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[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[S. 3452 Introduced in Senate (IS)]

112th CONGRESS
  2d Session
                                S. 3452

 To amend the Truth in Lending Act to establish a national usury rate 
                   for consumer credit transactions.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                             July 26, 2012

 Mr. Durbin (for himself, Mrs. Boxer, Mr. Merkley, and Mr. Whitehouse) 
introduced the following bill; which was read twice and referred to the 
            Committee on Banking, Housing, and Urban Affairs

_______________________________________________________________________

                                 A BILL

 
 To amend the Truth in Lending Act to establish a national usury rate 
                   for consumer credit transactions.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Protecting Consumers from 
Unreasonable Credit Rates Act of 2012''.

SEC. 2. FINDINGS.

    Congress finds that--
            (1) attempts have been made to prohibit usurious interest 
        rates in America since colonial times;
            (2) at the Federal level, in 2006, Congress enacted a 
        Federal 36-percent annualized usury cap for service members and 
        their families for covered credit products, as defined by the 
        Department of Defense, which curbed payday, car title, and tax 
        refund lending around military bases;
            (3) notwithstanding such attempts to curb predatory 
        lending, high-cost lending persists in all 50 States due to 
        loopholes in State laws, safe harbor laws for specific forms of 
        credit, and the exportation of unregulated interest rates 
        permitted by preemption;
            (4) due to the lack of a comprehensive Federal usury cap, 
        consumers annually pay approximately $23,700,000,000 for high-
        cost overdraft loans, as much as $8,100,000,000 for storefront 
        and online payday loans, and additional amounts in unreported 
        revenues from bank direct deposit advance loans and high-cost 
        online installment loans;
            (5) cash-strapped consumers pay on average 400 percent 
        annual interest for payday loans, 300 percent annual interest 
        for car title loans, up to 3,500 percent for bank overdraft 
        loans, and triple-digit rates for online installment loans;
            (6) a national maximum interest rate that includes all 
        forms of fees and closes all loopholes is necessary to 
        eliminate such predatory lending; and
            (7) alternatives to predatory lending that encourage small 
        dollar loans with minimal or no fees, installment payment 
        schedules, and affordable repayment periods should be 
        encouraged.

SEC. 3. NATIONAL MAXIMUM INTEREST RATE.

    The Truth in Lending Act (15 U.S.C. 1601 et seq.) is amended by 
adding at the end the following:

``SEC. 141. MAXIMUM RATES OF INTEREST.

