II

106TH CONGRESS

2D SESSION S. 2415

To amend the Home Ownership and Equity Protection Act of 1994 and

other sections of the Truth in Lending Act to protect consumers against

predatory practices in connection with high cost mortgage transactions,

to strengthen the civil remedies available to consumers under existing

law, and for other purposes.

IN THE SENATE OF THE UNITED STATES

APRIL 12, 2000

Mr. SARBANES (for himself, Mr. DODD, Mr. SCHUMER, and Mr. KERRY) introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs

A BILL

To amend the Home Ownership and Equity Protection Act

of 1994 and other sections of the Truth in Lending

Act to protect consumers against predatory practices in

connection with high cost mortgage transactions, to

strengthen the civil remedies available to consumers

under existing law, 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 Consumer Protection Act of 2000’’.
2

•S 2415 IS

1 SEC. 2. AMENDMENTS TO DEFINITIONS IN TRUTH IN LEND2 ING ACT.

3 (a) HIGH COST MORTGAGES.—

4 (1) IN GENERAL.—The portion of section

5 103(aa) of the Truth in Lending Act (15 U.S.C.

6 1602(aa)) that precedes paragraph (2) of such sec7 tion is amended to read as follows:

8 ‘‘(aa) MORTGAGE REFERRED TO IN THIS SUB9 SECTION.—

10 ‘‘(1) DEFINITION.—

11 ‘‘(A) IN GENERAL.—A mortgage referred

12 to in this subsection means a consumer credit

13 transaction—

14 ‘‘(i) that is secured by the consumer’s

15 principal dwelling, other than a reverse

16 mortgage transaction; and

17 ‘‘(ii) the terms of which are described

18 in at least 1 of the following subclauses:

19 ‘‘(I) The transaction is secured

20 by a first mortgage on the consumer’s

21 principal dwelling and the annual per22 centage rate on the credit, at the con23 summation of the transaction, will ex24 ceed by more than 6 percentage

25 points the yield on Treasury securities

26 having comparable periods of maturity
3

•S 2415 IS

1 on the 15th day of the month imme2 diately preceding the month in which

3 the application for the extension of

4 credit is received by the creditor;

5 ‘‘(II) The transaction is secured

6 by a junior or subordinate mortgage

7 on the consumer’s principal dwelling

8 and the annual percentage rate on the

9 credit, at the consummation of the

10 transaction, will exceed by more than

11 8 percentage points the yield on

12 Treasury securities having comparable

13 periods of maturity on the 15th day of

14 the month immediately preceding the

15 month in which the application for the

16 extension of credit is received by the

17 creditor.

18 ‘‘(III) The total points and fees

19 payable on the transaction will exceed

20 the greater of 5 percent of the total

21 loan amount or $1,000.

22 ‘‘(B) INTRODUCTORY RATES NOT TAKEN

23 INTO ACCOUNT.—If the terms of any consumer

24 credit transaction that is secured by the con25 sumer’s principal dwelling offer, for any initial
4

•S 2415 IS

1 or introductory period, an annual percentage

2 rate of interest which—

3 ‘‘(i) is less than the annual percentage

4 rate of interest which will apply after the

5 end of such initial or introductory period;

6 or

7 ‘‘(ii) in the case of an annual percent8 age rate which varies in accordance with

9 an index, which is less than the current

10 annual percentage rate under the index

11 which will apply after the end of such pe12 riod,

13 the annual percentage rate of interest that shall

14 be taken into account for purposes of sub15 clauses (I) and (II) of subparagraph (A)(ii)

16 shall be the rate described in clause (i) or (ii)

17 of this subparagraph rather than any rate in ef18 fect during the initial or introductory period.’’.

