I 

111TH CONGRESS 

2D SESSION H. R. 5689 

To amend the Truth in Lending Act to provide an interest rate cap and 

other requirements for creditors making covered loans, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

JULY 1, 2010 

Ms. GIFFORDS (for herself and Mr. POLIS of Colorado) introduced the 

following bill; which was referred to the Committee on Financial Services 

A BILL 

To amend the Truth in Lending Act to provide an interest 

rate cap and other requirements for creditors making 

covered loans, 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 ‘‘Predatory Lending 

5 Sunset Act’’. 

6 SEC. 2. COVERED LENDING. 

7 (a) IN GENERAL.—Chapter 2 of the Truth in Lend8 ing Act (15 U.S.C. 1631 et seq.) is amended— 

9 (1) by redesignating the second section 129 (as 

10 so designated by section 201(b) of the Helping FamVerDate Mar 15 2010 02:10 Jul 03, 2010 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H5689.IH H5689

pwalker on DSK8KYBLC1PROD with BILLS
2 

•HR 5689 IH

1 ilies Save Their Homes Act of 2009) as section 

2 129A; and 

3 (2) by inserting after section 129A, as so redes4 ignated, the following new section: 

5 ‘‘SEC. 129B. COVERED LENDING. 

6 ‘‘(a) MAXIMUM INTEREST RATE.—The maximum in7 terest rate a creditor may charge on a covered loan shall 

8 be the rate equal to an annual percentage rate of 36 per9 cent. 

10 ‘‘(b) PROHIBITION ON USING CERTAIN MEANS OF

11 ACCESS FOR SECURITY.—It shall be unlawful for any 

12 creditor to extend a covered loan with respect to which 

13 the creditor uses, as security for the obligation or as a 

14 condition of extending the credit— 

15 ‘‘(1) a check or other method of access to a de16 posit, savings, or other financial account maintained 

17 by the borrower; or 

18 ‘‘(2) the title of a vehicle. 

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

20 following definitions shall apply: 

21 ‘‘(1) ANNUAL PERCENTAGE RATE.—Notwith22 standing the manner described in section 107 for de23 termining the annual percentage rate, the term ‘an24 nual percentage rate’ means all charges payable di25 rectly or indirectly incident to, ancillary to, or as a 


pwalker on DSK8KYBLC1PROD with BILLS
3 

•HR 5689 IH

1 condition of the extension of a covered loan, includ2 ing— 

3 ‘‘(A) all fees which constitute a finance 

4 charge; and 

5 ‘‘(B) any other payments, fees or charges, 

6 including but not limited to application, mem7 bership and administrative fees, compensating a 

8 creditor for making the covered loan. 

9 ‘‘(2) COVERED LOAN.—The term ‘covered 

10 loan’— 

11 ‘‘(A) means a consumer credit transaction 

12 that— 

13 ‘‘(i) is unsecured by any interest in 

14 the consumer’s personal property; 

15 ‘‘(ii) is in an amount that does not ex16 ceed $3,000 or, in the case of a line of 

17 credit, a credit limit that does not exceed 

18 $3,000; 

19 ‘‘(iii) in the case of a closed end credit 

20 transaction, has a term of 91 days or less; 

21 and 

22 ‘‘(iv) in the case of an open end credit 

23 transaction— 

24 ‘‘(I) has an amortization period 

25 of 91 days or less; or 


pwalker on DSK8KYBLC1PROD with BILLS
4 

•HR 5689 IH

1 ‘‘(II) in the case of a line of cred2 it, the amount due in the first 91 

3 days, including finance charges, fees, 

4 service charges, renewals, credit insur5 ance premiums, and any other charge 

6 or premium with respect to the exten7 sion of credit, exceed 25 percent of 

8 the credit limit of the line of credit; 

9 and 

10 ‘‘(B) does not include a non-recourse ex11 tension of credit— 

12 ‘‘(i) extended by a pawn broker cred13 itor; and 

14 ‘‘(ii) secured by a possessory security 

15 interest in tangible goods physically deliv16 ered by the consumer to the pawn broker 

17 creditor, for which the consumer does not 

18 provide a written or electronic promise, 

19 order, or authorization to pay, or in any 

20 other manner authorize a debit of a de21 posit account, prior to or contempora22 neously with the disbursement of the origi23 nal proceeds and the creditor takes no se24 curity other than the goods and makes no 

