I

103D CONGRESS

1ST SESSION H. R. 1495

To amend title 18, United States Code, to prohibit certain practices by

unregulated loan brokers.

IN THE HOUSE OF REPRESENTATIVES

MARCH 25, 1993

Mr. SCHUMER introduced the following bill; which was referred to the

Committee on the Judiciary

A BILL

To amend title 18, United States Code, to prohibit certain

practices by unregulated loan brokers.

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 ‘‘Advance Fee Loan

5 Scam Prevention Act of 1993’’.

6 SEC. 2. TITLE 18 AMENDMENT.

7 (a) IN GENERAL.—Chapter 47 of title 18, United

8 States Code, is amended by adding at the end the

9 following:
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1 ‘‘§ 1033. Loan broker advance fees and fraud

2 ‘‘(a) It shall be unlawful for a loan broker—

3 ‘‘(1) to solicit an advance fee in connection

4 with—

5 ‘‘(A) arranging or attempting to arrange

6 consumer credit;

7 ‘‘(B) offering to find for any individual

8 consumer credit; or

9 ‘‘(C) advising any individual as to how to

10 obtain consumer credit;

11 ‘‘(2) to make or use any false or misleading

12 representations or omit any material fact in the

13 offer or sale of the service of a loan broker; or

14 ‘‘(3) to engage, directly or indirectly, in any

15 conduct that operates or would operate as fraud or

16 deception upon any person in connection with the

17 offer or sale of the services of a loan broker, not18 withstanding the absence of reliance by the person

19 to whom the loan broker’s services are offered or

20 sold.

21 ‘‘(b) Whoever knowingly violates subsection (a) of

22 this section shall be fined under this title or imprisoned

23 for not more than 5 years, or both

24 ‘‘(c) Any violation of subsection (a) shall—

25 ‘‘(1) be treated as a violation of a rule of the

26 Federal Trade Commission issued pursuant to sec-
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1 tion 18(a)(1)(B) of the Federal Trade Commission

2 Act; and

3 ‘‘(2) be subject to enforcement by the Federal

4 Trade Commission under the enforcement and pen5 alty provisions applicable to violations of such rules.

6 ‘‘(d) For purposes of section 3005(a) of title 39, a

7 violation of subsection (a) of this section by any person

8 shall constitute prima facie evidence that such person is

9 engaged in conducting a scheme or device for obtaining

10 money or property through the mail by means of false rep11 resentations.

12 ‘‘(e) For purposes of this section—

13 ‘‘(1) the term ‘‘loan broker’’—

14 ‘‘(A) means any person who, in or affect15 ing interstate or foreign commerce—

16 ‘‘(i) for, or in expectation of, a consid17 eration, arranges or attempts to arrange or

18 offers to find for any individual, consumer

19 credit;

20 ‘‘(ii) for, or in expectation of, a con21 sideration, assists or advises an individual

22 on obtaining, or attempting to obtain,

23 consumer credit; or

24 ‘‘(iii) acts or purports to act for, or on

25 behalf of, a person described in clause (i)
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1 or (ii) of this subparagraph, for the pur2 pose of soliciting individuals interested in

3 obtaining consumer credit; and

4 ‘‘(B) does not include—

5 ‘‘(i) any insured depository institution

6 (as defined in section 3(c)(2) of the Fed7 eral Deposit Insurance Act), any insured

8 credit union (as defined in section 101(7)

9 of the Federal Credit Union Act), or any

10 depository institution which is eligible for

11 deposit insurance under the Federal De12 posit Insurance Act or the Federal Credit

13 Union Act and has deposit insurance cov14 erage provided by any State;

15 ‘‘(ii) any lender approved by the Fed16 eral Housing Administration, Farmers

17 Home Administration, or Department of

18 Veterans Affairs;

19 ‘‘(iii) any seller or servicer of mort20 gages approved by the Federal National

21 Mortgage Association or the Federal Home

22 Loan Mortgage Corporation; or

23 ‘‘(iv) any consumer finance company,

24 retail installment sales company, securities

25 broker or dealer, real estate broker or real
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1 estate salesperson, attorney, credit card

2 company, installment loan licensee, mort3 gage broker or lender, or insurance com4 pany if such person is—

5 ‘‘(I) licensed by and subject to

6 regulation or supervision by any agen7 cy of the United States or by the

8 State in which the person seeking to

9 utilize the services of the loan broker

10 resides; and

11 ‘‘(II) is acting within the scope of

12 that license or regulation;

13 ‘‘(2) the term ‘‘advance fee’’—

14 ‘‘(A) means any fee (including any advance

15 payment of interest or other fees for any exten16 sion of consumer credit) which is assessed or

17 collected by a loan broker from any person

18 seeking the consumer credit before the exten19 sion of such credit; and

20 ‘‘(B) does not include—

21 ‘‘(i) any amount that the loan broker

22 can demonstrate is collected solely for the

23 purpose of payment to unaffiliated, third

24 party vendors for actual expenses incurred
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1 and payable before the extension of any

2 consumer credit; or

3 ‘‘(ii) any application fee or other

4 charge assessed or collected—

5 ‘‘(I) by a retail seller of property

6 that is primarily for personal, family,

7 or household purposes or automobiles;

8 ‘‘(II) in connection with a

9 consumer credit transaction in which

10 a purchase money security interest

11 arising under an installment sales

12 contract (or any equivalent consensual

13 security interest) is created or re14 tained against any such property or

15 automobile being sold by the retail

16 seller to the person seeking the exten17 sion of credit; or

18 ‘‘(III) in connection with a resi19 dential real estate transaction that is

20 secured by a first lien on the property,

21 including a purchase, refinancing, or

22 consolidation of an extension of credit;

23 and
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1 ‘‘(3) the terms ‘‘consumer’’ and ‘‘credit’’ have

2 the meanings given to such terms in section 103 of

3 the Truth in Lending Act.’’.

4 (b) CIVIL FORFEITURE.—Section 981(a)(1)(C) of

5 title 18, United States Code, is amended—

6 (1) by striking ‘‘title or a violation’’ and insert7 ing ‘‘title, a violation’’; and

8 (2) by inserting ‘‘, or a violation of section

9 1033 of this title’’ before the period.

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

11 at the beginning of chapter 47 of title 18, United States

12 Code, is amended by adding at the end the following:

‘‘1033. Loan broker advance fees and fraud.’’.

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