19 (2) TECHNICAL AND CONFORMING AMEND20 MENT.—Section 103(aa)(2) of the Truth in Lending

21 Act (15 U.S.C. 1602(aa)(2)) is amended—

22 (A) by striking subparagraph (B); and

23 (B) by redesignating subparagraph (C) as

24 subparagraph (B).
5

•S 2415 IS

1 (b) POINTS AND FEES.—Section 103(aa)(4) of the

2 Truth in Lending Act (15 U.S.C. 1602(aa)(4)) is

3 amended—

4 (1) by striking subparagraph (B) and inserting

5 the following new subparagraph:

6 ‘‘(B) all compensation paid directly or indi7 rectly by a consumer or a creditor to a mort8 gage broker;’’;

9 (2) by redesignating subparagraph (D) as sub10 paragraph (F); and

11 (3) by striking subparagraph (C) and inserting

12 the following new subparagraphs:

13 ‘‘(C) each of the charges listed in section

14 106(e) (except an escrow for future payment of

15 taxes and insurance);

16 ‘‘(D) the cost of all premiums financed by

17 the lender, directly or indirectly, for any credit

18 life, credit disability, credit unemployment or

19 credit property insurance, or any other life or

20 health insurance, or any payments financed by

21 the lender, directly or indirectly, for any debt

22 cancellation or suspension agreement or con23 tract, except that, for purposes of this subpara24 graph, insurance premiums or debt cancellation

25 or suspension fees calculated and paid on a
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•S 2415 IS

1 monthly basis shall not be considered financed

2 by the lender;

3 ‘‘(E) any prepayment penalty (as defined

4 in section 129(c)(5)) or other fee paid by the

5 consumer in connection with an existing loan

6 which is being refinanced with the proceeds of

7 the consumer credit transaction; and’’.

8 (c) HIGH COST MORTGAGE LENDER.—

9 (1) IN GENERAL.—Section 103(f) of the Truth

10 in Lending Act (15 U.S.C. 1602(f)) is amended by

11 striking the last sentence and inserting ‘‘Any person

12 who originates 2 or more mortgages referred to in

13 subsection (aa) in any 12-month period, any person

14 who originates 1 or more such mortgages through a

15 mortgage broker or acted as a mortgage broker be16 tween originators and consumers on more than 5

17 mortgages referred to in subsection (aa) within the

18 preceding 12-month period, and any creditor-affili19 ated party shall be considered to be a creditor for

20 purposes of this title.’’.

21 (2) CREDITOR-AFFILIATED PARTY DEFINED.—

22 Section 103 of the Truth in Lending Act (15 U.S.C.

23 1602) is amended by adding at the end the following

24 new subsection:
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•S 2415 IS

1 ‘‘(cc) CREDITOR-AFFILIATED PARTY.—The term

2 ‘‘creditor-affiliated party’’ means—

3 (1) any director, officer, employee, or control4 ling stockholder of, or agent for, a creditor;

5 (2) in the case of a creditor which is an insured

6 depository institution, any other person who has

7 filed or is required to file a change-in-control notice

8 with the appropriate Federal banking agency under

9 section 7(j) of the Federal Deposit Insurance Act;

10 and

11 (3) any shareholder, consultant, joint venture

12 partner, and any other person, including any inde13 pendent contractor (such as an attorney, appraiser,

14 or accountant), who participates in the conduct of

15 the affairs of, or controls the lending practices of, a

16 creditor, as determined (by regulation or on a case17 by-case) by the appropriate Federal agency under

18 subsection (a) or (c) of section 108 with respect to

19 the creditor.’’.

20 SEC. 3. AMENDMENTS TO EXISTING REQUIREMENTS FOR

21 HIGH COST CONSUMER MORTGAGES.

22 (a) ADDITIONAL DISCLOSURES.—Section 129(a)(1)

23 of the Truth in Lending Act (15 U.S.C. 1639(a)(1)) is

24 amended by adding at the end the following new subpara25 graphs:
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1 ‘‘(D) ‘The interest rate on this loan is

2 much higher than most people pay. This means

3 the chance that you will lose your home is much

4 higher if you do not make all payments under

5 the loan.’.

6 ‘‘(E) ‘You may be able to get a loan with

7 a much lower interest rate. Before you sign any

8 papers, you have the right to go see a credit

9 and debt counseling service and to consult other

10 lenders to find ways to get a cheaper loan.’.

