I 

109TH CONGRESS 

1ST SESSION H. R. 1643 

To amend various banking laws to combat predatory lending, particularly 

in regards to low and moderate income individuals, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

APRIL 14, 2005 

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

on Financial Services, and in addition to the Committee on the Judiciary, 

for a period to be subsequently determined by the Speaker, in each case 

for consideration of such provisions as fall within the jurisdiction of the 

committee concerned 

A BILL 

To amend various banking laws to combat predatory lending, 

particularly in regards to low and moderate income individuals, 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 ‘‘Borrower’s Bill of 

5 Rights Act’’. 
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1 SEC. 2. ASSISTANT SECRETARY OF THE TREASURY FOR FI2 NANCIAL EDUCATION. 

3 Section 301(e) of title 31, United States Code, is 

4 amended— 

5 (1) by striking ‘‘7 Assistant Secretaries’’ and 

6 inserting ‘‘8 Assistant Secretaries’’; and 

7 (2) by inserting after the 2nd sentence the fol8 lowing new sentence: ‘‘One of the Assistant Secre9 taries shall be the Assistant Secretary for Financial 

10 Education.’’ 

11 SEC. 3. FINANCIAL LITERACY FOR MIDDLE AND HIGH 

12 SCHOOL STUDENTS. 

13 The Financial Literacy and Education Improvement 

14 Act (20 U.S.C. 9701, et seq.) is amended— 

15 (1) by redesignating section 519 as section 520; 

16 and 

17 (2) by inserting after section 518 the following 

18 new section: 

19 ‘‘SEC. 519. FINANCIAL LITERACY FOR MIDDLE AND HIGH 

20 SCHOOL STUDENTS. 

21 ‘‘(a) PILOT PROGRAM.—The Assistant Secretary for 

22 Financial Education (hereafter in this section referred to 

23 as the ‘Assistant Secretary’ shall establish a 2-year pilot 

24 financial literacy pilot program for middle and high school 

25 students. 
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1 ‘‘(b) REQUIREMENTS.—The pilot program estab2 lished by the Assistant Secretary shall comply with the 

3 following requirements: 

4 ‘‘(1) The pilot program shall be implemented in 

5 10 middle schools and 10 high schools, selected by 

6 the Assistant Secretary based on such criteria as the 

7 Assistant Secretary may determine to be appro8 priate, in 10 different school systems and provided 

9 to 8th grade students at the middle schools selected 

10 and 12th grade students at the high schools selected. 

11 ‘‘(2) The program shall use as guidance the fi12 nancial education program in the secondary schools 

13 of the State of Delaware called the ‘Keys to Finan14 cial Success’. 

15 ‘‘(3) The program shall be funded by the Sec16 retary of the Treasury, out of funds appropriated to 

17 the Secretary, and administered by the State and 

18 the local school administration of each school se19 lected, based on criteria established by the Assistant 

20 Secretary, including an annual update of the mate21 rials used in the curriculum. 

22 ‘‘(c) REPORT.—Upon the completion of the 2-year 

23 pilot program, the Assistant Secretary shall submit to the 

24 Secretary of the Treasury and the Congress a report con25 taining a detailed description of the findings and conclu-
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1 sions of the Assistant Secretary with respect to the pilot 

2 program.’’. 

3 SEC. 4. ‘‘PLAIN LANGUAGE’’ DISCLOSURES. 

4 Section 122 of the Truth in Lending Act (15 U.S.C. 

5 1632) is amended by adding at the end the following new 

6 subsection: 

7 ‘‘(d) PLAIN AND SIMPLE LANGUAGE DISCLOSURES

8 REQUIRED FOR ALL DISCLOSURES.—The Board shall 

9 take such action as may be necessary to ensure that all 

10 disclosures that are required to be provided under this title 

11 with respect to any consumer credit transaction, including 

12 all the disclosures required under section 129, shall be 

13 simple and easy to understand and in a language under14 stood by the consumer.’’. 

15 SEC. 5. LIMITATION ON USURIOUS INTEREST RATES AND 

16 UNFAIR PRACTICES. 

17 (a) REPEAL OF PREEMPTION OF STATE MORTGAGE

18 USURY LAWS.— 

19 (1) IN GENERAL.—Sections 501, 511, 512, 525, 

20 526, 527, 528, and 529 of the Depository Institu21 tions Deregulation and Monetary Control Act of 

22 1980 are hereby repealed. 

