INSTITUTIONS.—The terms ‘in16 sured depository institution’ and ‘insured credit 

17 union’ have the meanings given those terms in sec18 tion 3 of the Federal Deposit Insurance Act and sec19 tion 101 of the Federal Credit Union Act, respec20 tively. 

21 ‘‘(2) PAYDAY LOAN.—The term ‘payday loan’ 

22 means any transaction in which a short-term cash 

23 advance is made to a consumer in exchange for— 

24 ‘‘(A) the personal check or share draft of 

25 the consumer, in the amount of the advance 

26 plus a fee, where presentment or negotiation of 
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•S 1878 IS

1 such check or share draft is deferred by agree2 ment of the parties until a designated future 

3 date; or 

4 ‘‘(B) the authorization of a consumer to 

5 debit the transaction account or share draft ac6 count of the consumer, in the amount of the ad7 vance plus a fee, where such account will be 

8 debited on or after a designated future date.’’. 

9 SEC. 3. PROHIBITION ON INSURED DEPOSITORY INSTITU10 TIONS MAKING PAYDAY LOANS. 

11 Section 18 of the Federal Deposit Insurance Act (12 

12 U.S.C. 1828) is amended by adding at the end the fol13 lowing: 

14 ‘‘(x) PROHIBITION ON CERTAIN UNSAFE AND UN15 SOUND BANKING PRACTICES.— 

16 ‘‘(1) IN GENERAL.—An insured depository in17 stitution may not— 

18 ‘‘(A) make any payday loan, either directly 

19 or indirectly; or 

20 ‘‘(B) make any loan to any other lender 

21 for purposes of financing a payday loan or refi22 nancing or extending any payday loan. 

23 ‘‘(2) PAYDAY LOAN DEFINED.—For purposes of 

24 this subsection, the term ‘payday loan’ means any 
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1 transaction in which a short-term cash advance is 

2 made to a consumer in exchange for— 

3 ‘‘(A) the personal check or share draft of 

4 the consumer, in the amount of the advance 

5 plus a fee, where presentment or negotiation of 

6 such check or share draft is deferred by agree7 ment of the parties until a designated future 

8 date; or 

9 ‘‘(B) the authorization of the consumer to 

10 debit the transaction account or share draft ac11 count of the consumer, in the amount of the ad12 vance plus a fee, where such account will be 

13 debited on or after a designated future date.’’. 

Æ