11 ‘‘(F) ‘If you are taking out this loan to

12 repay other loans, look to see how many months

13 it will take to pay for this loan and what the

14 total amount is that you will have to pay before

15 this loan is repaid. Even though the total

16 amount you will have to pay each month for

17 this loan may be less than the total amount you

18 are paying each month for those other loans,

19 you may have to pay on this loan for many

20 more months than those other loans which will

21 cost you more money in the end.’ ’’.

22 (b) PREPAYMENT PENALTY PROVISIONS.—Section

23 129(c) of the Truth in Lending Act (15 U.S.C. 1639(c))

24 is amended to read as follows:

25 ‘‘(c) PREPAYMENT PENALTY PROVISIONS.—
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•S 2415 IS

1 ‘‘(1) NO PREPAYMENT PENALTIES AFTER END

2 OF 24-MONTH PERIOD.—A mortgage referred to in

3 section 103(aa) may not contain terms under which

4 a consumer must pay any prepayment penalty for

5 any payment made after the end of the 24-month

6 period beginning on the date the mortgage is con7 summated.

8 ‘‘(2) NO PREPAYMENT PENALTIES IF MORE

9 THAN 3 PERCENT OF POINTS AND FEES WERE FI10 NANCED.—Subject to subsection (l)(1), a mortgage

11 referred to in section 103(aa) may not contain terms

12 under which a consumer must pay any prepayment

13 penalty for any payment made at or before the end

14 of the 24-month period referred to in paragraph (1)

15 if the creditor financed points or fees in connection

16 with the consumer credit transaction in an amount

17 equal to or greater than 3 percent of the total

18 amount of credit extended in the transaction.

19 ‘‘(3) LIMITED PREPAYMENT PENALTY FOR

20 EARLY REPAYMENT UNDER CERTAIN CIR21 CUMSTANCES.—Subject to paragraph (2), the terms

22 of a mortgage referred to in section 103(aa) may

23 contain terms under which a consumer must pay a

24 prepayment penalty for any payment made at or be25 fore the end of the 24-month period referred to in
10

•S 2415 IS

1 paragraph (1) to the extent the sum of total amount

2 of points or fees financed by the creditor, if any, in

3 connection with the consumer credit transaction and

4 the total amount payable as a prepayment penalty

5 does not exceed the amount which is equal to 3 per6 cent of the total amount of credit extended in the

7 transaction.

8 ‘‘(4) CONSTRUCTION.—For purposes of this

9 subsection, any method of computing a refund of un10 earned scheduled interest is a prepayment penalty if

11 it is less favorable to the consumer than the actu12 arial method (as that term is defined in section

13 933(d) of the Housing and Community Development

14 Act of 1992).

15 ‘‘(5) PREPAYMENT PENALTY DEFINED.—The

16 term ‘prepayment penalty’ means any monetary pen17 alty imposed on a consumer for paying all or part

18 of the principal with respect to a consumer credit

19 transaction before the date on which the principal is

20 due.’’.

21 (c) ALL BALLOON PAYMENTS PROHIBITED.—Section

22 129(e) of the Truth in Lending Act (15 U.S.C. 1639(e))

23 is amended by striking ‘‘having a term of less than 5

24 years’’.
11

•S 2415 IS

1 (d) ASSESSMENT OF ABILITY TO REPAY.—Section

2 129(h) of the Truth in Lending Act (15 U.S.C. 1639(h))

3 is amended—

4 (1) by striking ‘‘CONSUMER.—A creditor’’ and

5 inserting ‘‘CONSUMER.—

6 ‘‘(1) PROHIBITION ON PATTERNS AND PRAC7 TICES.—A creditor’’; and

8 (2) by adding at the end the following new

9 paragraphs:

10 ‘‘(2) CASE-BY-CASE ASSESSMENTS OF CON11 SUMER ABILITY TO PAY REQUIRED.—

12 ‘‘(A) IN GENERAL.—In addition to the pro13 hibition in paragraph (1) on engaging in certain

14 patterns and practices, a creditor may not ex15 tend any credit in connection with any mort16 gage referred to in section 103(aa) unless the

17 creditor has determined, at the time such credit

18 is extended, that 1 or more of the resident obli19 gors, when considered individually and collec20 tively, will be able to make the scheduled pay21 ments under the terms of the transaction based

22 on a consideration of their current and expected

23 income, current obligations, employment status,

24 and other financial resources, without taking
12

•S 2415 IS

1 into account any equity of any such obligor in

2 the dwelling which is the security for the credit.

