I 

109TH CONGRESS 

1ST SESSION H. R. 1660 

To amend the Consumer Credit Protection Act and other banking laws 

to protect consumers who avail themselves of payday loans from usurious 

interest rates and exorbitant fees, perpetual debt, the use of criminal 

actions to collect debts, and other unfair practices by payday lenders, 

to encourage the States to license and closely regulate payday lenders, 

and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

APRIL 14, 2005 

Mr. RUSH introduced the following bill; which was referred to the Committee 

on Financial Services 

A BILL 

To amend the Consumer Credit Protection Act and other 

banking laws to protect consumers who avail themselves 

of payday loans from usurious interest rates and exorbitant fees, perpetual debt, the use of criminal actions 

to collect debts, and other unfair practices by payday 

lenders, to encourage the States to license and closely 

regulate payday lenders, 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, 
2

•HR 1660 IH 

1 SECTION 1. SHORT TITLE. 

2 This Act may be cited as the ‘‘Payday Borrower Pro3 tection Act of 2005’’. 

4 SEC. 2. PAYDAY LOANS PROHIBITED UNLESS AUTHORIZED 

5 PURSUANT TO STATE LAW THAT LICENSES 

6 AND REGULATES PAYDAY LENDERS. 

7 (a) IN GENERAL.—Section 128 of the Truth in Lend8 ing Act (15 U.S.C. 1638) is amended by adding at the 

9 end the following new subsection: 

10 ‘‘(e) DEFERRED DEPOSIT LOANS.—

11 ‘‘(1) DEFINITIONS.—For purposes of this sub12 section, the following definitions shall apply: 

13 ‘‘(A) CHECK.—The term ‘check’ means 

14 any negotiable demand draft drawn on or pay15 able through an office of a depository institu16 tion (as defined in section 19(b)(1)(A) of the 

17 Federal Reserve Act) located in the United 

18 States. 

19 ‘‘(B) DEFERRED DEPOSIT LOAN.—The 

20 term ‘deferred deposit loan’ means a trans21 action in which credit is extended by a payday 

22 lender, for a specified period of time, upon re23 ceipt by the lender of—

24 ‘‘(i) a check made by the borrower for 

25 the amount of the credit extended, the pre26 sentment or negotiation of which, by mu-
3 

•HR 1660 IH 

1 tual agreement of the lender and borrower, 

2 will be deferred for such specified period; 

3 or 

4 ‘‘(ii) authorization from the borrower 

5 for the payday lender to initiate an elec6 tronic fund transfer at the end of the spec7 ified period from the account of the bor8 rower for the amount of the credit ex9 tended. 

10 ‘‘(C) PAYDAY LENDER.—The term ‘payday 

11 lender’ means any person who extends credit to 

12 any other person through a deferred deposit 

13 loan. 

14 ‘‘(2) PAYDAY LOANS PROHIBITED UNLESS AU15 THORIZED UNDER STATE LAWS THAT LICENSE AND

16 REGULATE SUCH LENDING.—No person may engage 

17 in the business of making deferred deposit loans in 

18 any State unless— 

19 ‘‘(A) expressly authorized to do so under a 

20 law of such State that the Board determines at 

21 least meets, if not exceeds, all the requirements 

22 described in section 4(b) of the Payday Bor23 rower Protection Act of 2005 with respect to 

24 deferred deposit loans; and 
4 

•HR 1660 IH 

1 ‘‘(B) such person maintains policies and 

2 procedures designed to prevent such person 

3 from violating any requirement of this title with 

4 regard to such loans or with regard to applica5 tions, solicitations, or advertisements relating to 

6 such loans. 

7 ‘‘(3) SITUS OF LOAN.—For purposes of para8 graph (2), a deferred deposit loan shall be consid9 ered to be made in the State in which the borrower 

10 receives the proceeds of the loan.’’. 

11 (b) EFFECTIVE DATE.—The amendment made by 

12 subsection (a) shall apply after the end of the 10-day pe13 riod beginning on the date of the enactment of this Act. 