23 (2) TECHNICAL AND CONFORMING AMEND24 MENTS.— 
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1 (A) INSURED DEPOSITORY INSTITU2 TIONS.—Section 27 of the Federal Deposit In3 surance Act (12 U.S.C. 1831d) is amended to 

4 read as follows: 

5 ‘‘SEC. 27. UNIFORM APPLICABILITY OF STATE LAW. 

6 ‘‘In order to prevent discrimination against State7 chartered insured depository institutions, including in8 sured savings banks and insured branches of foreign 

9 banks and notwithstanding any other provision of Federal 

10 law, the provision of the constitution or the laws of any 

11 State expressly limiting the rate or amount of interest, 

12 discount points, finance charges, or other charges which 

13 may be charged, taken, received, or reserved shall apply 

14 to all depository institutions that are located in, have any 

15 branch in, or do business in such State with respect to 

16 customers of any such institution which reside in or are 

17 located in such State.’’. 

18 (B) INSURED CREDIT UNIONS.—Section 

19 205(g) of the Federal Credit Union Act (12 

20 U.S.C. 1785(g)) is amended to read as follows: 

21 ‘‘(g) UNIFORM APPLICABILITY OF STATE LAW.—In 

22 order to prevent discrimination against State-chartered in23 sured credit unions and notwithstanding any other provi24 sion of Federal law, the provision of the constitution or 

25 the laws of any State expressly limiting the rate or amount 
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1 of interest, discount points, finance charges, or other 

2 charges which may be charged, taken, received, or re3 served shall apply to all credit unions that are located in, 

4 have any branch in, or do business in such State with re5 spect to customers of any such credit union which reside 

6 in or are located in such State.’’. 

7 (b) PROHIBITION ON LOAN ‘‘FLIPPING’’ AND MAN8 DATORY ARBITRATION.— 

9 (1) IN GENERAL.—Chapter 2 of the Truth in 

10 Lending Act (15 U.S.C. 1631 et seq.) is amended by 

11 inserting after section 129 the following new section: 

12 ‘‘§ 129A. Protections for all loans 

13 ‘‘(a) FLIPPING.— 

14 ‘‘(1) IN GENERAL.—No creditor may knowingly 

15 or intentionally engage in the unfair act or practice 

16 of flipping. 

17 ‘‘(2) FLIPPING DEFINED.—For purposes of this 

18 subsection, the term ‘flipping’ means the making of 

19 a loan or extension of credit to a consumer which re20 finances an existing loan or other extension of credit 

21 when the new loan or extension of credit does not 

22 have reasonable, tangible net benefit to the con23 sumer considering all of the circumstances, including 

24 the terms of both the new and the refinanced loans 
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1 or credit, the cost of the new loan or credit, and the 

2 consumer’s circumstances. 

3 ‘‘(3) TANGIBLE NET BENEFIT.—The Board 

4 may prescribe regulations, in the discretion of the 

5 Board, defining the term ‘tangible net benefit’ for 

6 purposes of this subsection. 

7 ‘‘(b) ARBITRATION.— 

8 ‘‘(1) IN GENERAL.—A loan or other extension 

9 of credit subject to this title may not include terms 

10 which require arbitration or any other nonjudicial 

11 procedure as the method for resolving any con12 troversy or settling any claims arising out of the 

13 transaction. 

14 ‘‘(2) POST-CONTROVERSY AGREEMENTS.—Sub15 ject to paragraph (3), paragraph (1) shall not be 

16 construed as limiting the right of the consumer and 

17 the creditor to agree to arbitration or any other non18 judicial procedure as the method for resolving any 

19 controversy at any time after a dispute or claim 

20 under the transaction arises. 

21 ‘‘(3) NO WAIVER OF STATUTORY CAUSE OF AC22 TION.—No provision of any loan or other extension 

23 of credit or any agreement between the consumer 

24 and the creditor shall be applied or interpreted so as 

25 to bar a consumer from bringing an action in an ap-
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1 propriate district court of the United States, or any 

2 other court of competent jurisdiction, pursuant to 

3 section 130 or any other provision of law, for dam4 ages or other relief in connection with any alleged 

5 violation of this section, any other provision of this 

6 title, or any other Federal law.’’. 