3 ‘‘(B) REGULATIONS.—The Board shall

4 prescribe, by regulation the appropriate format

5 for determining a consumer’s ability to pay and

6 the criteria to be considered in making any

7 such determination.

8 ‘‘(C) RESIDENT OBLIGOR.—For purposes

9 of this paragraph, the term ‘resident obligor’

10 means an obligor for whom the dwelling secur11 ing the extension of credit is, or upon the con12 summation of the transaction will be, the prin13 cipal residence.

14 ‘‘(3) VERIFICATION.—The requirements of

15 paragraphs (1) and (2) shall not be deemed to have

16 been met unless any information relied upon by the

17 creditor for purposes of any such paragraph has

18 been verified by the creditor independently of infor19 mation provided by any resident obligor.’’.

20 (e) REQUIREMENTS RELATING TO HOME IMPROVE21 MENT CONTRACTS.—Section 129(i) of the Truth in Lend22 ing Act (15 U.S.C. 1639(i)) is amended—

23 (1) by striking ‘‘IMPROVEMENT CONTRACTS.—

24 A creditor’’ and inserting ‘‘IMPROVEMENT CON25 TRACTS.—
13

•S 2415 IS

1 ‘‘(1) IN GENERAL.—A creditor’’; and

2 (2) by adding at the end the following new

3 paragraph:

4 ‘‘(2) AFFIRMATIVE CLAIMS AND DEFENSES.—

5 Notwithstanding any other provision of law, any as6 signee or holder, in any capacity, of a mortgage re7 ferred to in section 103(aa) which was made, ar8 ranged, or assigned by a person financing home im9 provements to the dwelling of a consumer shall be

10 subject to all affirmative claims and defenses which

11 the consumer may have against the seller, home im12 provement contractor, broker, or creditor with re13 spect to such mortgage or home improvements.’’.

14 (f) CLARIFICATION OF RESCISSION RIGHTS.—Sec15 tion 129(j) of the Truth in Lending Act (15 U.S.C.

16 1639(j)) is amended to read as follows:

17 ‘‘(j) CONSEQUENCE OF FAILURE TO COMPLY.—

18 ‘‘(1) IN GENERAL.—If, in the case of a mort19 gage referred to in section 103(aa)—

20 ‘‘(A) the mortgage contains a provision

21 prohibited by this section or does not contain a

22 provision required by this section; or

23 ‘‘(B) a creditor or other person fails to

24 comply with the provisions of this section,
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•S 2415 IS

1 whether by an act or omission, with regard to

2 such mortgage at any time,

3 the consummation of the consumer credit trans4 action resulting in such mortgage shall be treated as

5 a failure to deliver the material disclosures required

6 under this title for the purpose of section 125.

7 ‘‘(2) RULE OF APPLICATION.—In any applica8 tion of section 125 to a mortgage described in sec9 tion 103(aa) under circumstances described in para10 graph (1), paragraphs (2) and (4) of section 125(e)

11 shall not apply or be taken into account.’’.

