II 

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. 

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 ‘‘Protecting Consumers 

5 from Unreasonable Credit Rates Act of 2012’’. 

6 SEC. 2. FINDINGS. 

7 Congress finds that— 

8 (1) attempts have been made to prohibit usu9 rious interest rates in America since colonial times; 


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1 (2) at the Federal level, in 2006, Congress en2 acted a Federal 36-percent annualized usury cap for 

3 service members and their families for covered credit 

4 products, as defined by the Department of Defense, 

5 which curbed payday, car title, and tax refund lend6 ing around military bases; 

7 (3) notwithstanding such attempts to curb 

8 predatory lending, high-cost lending persists in all 

9 50 States due to loopholes in State laws, safe harbor 

10 laws for specific forms of credit, and the exportation 

11 of unregulated interest rates permitted by preemp12 tion; 

13 (4) due to the lack of a comprehensive Federal 

14 usury cap, consumers annually pay approximately 

15 $23,700,000,000 for high-cost overdraft loans, as 

16 much as $8,100,000,000 for storefront and online 

17 payday loans, and additional amounts in unreported 

18 revenues from bank direct deposit advance loans and 

19 high-cost online installment loans; 

20 (5) cash-strapped consumers pay on average 

21 400 percent annual interest for payday loans, 300 

22 percent annual interest for car title loans, up to 

23 3,500 percent for bank overdraft loans, and triple24 digit rates for online installment loans; 


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1 (6) a national maximum interest rate that in2 cludes all forms of fees and closes all loopholes is 

3 necessary to eliminate such predatory lending; and 

4 (7) alternatives to predatory lending that en5 courage small dollar loans with minimal or no fees, 

6 installment payment schedules, and affordable re7 payment periods should be encouraged. 

8 SEC. 3. NATIONAL MAXIMUM INTEREST RATE. 

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

10 is amended by adding at the end the following: 

11 ‘‘SEC. 141. MAXIMUM RATES OF INTEREST. 

12 ‘‘(a) IN GENERAL.—Notwithstanding any other pro13 vision of law, no creditor may make an extension of credit 

14 to a consumer with respect to which the fee and interest 

15 rate, as defined in subsection (b), exceeds 36 percent. 

16 ‘‘(b) FEE AND INTEREST RATE DEFINED.— 

17 ‘‘(1) IN GENERAL.—For purposes of this sec18 tion, the fee and interest rate includes all charges 

19 payable, directly or indirectly, incident to, ancillary 

20 to, or as a condition of the extension of credit, in21 cluding— 

22 ‘‘(A) any payment compensating a creditor 

23 or prospective creditor for— 

24 ‘‘(i) an extension of credit or making 

25 available a line of credit, such as fees conVerDate Mar 15 2010 03:20 Jul 31, 2012 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S3452.IS S3452

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1 nected with credit extension or availability 

2 such as numerical periodic rates, annual 

3 fees, cash advance fees, and membership 

4 fees; or 

5 ‘‘(ii) any fees for default or breach by 

6 a borrower of a condition upon which cred7 it was extended, such as late fees, creditor8 imposed not sufficient funds fees charged 

9 when a borrower tenders payment on a 

10 debt with a check drawn on insufficient 

11 funds, overdraft fees, and over limit fees; 

12 ‘‘(B) all fees which constitute a finance 

13 charge, as defined by rules of the Bureau in ac14 cordance with this title; 

15 ‘‘(C) credit insurance premiums, whether 

16 optional or required; and 

17 ‘‘(D) all charges and costs for ancillary 

18 products sold in connection with or incidental to 

19 the credit transaction. 

20 ‘‘(2) TOLERANCES.— 

21 ‘‘(A) IN GENERAL.—With respect to a 

22 credit obligation that is payable in at least 3 

23 fully amortizing installments over at least 90 

24 days, the term ‘fee and interest rate’ does not 

25 include— 


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1 ‘‘(i) application or participation fees 

2 that in total do not exceed the greater of 

3 $30 or, if there is a limit to the credit line, 

4 5 percent of the credit limit, up to $120, 

5 if— 

6 ‘‘(I) such fees are excludable 

7 from the finance charge pursuant to 

8 section 106 and regulations issued 

9 thereunder; 

10 ‘‘(II) such fees cover all credit 

11 extended or renewed by the creditor 

12 for 12 months; and 

13 ‘‘(III) the minimum amount of 

14 credit extended or available on a cred15 it line is equal to $300 or more; 

16 ‘‘(ii) a late fee charged as authorized 

17 by State law and by the agreement that 

18 does not exceed either $20 per late pay19 ment or $20 per month; or 

20 ‘‘(iii) a creditor-imposed not sufficient 

21 funds fee charged when a borrower tenders 

22 payment on a debt with a check drawn on 

23 insufficient funds that does not exceed 

24 $15. 