25 effort to collect the credit. 


pwalker on DSK8KYBLC1PROD with BILLS
5 

•HR 5689 IH

1 ‘‘(3) CREDITOR.—Notwithstanding the defini2 tion of the term ‘creditor’ in section 103, the term 

3 ‘creditor’— 

4 ‘‘(A) means a person who makes or offers 

5 covered loans; and 

6 ‘‘(B) includes— 

7 ‘‘(i) any affiliate of a creditor that of8 fers or makes a covered loan, buys a whole 

9 or partial interest in a covered loan, ar10 ranges a covered loan for a third party, or 

11 acts as an agent for a third party in mak12 ing a covered loan, regardless of whether 

13 approval, acceptance, or ratification by the 

14 third party is necessary to create a legal 

15 obligation for the third party; and 

16 ‘‘(ii) any other person or entity that is 

17 engaged in a transaction that is in sub18 stance a disguised covered loan or a sub19 terfuge for the purpose of avoiding the re20 quirements of this section.’’. 

21 (b) CLOSING THE SINGLE PAYMENT LOOPHOLE.— 

22 Section 903(9) of the Electronic Fund Transfer Act (15 

23 U.S.C. 1693a(9)) is amended by striking ‘‘to recur at sub24 stantially regular intervals’’. 


pwalker on DSK8KYBLC1PROD with BILLS
6 

•HR 5689 IH

1 (c) REMOTELY CREATED CHECKS PROHIBITED.— 

2 Section 905 of the Electronic Fund Transfer Act (15 

3 U.S.C. 1693c) is amended by adding at the end the fol4 lowing new subsection: 

5 ‘‘(d) REMOTELY CREATED CHECKS PROHIBITED.— 

6 ‘‘(1) IN GENERAL.—No person shall deposit, 

7 pay, obtain payment with respect to, or otherwise 

8 negotiate a remotely created check. 

9 ‘‘(2) REMOTELY CREATED CHECK DEFINED.— 

10 For purposes of this subsection, the term ‘remotely 

11 created check’ means a check that— 

12 ‘‘(A) is not created by the financial institu13 tion that holds the customer account from 

14 which the check is to be paid; and 

15 ‘‘(B) does not bear a signature applied, or 

16 purported to be applied, by the person from 

17 whose account the check is to be paid.’’. 

18 (d) TREATMENT OF STATE LAW.—No provision of 

19 this Act or any amendment made by this Act shall be con20 strued as— 

21 (1) preempting any provision of State law, to 

22 the extent that such State law provides greater pro23 tection to consumers than is provided under such 

24 provision; 


pwalker on DSK8KYBLC1PROD with BILLS
7 

•HR 5689 IH

1 (2) preventing any State from enacting any 

2 provision of law that provides greater protection to 

3 consumers than is provided under such provision; 

4 (3) authorizing covered loans to be made in a 

5 State where they are otherwise not permitted under 

6 State law; or 

7 (4) authorizing an extension of credit at an an8 nual percentage rate that would be prohibited by ap9 plicable State law. 

10 (e) UNENFORCEABILITY OF CONTRACTS.—No con11 tract made in violation of this Act or any amendment 

12 made by this Act may be enforced with respect to any con13 sumer. 

14 (f) DEFINITIONS.—For purposes of this Act, the 

15 terms ‘‘consumer’’ and ‘‘covered loan’’ shall have the 

16 meaning given those terms under the Truth in Lending 

17 Act. 

18 (g) CLERICAL AMENDMENT.—The table of sections 

19 for chapter 2 of the Truth in Lending Act is amended 

20 by inserting after section 129 the follow new items: 

‘‘129A. Duty of servicers of residential mortgages. 

‘‘129B. Covered lending.’’. 

21 (h) EFFECTIVE DATE.—The amendments made by 

22 this Act shall take effect at the end of the 180-day period 

23 beginning on the date of the enactment of this Act and 


pwalker on DSK8KYBLC1PROD with BILLS
8 

•HR 5689 IH

1 shall apply to all covered loans initiated on or after such 

2 date. 

Æ 


pwalker on DSK8KYBLC1PROD with BILLS