12 SEC. 4. ADDITIONAL REQUIREMENTS FOR HIGH COST CON13 SUMER MORTGAGES.

14 (a) SINGLE PREMIUM CREDIT INSURANCE.—Section

15 129 of the Truth in Lending Act (15 U.S.C. 1639) is

16 amended—

17 (1) by redesignating subsections (k) and (l) as

18 subsections (s) and (t), respectively; and

19 (2) by inserting after subsection (j), the fol20 lowing new subsection:

21 ‘‘(k) SINGLE PREMIUM CREDIT INSURANCE.—

22 ‘‘(1) IN GENERAL.—The terms of a mortgage

23 referred to in section 103(aa) may not require, and

24 no creditor or other person may require or allow—
15

•S 2415 IS

1 ‘‘(A) the advance collection of a premium,

2 on a single premium basis, for any credit life,

3 credit disability, credit unemployment, or credit

4 property insurance, and any analogous product;

5 or

6 ‘‘(B) the advance collection of a fee for any

7 debt cancellation or suspension agreement or

8 contract,

9 in connection with any such mortgage, whether such

10 premium or fee is paid directly by the consumer or

11 is financed by the consumer through such mortgage.

12 ‘‘(2) RULE OF CONSTRUCTION.—Paragraph (1)

13 shall not be construed as affecting the right of a

14 creditor to collect premium payments on insurance

15 or debt cancellation or suspension fees referred to in

16 paragraph (1) that are calculated and paid on a reg17 ular monthly basis, if the insurance transaction is

18 conducted separately from the mortgage transaction,

19 the insurance may be canceled by the consumer at

20 any time, and the insurance policy is automatically

21 canceled upon repayment or other termination of the

22 mortgage referred to in paragraph (1).’’.

23 (b) RESTRICTION ON FINANCING POINTS AND

24 FEES.—Section 129 of the Truth in Lending Act (15

25 U.S.C. 1639) is amended by inserting after subsection (k)
16

•S 2415 IS

1 (as added by subsection (a) of this section) the following

2 new subsection:

3 ‘‘(l) RESTRICTION ON FINANCING POINTS AND

4 FEES.—

5 ‘‘(1) LIMIT ON AMOUNT OF POINTS AND FEES

6 THAT MAY BE FINANCED.—Subject to paragraphs

7 (2) and (3) of subsection (c), no creditor may, in

8 connection with the formation or consummation of a

9 mortgage referred to in section 103(aa), finance, di10 rectly or indirectly, any portion of the points, fees,

11 or other charges payable to the creditor or any third

12 party in an amount in excess of the greater of 3 per13 cent of the total loan amount or $600.

14 ‘‘(2) PROHIBITION ON FINANCING CERTAIN

15 POINTS, FEES, OR CHARGES.—No creditor may, in

16 connection with the formation or consummation of a

17 mortgage referred to in section 103(aa), finance, di18 rectly or indirectly, any of the following fees or other

19 charges payable to the creditor or any third party:

20 ‘‘(A) Any prepayment fee or penalty re21 quired to be paid by the consumer in connection

22 with a loan or other extension of credit which

23 is being refinanced by such mortgage if the

24 creditor, with respect to such mortgage, or any

25 affiliate of the creditor, is the creditor with re-
17

•S 2415 IS

1 spect to the loan or other extension of credit

2 being refinanced.

3 ‘‘(B) Any points, fees, or other charges re4 quired to be paid by the consumer in connection

5 with such mortgage if—

6 ‘‘(i) the mortgage is being entered

7 into in order to refinance an existing mort8 gage of the consumer that is referred to in

9 section 103(aa); and

10 ‘‘(ii) if the creditor, with respect to

11 such new mortgage, or any affiliate of the

12 creditor, is the creditor with respect to the

13 existing mortgage which is being refi14 nanced.’’.

15 (c) CREDITOR CALL PROVISION.—Section 129 of the

16 Truth in Lending Act (15 U.S.C. 1639) is amended by

17 inserting after subsection (l) (as added by subsection (b)

18 of this section) the following new subsection:

19 ‘‘(m) CREDITOR CALL PROVISION.—

20 ‘‘(1) IN GENERAL.—A mortgage referred to in

21 section 103(aa) may not include terms under which

22 the indebtedness may be accelerated by the creditor,

23 in the creditor’s sole discretion.
18

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1 ‘‘(2) EXCEPTION.—Paragraph (1) shall not

2 apply when repayment of the loan has been acceler3 ated as a result of a bona fide default.’’.