7 (2) CLERICAL AMENDMENT.—The table of sec8 tions for chapter 2 of the Truth in Lending Act is 

9 amended by inserting after the item relating to sec10 tion 129 the following new item: 

‘‘129A. Protections for all loans.’’. 

11 (3) REGULATIONS.—The Board of Governors of 

12 the Federal Reserve System shall publish regulations 

13 implementing the amendments made by this section 

14 in final form before the end of the 6-month period 

15 beginning on the date of enactment of this Act. 

16 (c) AMENDMENT TO DEFINITION OF HIGH COST

17 MORTGAGES.—Subparagraph (A) of section 103(aa)(1) of 

18 the Truth in Lending Act (15 U.S.C. 1602(aa)(1)(A)) is 

19 amended by striking ‘‘10 percentage points’’ and inserting 

20 ‘‘8 percentage points’’. 

21 (d) PRE-LOAN COUNSELING REQUIRED FOR HIGH

22 COST MORTGAGES.—Section 129 of the Truth in Lending 

23 Act (15 U.S.C. 1639) is amended by inserting after sub24 section (l) the following new subsection: 

25 ‘‘(m) PRE-LOAN COUNSELING.— 
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1 ‘‘(1) IN GENERAL.—A creditor may not extend 

2 credit to a consumer under a mortgage referred to 

3 in section 103(aa) without first receiving certifi4 cation from a counselor that is approved by the Sec5 retary of Housing and Urban Development, that the 

6 consumer has received— 

7 ‘‘(A) and successfully completed coun8 seling, in person or by telephone, on the advis9 ability of the loan transaction; and 

10 ‘‘(B) a general range of interest rates that 

11 the applicant qualifies for given their credit 

12 score. 

13 ‘‘(2) NONAFFILIATION RULE FOR COUN14 SELORS.—A counselor providing a certification to a 

15 creditor under paragraph (1) may not be employed 

16 by the creditor or an affiliate of the creditor or be 

17 affiliated with the creditor in any other manner (in18 cluding any referral agreement). 

19 ‘‘(3) DISCLOSURES REQUIRED PRIOR TO COUN20 SELING.—No counselor may certify that a borrower 

21 has received counseling on the advisability of the 

22 loan transaction unless the counselor can verify that 

23 the consumer has received each statement required 

24 (in connection with such loan) by this section, or by 
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1 the Real Estate Settlement Procedures Act of 1974, 

2 with respect to the transaction. 

3 ‘‘(4) REGULATIONS.—The Secretary of Housing 

4 and Urban Development may prescribe such regula5 tions as the Secretary determines to be appropriate 

6 to carry out the requirements of paragraph (1).’’. 

7 SEC. 6. LIMITATION ON ROLLOVERS OF PAYDAY LOANS. 

8 Section 128 of the Truth in Lending Act (15 U.S.C. 

9 1638) is amended by adding at the end the following new 

10 subsection: 

11 ‘‘(e) LIMITATIONS ON ROLLOVERS OR REFINANCING

12 OF PAYDAY LOANS WITH THE SAME CREDITOR.— 

13 ‘‘(1) IN GENERAL.—A payday lender— 

14 ‘‘(A) may not refinance or roll over any 

15 payday loan made by such lender, or any affil16 iate or other associate of the payday lender, to 

17 any consumer with another payday loan more 

18 than 3 times; and 

19 ‘‘(B) shall provide a consumer who seeks 

20 to refinance or roll over any payday loan made 

21 by such lender, or any affiliate or other asso22 ciate of the payday lender, to the consumer 

23 with another payday loan more than 2 times 

24 with a disclosure notice, which the Board shall 

25 prescribe by regulation, regarding the hazards 
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1 of payday lending and the benefits of banking 

2 traditionally, in prominent format and type-size, 

3 that is separate from the disclosures required 

4 under subsection (a) with regard to such exten5 sion of credit. 

6 ‘‘(2) DEFINITIONS.— 

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

8 any negotiable demand draft drawn on or pay9 able through an office of a depository institu10 tion (as defined in section 19(b)(1)(A) of the 

11 Federal Reserve Act) located in any State. 

12 ‘‘(B) PAYDAY LENDER.—The term ‘payday 

13 lender’ means any person who extends credit to 

14 any other person through a payday loan. 