14 SEC. 3. REGULATION OF INVOLVEMENT OF DEPOSITORY 

15 INSTITUTIONS IN PAYDAY LENDING. 

16 Section 18 of the Federal Deposit Insurance Act (12 

17 U.S.C. 1828) is amended by adding at the end the fol18 lowing new section: 

19 ‘‘(x) PAYDAY LOANS.— 

20 ‘‘(1) LOANS TO NONCOMPLIANT PAYDAY LEND21 ERS PROHIBITED.—An insured depository institution 

22 may not— 

23 ‘‘(A) make any deferred deposit loan, ei24 ther directly or through any agent, unless— 
5 

•HR 1660 IH 

1 ‘‘(i) such loan is in full compliance 

2 with the law of the State in which such 

3 loan is made; and 

4 ‘‘(ii) the annual interest rate applica5 ble with respect to such loan is less than 

6 36 percent (as determined without taking 

7 into account any administrative fee which 

8 meets the requirements of section 

9 4(b)(7)(E) of the Payday Borrowers Pro10 tection Act of 2003); or 

11 ‘‘(B) make any loan to any payday lender 

12 for purposes of financing deferred deposit loans 

13 unless the depository institution ascertains that 

14 such lender is in full compliance with the Truth 

15 in Lending Act, the Electronic Fund Transfer 

16 Act, and the law of the State in which any bor17 rower from such payday lender will receive the 

18 proceeds of any such deferred deposit loan. 

19 ‘‘(2) SITUS OF LOAN.—For purposes of para20 graph (1) and determining compliance with this sub21 section, the Truth in Lending Act, the Electronic 

22 Fund Transfer Act, and the law of any State, a de23 ferred deposit loan shall be considered to be made 

24 in the State in which the borrower receives the pro25 ceeds of the loan.’’. 
6 

•HR 1660 IH 

1 SEC. 4. STATE LICENSING AND REGULATION OF PAYDAY 

2 LOANS. 

3 (a) IN GENERAL.—For purposes of protecting the 

4 payment system and protecting the consumers of payday 

5 loans from fraud, abuse, unfair practices, usurious rates 

6 of interest, and exorbitant fees, deferred deposit loans 

7 shall only be lawful in States in which laws and regula8 tions are in effect that meet the requirements described 

9 in subsection (b), as determined by the Board of Gov10 ernors of the Federal Reserve System. 

11 (b) MINIMUM REQUIREMENTS FOR DEFERRED DE12 POSIT LOANS.—The law of any State meets the require13 ments of this subsection if a statute in effect in such State 

14 includes the following: 

15 (1) LICENSING REQUIREMENTS.— 

16 (A) IN GENERAL.—Subject to subpara17 graphs (B) and (C), a requirement that any 

18 payday lender, other than a depository institu19 tion (as defined in section 19(b)(1)(A) of the 

20 Federal Reserve Act), be licensed and regulated 

21 by an appropriate State agency in order to con22 duct any business within such State or make 

23 any deferred deposit loan within the State (as 

24 determined in accordance with paragraph (12)). 

25 (B) DEPOSITORY INSTITUTIONS.—A re26 quirement that any depository institution which 
7 

•HR 1660 IH 

1 makes deferred deposit loans in such State (as 

2 determined in accordance with paragraph (12)) 

3 shall be subject to such statute and regulated 

4 by an appropriate State agency with respect to 

5 such lending activity. 

6 (2) LICENSING STANDARDS.—A requirement 

7 that— 

8 (A) in order for any person to be licensed 

9 in the State as a payday lender, the appropriate 

10 State agency shall review and approve— 

11 (i) the business record and the capital 

12 adequacy of the business seeking the li13 cense; and 

14 (ii) the competence, experience, char15 acter, integrity, and financial responsibility 

16 of each individual who— 

17 (I) is a director, officer, or super18 visory employee of such business; or 

19 (II) owns or controls, directly or 

20 indirectly, such business (including 

21 any person who directly or indirectly 

22 controls more than 5 percent of the 

23 shares or assets of the business; 
8 

•HR 1660 IH 

1 (B) any record, on the part of any business 

2 seeking the license or any person referred to in 

3 subparagraph (A)(ii), of— 

4 (i) any criminal activity; 

5 (ii) any fraud or other act of personal 

6 dishonesty; 

7 (iii) any act, omission, or practice 

8 which constitutes a breach of a fiduciary 

9 duty; or 

10 (iv) any suspension or removal, by any 

11 agency or department of the United States 

12 or any State, from participation in the con13 duct of any federally or State licensed or 

14 regulated business, 

15 be grounds for the denial of any such license by 

16 the appropriate State agency; 

17 (C) the applicant establish to the satisfac18 tion of the appropriate State agency that the 

19 operation of the business at each authorized lo20 cation is in the public interest, taking into ac21 count the probable effect of such operation in 