4 (d) PROHIBITION ON ACTIONS ENCOURAGING DE5 FAULT.—Section 129 of the Truth in Lending Act (15

6 U.S.C. 1639) is amended by inserting after subsection (m)

7 (as added by subsection (c) of this section) the following

8 new subsection:

9 ‘‘(n) PROHIBITION ON ACTIONS ENCOURAGING DE10 FAULT.—No creditor may make any statement, take any

11 action, or fail to take any action before or in connection

12 with the formation or consummation of any mortgage re13 ferred to in section 103(aa) to refinance all or any portion

14 of an existing loan or other extension of credit, if the state15 ment, action, or failure to act has the effect of encour16 aging or recommending the consumer to default on the

17 existing loan or other extension of credit at any time be18 fore, or in connection with, the closing or any scheduled

19 closing on such mortgage.’’.

20 (e) MODIFICATION OR DEFERRAL FEES.—Section

21 129 of the Truth in Lending Act (15 U.S.C. 1639) is

22 amended by inserting after subsection (n) (as added by

23 subsection (d) of this section) the following new sub24 section:

25 ‘‘(o) MODIFICATION OR DEFERRAL FEES.—
19

•S 2415 IS

1 ‘‘(1) IN GENERAL.—Except as provided in para2 graph (2), a creditor may not charge any consumer

3 with respect to a mortgage referred to in section

4 103(aa) any fee or other charge—

5 ‘‘(A) to modify, renew, extend, or amend

6 such mortgage, or any provision of the terms of

7 the mortgage; or

8 ‘‘(B) to defer any payment otherwise due

9 under the terms of the mortgage.

10 ‘‘(2) EXCEPTION FOR MODIFICATIONS FOR THE

11 BENEFIT OF THE CONSUMER.—Paragraph (1) shall

12 not apply with respect to any fee imposed in connec13 tion with any action described in subparagraph (A)

14 or (B) if—

15 ‘‘(A) the action provides a material benefit

16 to the consumer; and

17 ‘‘(B) the amount of the fee or charge does

18 not exceed—

19 ‘‘(i) an amount equal to 0.5 percent of

20 the total loan amount; or

21 ‘‘(ii) in any case in which the total

22 loan amount of the mortgage does not ex23 ceed $60,000, an amount in excess of

24 $300.’’.
20

•S 2415 IS

1 (f) CONSUMER COUNSELING REQUIREMENTS.—Sec2 tion 129 of the Truth in Lending Act (15 U.S.C. 1639)

3 is amended by inserting after subsection (o) (as added by

4 subsection (e) of this section) the following new sub5 section:

6 ‘‘(p) CONSUMER COUNSELING REQUIREMENT.—

7 ‘‘(1) IN GENERAL.—A creditor may not extend

8 any credit in the form of a mortgage referred to in

9 section 103(aa) to any consumer, unless the creditor

10 has provided to the consumer, at such time before

11 the consummation of the mortgage and in such man12 ner as the Board shall provide by regulation, all of

13 the following:

14 ‘‘(A) All warnings and disclosures regard15 ing the risks of the mortgage to the consumer.

16 ‘‘(B) A separate written statement recom17 mending that the consumer take advantage of

18 available home ownership or credit counseling

19 services before agreeing to the terms of any

20 mortgage referred to in section 103(aa).

21 ‘‘(C) A written statement containing the

22 names, addresses, and telephone numbers of

23 counseling agencies or programs reasonably

24 available to the consumer that have been cer25 tified or approved by the Secretary of Housing
21

•S 2415 IS

1 and Urban Development, a State housing fi2 nance authority (as defined in section 1301 of

3 the Financial Institutions Reform, Recovery,

4 and Enforcement Act of 1989), or the agency

5 referred to in subsection (a) or (c) of section

6 108 with jurisdiction over the creditor as quali7 fied to provide counseling on—

8 ‘‘(i) the advisability of a high cost

9 loan transaction; and

10 ‘‘(ii) the appropriateness of a high

11 cost loan for the consumer.

12 ‘‘(D) COMPLETE AND UPDATED LISTS RE13 QUIRED.—Any failure to provide as complete or up14 dated a list under paragraph (1)(C) as is reasonably

15 possible shall constitute a violation of this section.’’.