    ``(a) In General.--Notwithstanding any other provision of law, no 
creditor may make an extension of credit to a consumer with respect to 
which the fee and interest rate, as defined in subsection (b), exceeds 
36 percent.
    ``(b) Fee and Interest Rate Defined.--
            ``(1) In general.--For purposes of this section, the fee 
        and interest rate includes all charges payable, directly or 
        indirectly, incident to, ancillary to, or as a condition of the 
        extension of credit, including--
                    ``(A) any payment compensating a creditor or 
                prospective creditor for--
                            ``(i) an extension of credit or making 
                        available a line of credit, such as fees 
                        connected with credit extension or availability 
                        such as numerical periodic rates, annual fees, 
                        cash advance fees, and membership fees; or
                            ``(ii) any fees for default or breach by a 
                        borrower of a condition upon which credit was 
                        extended, such as late fees, creditor-imposed 
                        not sufficient funds fees charged when a 
                        borrower tenders payment on a debt with a check 
                        drawn on insufficient funds, overdraft fees, 
                        and over limit fees;
                    ``(B) all fees which constitute a finance charge, 
                as defined by rules of the Bureau in accordance with 
                this title;
                    ``(C) credit insurance premiums, whether optional 
                or required; and
                    ``(D) all charges and costs for ancillary products 
                sold in connection with or incidental to the credit 
                transaction.
            ``(2) Tolerances.--
                    ``(A) In general.--With respect to a credit 
                obligation that is payable in at least 3 fully 
                amortizing installments over at least 90 days, the term 
                `fee and interest rate' does not include--
                            ``(i) application or participation fees 
                        that in total do not exceed the greater of $30 
                        or, if there is a limit to the credit line, 5 
                        percent of the credit limit, up to $120, if--
                                    ``(I) such fees are excludable from 
                                the finance charge pursuant to section 
                                106 and regulations issued thereunder;
                                    ``(II) such fees cover all credit 
                                extended or renewed by the creditor for 
                                12 months; and
                                    ``(III) the minimum amount of 
                                credit extended or available on a 
                                credit line is equal to $300 or more;
                            ``(ii) a late fee charged as authorized by 
                        State law and by the agreement that does not 
                        exceed either $20 per late payment or $20 per 
                        month; or
                            ``(iii) a creditor-imposed not sufficient 
                        funds fee charged when a borrower tenders 
                        payment on a debt with a check drawn on 
                        insufficient funds that does not exceed $15.
                    ``(B) Adjustments for inflation.--The Bureau may 
                adjust the amounts of the tolerances established under 
                this paragraph for inflation over time, consistent with 
                the primary goals of protecting consumers and ensuring 
                that the 36-percent fee and interest rate limitation is 
                not circumvented.
    ``(c) Calculations.--
            ``(1) Open end credit plans.--For an open end credit plan--
                    ``(A) the fee and interest rate shall be calculated 
                each month, based upon the sum of all fees and finance 
                charges described in subsection (b) charged by the 
                creditor during the preceding 1-year period, divided by 
                the average daily balance; and
                    ``(B) if the credit account has been open less than 
                1 year, the fee and interest rate shall be calculated 
                based upon the total of all fees and finance charges 
                described in subsection (b)(1) charged by the creditor 
                since the plan was opened, divided by the average daily 
                balance, and multiplied by the quotient of 12 divided 
                by the number of full months that the credit plan has 
                been in existence.
            ``(2) Other credit plans.--For purposes of this section, in 
        calculating the fee and interest rate, the Bureau shall require 
        the method of calculation of annual percentage rate specified 
        in section 107(a)(1), except that the amount referred to in 
        that section 107(a)(1) as the `finance charge' shall include 
        all fees, charges, and payments described in subsection (b)(1) 
        of this section.
            ``(3) Adjustments authorized.--The Bureau may make 
        adjustments to the calculations in paragraphs (1) and (2), but 
        the primary goals of such adjustment shall be to protect 
        consumers and to ensure that the 36-percent fee and interest 
        rate limitation is not circumvented.
    ``(d) Definition of Creditor.--As used in this section, the term 
`creditor' has the same meaning as in section 702(e) of the Equal 
Credit Opportunity Act (15 U.S.C. 1691a(e)).
    ``(e) No Exemptions Permitted.--The exemption authority of the 
Bureau under section 105 shall not apply to the rates established under 
this section or the disclosure requirements under section 127(b)(6).
    ``(f) Disclosure of Fee and Interest Rate for Credit Other Than 
Open End Credit Plans.--In addition to the disclosure requirements 
under section 127(b)(6), the Bureau may prescribe regulations requiring 
disclosure of the fee and interest rate established under this section.
    ``(g) Relation to State Law.--Nothing in this section may be 
construed to preempt any provision of State law that provides greater 
protection to consumers than is provided in this section.
    ``(h) Civil Liability and Enforcement.--In addition to remedies 
available to the consumer under section 130(a), any payment 
compensating a creditor or prospective creditor, to the extent that 
such payment is a transaction made in violation of this section, shall 
be null and void, and not enforceable by any party in any court or 
alternative dispute resolution forum, and the creditor or any 
subsequent holder of the obligation shall promptly return to the 
consumer any principal, interest, charges, and fees, and any security 
interest associated with such transaction. Notwithstanding any statute 
of limitations or repose, a violation of this section may be raised as 
a matter of defense by recoupment or setoff to an action to collect 
such debt or repossess related security at any time.
    ``(i) Violations.--Any person that violates this section, or seeks 
to enforce an agreement made in violation of this section, shall be 
subject to, for each such violation, 1 year in prison and a fine in an 
amount equal to the greater of--
            ``(1) 3 times the amount of the total accrued debt 
        associated with the subject transaction; or
            ``(2) $50,000.
    ``(j) State Attorneys General.--An action to enforce this section 
may be brought by the appropriate State attorney general in any United 
States district court or any other court of competent jurisdiction 
within 3 years from the date of the violation, and such attorney 
general may obtain injunctive relief.''.

SEC. 4. DISCLOSURE OF FEE AND INTEREST RATE FOR OPEN END CREDIT PLANS.

    Section 127(b)(6) of the Truth in Lending Act (15 U.S.C. 
1637(b)(6)) is amended by striking ``the total finance charge 
expressed'' and all that follows through the end of the paragraph and 
inserting ``the fee and interest rate, displayed as `FAIR', established 
under section 141.''.
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