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1 ‘‘(B) ADJUSTMENTS FOR INFLATION.— 

2 The Bureau may adjust the amounts of the tol3 erances established under this paragraph for in4 flation over time, consistent with the primary 

5 goals of protecting consumers and ensuring 

6 that the 36-percent fee and interest rate limita7 tion is not circumvented. 

8 ‘‘(c) CALCULATIONS.— 

9 ‘‘(1) OPEN END CREDIT PLANS.—For an open 

10 end credit plan— 

11 ‘‘(A) the fee and interest rate shall be cal12 culated each month, based upon the sum of all 

13 fees and finance charges described in subsection 

14 (b) charged by the creditor during the pre15 ceding 1-year period, divided by the average 

16 daily balance; and 

17 ‘‘(B) if the credit account has been open 

18 less than 1 year, the fee and interest rate shall 

19 be calculated based upon the total of all fees 

20 and finance charges described in subsection 

21 (b)(1) charged by the creditor since the plan 

22 was opened, divided by the average daily bal23 ance, and multiplied by the quotient of 12 di24 vided by the number of full months that the 

25 credit plan has been in existence. 


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1 ‘‘(2) OTHER CREDIT PLANS.—For purposes of 

2 this section, in calculating the fee and interest rate, 

3 the Bureau shall require the method of calculation 

4 of annual percentage rate specified in section 

5 107(a)(1), except that the amount referred to in 

6 that section 107(a)(1) as the ‘finance charge’ shall 

7 include all fees, charges, and payments described in 

8 subsection (b)(1) of this section. 

9 ‘‘(3) ADJUSTMENTS AUTHORIZED.—The Bu10 reau may make adjustments to the calculations in 

11 paragraphs (1) and (2), but the primary goals of 

12 such adjustment shall be to protect consumers and 

13 to ensure that the 36-percent fee and interest rate 

14 limitation is not circumvented. 

15 ‘‘(d) DEFINITION OF CREDITOR.—As used in this 

16 section, the term ‘creditor’ has the same meaning as in 

17 section 702(e) of the Equal Credit Opportunity Act (15 

18 U.S.C. 1691a(e)). 

19 ‘‘(e) NO EXEMPTIONS PERMITTED.—The exemption 

20 authority of the Bureau under section 105 shall not apply 

21 to the rates established under this section or the disclosure 

22 requirements under section 127(b)(6). 

23 ‘‘(f) DISCLOSURE OF FEE AND INTEREST RATE FOR

24 CREDIT OTHER THAN OPEN END CREDIT PLANS.—In 

25 addition to the disclosure requirements under section 


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1 127(b)(6), the Bureau may prescribe regulations requiring 

2 disclosure of the fee and interest rate established under 

3 this section. 

4 ‘‘(g) RELATION TO STATE LAW.—Nothing in this 

5 section may be construed to preempt any provision of 

6 State law that provides greater protection to consumers 

7 than is provided in this section. 

8 ‘‘(h) CIVIL LIABILITY AND ENFORCEMENT.—In addi9 tion to remedies available to the consumer under section 

10 130(a), any payment compensating a creditor or prospec11 tive creditor, to the extent that such payment is a trans12 action made in violation of this section, shall be null and 

13 void, and not enforceable by any party in any court or 

14 alternative dispute resolution forum, and the creditor or 

15 any subsequent holder of the obligation shall promptly re16 turn to the consumer any principal, interest, charges, and 

17 fees, and any security interest associated with such trans18 action. Notwithstanding any statute of limitations or 

19 repose, a violation of this section may be raised as a mat20 ter of defense by recoupment or setoff to an action to col21 lect such debt or repossess related security at any time. 

22 ‘‘(i) VIOLATIONS.—Any person that violates this sec23 tion, or seeks to enforce an agreement made in violation 

24 of this section, shall be subject to, for each such violation, 


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1 1 year in prison and a fine in an amount equal to the 

2 greater of— 

3 ‘‘(1) 3 times the amount of the total accrued 

4 debt associated with the subject transaction; or 

5 ‘‘(2) $50,000. 

6 ‘‘(j) STATE ATTORNEYS GENERAL.—An action to en7 force this section may be brought by the appropriate State 

8 attorney general in any United States district court or any 

9 other court of competent jurisdiction within 3 years from 

10 the date of the violation, and such attorney general may 

11 obtain injunctive relief.’’. 

12 SEC. 4. DISCLOSURE OF FEE AND INTEREST RATE FOR 

13 OPEN END CREDIT PLANS. 

14 Section 127(b)(6) of the Truth in Lending Act (15 

15 U.S.C. 1637(b)(6)) is amended by striking ‘‘the total fi16 nance charge expressed’’ and all that follows through the 

17 end of the paragraph and inserting ‘‘the fee and interest 

18 rate, displayed as ‘FAIR’, established under section 141.’’. 

Æ 


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