22 promoting the convenience of, and meeting the 

23 credit needs of, the community in which such 

24 business is conducted; 
9 

•HR 1660 IH 

1 (D) the applicant and licensed payday 

2 lender meet such surety bond requirements and 

3 minimum asset requirements as may be estab4 lished and maintained by the appropriate State 

5 agency; and 

6 (E) in order for an applicant to meet the 

7 requirements of subparagraph (D)— 

8 (i) the applicant maintain a minimum 

9 of $50,000 of surety bond coverage for 

10 each business location maintained by the 

11 applicant; and 

12 (ii) the proceeds of any such surety 

13 bond coverage be available to pay any con14 sumer for any violation of any Federal or 

15 State law relating to deferred deposit 

16 loans. 

17 (3) PUBLIC HEARINGS.—A requirement that 

18 any application for a payday lender license be the 

19 subject of a public hearing before any final deter20 mination is made with regard to such application by 

21 the appropriate State agency. 

22 (4) ADMINISTRATIVE ACTION.—Authority for 

23 the appropriate State agency to issue regulations to 

24 carry out the purposes of such statute, investigate 

25 and enforce compliance with the statute and such 
10 

•HR 1660 IH 

1 regulations, handle complaints, suspend or revoke li2 censes issued to payday lenders and impose civil 

3 money penalties for violations of such statute or reg4 ulations, and make public the results of any such in5 vestigations or enforcement actions and the records 

6 of any complaints. 

7 (5) REPORTS AND RECORDS.—A requirement 

8 that licensed payday lenders— 

9 (A) maintain such records as the appro10 priate State agency determines are necessary to 

11 enforce compliance with the statute; and 

12 (B) submit annual reports to the appro13 priate State agency containing such information 

14 as the agency determines to be appropriate to 

15 allow the agency to enforce compliance with the 

16 statute and regulations prescribed by the agen17 cy under the statute, including a copy of all 

18 loan documents used by the payday lender in 

19 connection with deferred deposit loans and a fee 

20 schedule. 

21 (6) PROHIBITIONS.—A prohibition on— 

22 (A) the initiation of any criminal action or 

23 any civil proceeding, or use of any threat of ini24 tiating any such criminal action or civil pro25 ceeding, in connection with the failure of any 
11 

•HR 1660 IH 

1 borrower to repay any deferred deposit loan in 

2 accordance with the terms of the loan (other 

3 than a proceeding directly related to the collec4 tion of such debt and actual damages), includ5 ing any criminal action or civil proceeding, or a 

6 threat of any such action or proceeding, relat7 ing to the act of a customer in drawing a check 

8 or authorizing an electronic fund transfer which 

9 formed the basis for a payday loan and is 

10 drawn on an account with insufficient funds; 

11 (B) any practice which is prohibited under 

12 section 808 of the Fair Debt Collection Prac13 tices Act for a debt collector (as defined in such 

14 Act); 

15 (C) extending credit under any loan agree16 ment which includes any terms which are un17 conscionable or against the public interest; 

18 (D) engaging in any unfair or deceptive 

19 practice; 

20 (E) accepting the repayment of any de21 ferred deposit loan if the payday lender knows 

22 or has any reason to believe that the funds 

23 proffered by the borrower were acquired from 

24 the proceeds of another deferred deposit loan; 
12 

•HR 1660 IH 

1 (F) refinancing or rolling over any deferred 

2 deposit loan, or initiating a new deferred de3 posit loan unless 30 days has elapsed from the 

4 termination of any prior deferred deposit loan 

5 from that payday lender (or any affiliate or 

6 other associate of the payday lender) to the cus7 tomer; 

8 (G) imposing any additional fee or any 

9 premium for any credit insurance offered in 

10 conjunction with any deferred deposit loan; and 

11 (H) including any clause in the note or 

12 other document related to the deferred deposit 

13 loan which requires the consumer to submit any 

14 claim or defense relating to the transaction to 

15 binding arbitration or other nonjudicial pro16 ceeding. 