15 ‘‘(C) PAYDAY LOAN.—The term ‘payday 

16 loan’ means means a transaction in which cred17 it is extended by a payday lender, for a speci18 fied period of time, upon receipt by the lender 

19 of— 

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

21 the amount of the credit extended, the pre22 sentment or negotiation of which, by mu23 tual agreement of the lender and borrower, 

24 will be deferred for such specified period; 

25 or 
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1 ‘‘(ii) authorization from the borrower 

2 for the payday lender to initiate an elec3 tronic fund transfer at the end of the spec4 ified period from the account of the bor5 rower for the amount of the credit ex6 tended.’’. 

7 SEC. 7. FAIR TREATMENT OF EMPLOYEE BENEFITS. 

8 (a) DEFINITION OF CLAIM.—Section 101(5) of title 

9 11, United States Code, is amended— 

10 (1) in subparagraph (A), by striking ‘‘or’’ at 

11 the end; 

12 (2) in subparagraph (B), by inserting ‘‘or’’ 

13 after the semicolon; and 

14 (3) by adding at the end the following: 

15 ‘‘(C) right or interest in equity securities 

16 of the debtor, or an affiliate of the debtor, held 

17 in a pension plan (within the meaning of sec18 tion 3(2) of the Employee Retirement Income 

19 Security Act of 1974 (29 U.S.C. 1002(2))) for 

20 the benefit of an individual who is not an offi21 cer or director of the debtor, if such securities 

22 were attributable to— 

23 ‘‘(i) employer contributions by the 

24 debtor or an affiliate of the debtor other 

25 than elective deferrals (within the meaning 
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1 of section 402(g) of the Internal Revenue 

2 Code of 1986), and any earnings thereon; 

3 and 

4 ‘‘(ii) elective deferrals (and any earn5 ings thereon) that are required to be in6 vested in such securities under the terms 

7 of the plan or at the direction of a person 

8 other than the individual or any bene9 ficiary, 

10 except that this subparagraph shall not apply to 

11 any such securities during any period during 

12 which the individual or any beneficiary has the 

13 right to direct the plan to divest such securities 

14 and to reinvest an equivalent amount in other 

15 investment options of the plan;’’. 

16 (b) PRIORITIES.—Section 507(a)(4) of title 11, 

17 United States Code, is amended— 

18 (1) in subparagraph (B), by indenting the left 

19 margin of clauses (i) and (ii) 2 ems to the right and 

20 redesignating such clauses as subclauses (I) and 

21 (II), respectively; 

22 (2) by indenting the left margin of subpara23 graphs (A) and (B) 2 ems to the right and redesig24 nating such subparagraphs as clauses (i) and (ii), 

25 respectively; 
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1 (3) in the matter preceding clause (i), as so re2 designated, by striking ‘‘Fourth’’ and all that follows 

3 through ‘‘plan—’’ and inserting the following: 

4 ‘‘Fourth—

5 ‘‘(A) allowed unsecured claims for con6 tributions to an employee benefit plan—’’. 

7 (4) by striking the period at the end and insert8 ing the following: ‘‘or’’; and 

9 (5) by adding at the end the following: 

10 ‘‘(B) allowed unsecured claims with respect 

11 to rights or interests in equity securities of the 

12 debtor, or an affiliate of the debtor, that are 

13 held in a pension plan (within the meaning of 

14 section 3(2) of the Employee Retirement In15 come Security Act of 1974), without regard to 

16 when services were rendered or limitation in 

17 amount, and measured by the market value of 

18 the stock at the time the stock was contributed 

19 to, or purchased by, the plan.’’. 

20 SEC. 8. WAGE PRIORITY AND EMPLOYEE BENEFIT CAP. 

21 Section 507(a) of title 11, United States Code, is 

22 amended—

23 (1) in paragraph (3), by striking ‘‘$4,000’’ and 

24 inserting ‘‘$13,500’’; and 
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1 (2) in paragraph (4)(B)(i), by striking 

2 ‘‘$4,000’’ and inserting ‘‘$13,500’’. 

3 SEC. 9. SUBORDINATION. 

4 Section 510(b) of title 11, United States Code, is 

5 amended by inserting ‘‘, other than a claim described in 

6 section 105(5)(C).’’ after ‘‘claim’’ the 1st place it appears. 

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