17 (7) REQUIREMENTS RELATING TO TERMS AND

18 CONDITIONS.—A requirement that— 

19 (A) the period to maturity of any deferred 

20 deposit loan may not be less than 2 weeks for 

21 each $50 of loan principal; 

22 (B) the principal amount of any deferred 

23 deposit loan may not exceed $300; 

24 (C) any check which forms the basis of a 

25 deferred deposit loan be stamped on the back 
13 

•HR 1660 IH 

1 with an endorsement that the check has been 

2 received and is being negotiated in connection 

3 with a deferred deposit loan and any subse4 quent holder of the check takes it subject to all 

5 claims and defenses of the maker; 

6 (D) the annual interest rate applicable to 

7 any deferred deposit loan may not exceed the 

8 lesser of— 

9 (i) 36 percent; or 

10 (ii) the maximum annual percentage 

11 rate allowable in such State for comparable 

12 small loans; 

13 (E) the amount of any administrative fee 

14 imposed in connection with making a deferred 

15 deposit loan may not exceed $5; 

16 (F) any unearned interest on deferred de17 posit loans which are paid before the due date 

18 shall be repaid to the borrower on an actuarial 

19 basis; and 

20 (G) the amount of any fee imposed for any 

21 check made or any electronic fund transfer au22 thorized by a borrower in connection with any 

23 deferred deposit loan which is returned unpaid 

24 to the payday lender due to insufficient funds 
14 

•HR 1660 IH 

1 in an account of such borrower may not exceed 

2 the lesser of— 

3 (i) $15; or 

4 (ii) the charge imposed by the finan5 cial institution returning the check to the 

6 payday lender for handling such check. 

7 (8) DISCLOSURES.—A requirement that the fol8 lowing information be disclosed in writing to a bor9 rower in connection with any deferred deposit loan 

10 and posted in a prominent place at any location 

11 where deferred deposit loans are made or extended: 

12 (A) A complete description of the terms of 

13 the loan. 

14 (B) A complete description of the rights of 

15 the borrower under the laws of the State, the 

16 Truth in Lending Act, the Fair Debt Collection 

17 Practices Act, the Electronic Fund Transfer 

18 Act, and any other provision of law the appro19 priate State agency determines to be applicable 

20 to such loan. 

21 (C) A clear and conspicuous statement 

22 that the borrower may not be subject to any 

23 criminal action or civil proceeding, or the use of 

24 any threat of initiating any such criminal action 

25 or civil proceeding, in connection with the fail-
15 

•HR 1660 IH 

1 ure of any borrower to repay any deferred de2 posit loan in accordance with the terms of the 

3 loan (other than a proceeding directly related to 

4 the collection of such debt and actual damages), 

5 including any criminal action or civil pro6 ceeding, or a threat of any such action or pro7 ceeding, relating to the act of a customer in 

8 drawing a check or authorizing an electronic 

9 fund transfer which formed the basis for a pay10 day loan and is drawn on an account with in11 sufficient funds. 

12 (9) CIVIL ENFORCEMENT.—Provision for civil 

13 penalties for violations of the statute with a min14 imum civil money penalty of $1,000 for any violation 

15 of the statute by any payday lender. 

16 (10) PRIVATE RIGHT OF ACTION.—Provisions 

17 that make any person who violates any provision of 

18 the statute with respect to any other person liable to 

19 such other person, or to a class of such other per20 sons, for actual, consequential, and punitive dam21 ages, statutory damages of $1,000 for each violation, 

22 and costs and attorney’s fees. 

23 (11) CRIMINAL PENALTIES FOR OPERATION OF

24 BUSINESS WITHOUT A LICENSE.—A criminal penalty 

25 for anyone, other than a depository institution, mak-
16 

•HR 1660 IH 

1 ing any payday loan within the State after the effec2 tive date of such State statute without a license 

3 issued by the State. 

4 (12) CRIMINAL PENALTIES FOR OTHER VIOLA5 TIONS OF THE STATUTE.—A provision that any per6 son who knowingly violates any provision of the stat7 ute, or any regulation prescribed under the statute, 

8 shall be subject to a fine of $1,000, imprisonment 

9 for not to exceed 6 months, or both. 

10 (13) SITUS OF LOAN.—A deferred deposit loan 

11 is considered to be made in the State in which the 

12 borrower will receive the proceeds of the loan. 

13 (c) DEFINITIONS.—For purposes of this section, the 

14 following definitions shall apply: 

15 (1) DEPOSITORY INSTITUTION.—The term ‘‘de16 pository institution’’ has the meaning given to such 

17 term in section 19(b)(1)(A) of the Federal Reserve 

18 Act. 

19 (2) OTHER TERMS.—The terms ‘‘deferred de20 posit loan’’, ‘‘payday lender’’, and ‘‘check’’ have the 

21 meanings given to such terms in section 128(e)(1) of 

22 the Truth in Lending Act. 

Æ