16 (g) ARBITRATION.—Section 129 of the Truth in

17 Lending Act (15 U.S.C. 1639) is amended by inserting

18 after subsection (p) (as added by subsection (f) of this

19 section) the following new subsection:

20 ‘‘(q) ARBITRATION.—

21 ‘‘(1) IN GENERAL.—A mortgage referred to in

22 section 103(aa) may not include terms which require

23 arbitration or any other nonjudicial procedure as the

24 method for resolving any controversy or settling any

25 claims arising out of the transaction.
22

•S 2415 IS

1 ‘‘(2) POST-CONTROVERSY AGREEMENTS.—Sub2 ject to paragraph (3), paragraph (1) shall not be

3 construed as limiting the right of the consumer and

4 the creditor to agree to arbitration or any other non5 judicial procedure as the method for resolving any

6 controversy at any time after a dispute or claim

7 under the transaction arises.

8 ‘‘(3) NO WAIVER OF STATUTORY CAUSE OF AC9 TION.—No provision of any mortgage referred to in

10 section 103(aa) or any agreement between the con11 sumer and the creditor shall be applied or inter12 preted so as to bar a consumer from bringing an ac13 tion in an appropriate district court of the United

14 States, or any other court of competent jurisdiction,

15 pursuant to section 130 or any other provision of

16 law, for damages or other relief in connection with

17 any alleged violation of this section, any other provi18 sion of this title, or any other Federal law.’’.

19 (h) PROHIBITION ON EVASIONS.—Section 129 of the

20 Truth in Lending Act (15 U.S.C. 1639) is amended by

21 inserting after subsection (q) (as added by subsection (g)

22 of this section) the following new subsection:

23 ‘‘(r) PROHIBITIONS ON EVASIONS, STRUCTURING OF

24 TRANSACTIONS, AND RECIPROCAL ARRANGEMENTS.—
23

•S 2415 IS

1 ‘‘(1) IN GENERAL.—A creditor may not take

2 any action—

3 ‘‘(A) for the purpose or with the intent to

4 circumvent or evade any requirement of this

5 title, including entering into a reciprocal ar6 rangement with any other creditor or affiliate of

7 another creditor or dividing a transaction into

8 separate parts, for the purpose of evading or

9 circumventing any such requirement; or

10 ‘‘(B) with regard to any other loan or ex11 tension of credit for the purpose or with the in12 tent to evade the requirements of this title, in13 cluding structuring or restructuring a consumer

14 credit transaction as another form of loan, such

15 as a business loan.

16 ‘‘(2) OTHER ACTIONS.—In addition to the ac17 tions prohibited under paragraph (1), a creditor may

18 not take any action which the Board determines, by

19 regulation, constitutes a bad faith effort to evade or

20 circumvent any requirement of this section with re21 gard to a consumer credit transaction.

22 ‘‘(3) REGULATIONS.—The Board shall prescribe

23 such regulations as the Board determines to be ap24 propriate to prevent circumvention or evasion of the
24

•S 2415 IS

1 requirements of this section or to facilitate compli2 ance with the requirements of this section.’’.

3 SEC. 5. AMENDMENTS RELATING TO RIGHT OF RESCIS4 SION.

5 (a) TIMING OF WAIVER BY CONSUMER.—Section

6 125(a) of the Truth in Lending Act (15 U.S.C. 1635(a))

7 is amended—

8 (1) by striking ‘‘(a) Except as otherwise pro9 vided’’ and inserting ‘‘(a) RIGHT ESTABLISHED.—

10 ‘‘(1) IN GENERAL.—Except as otherwise pro11 vided’’; and

12 (2) by adding at the end the following new

13 paragraph:

14 ‘‘(2) TIMING OF ELECTION OF WAIVER BY CON15 SUMER.—No election by a consumer to waive the

16 right established under paragraph (1) to rescind a

17 transaction shall be effective if—

18 ‘‘(A) the waiver was required by the cred19 itor as a condition for the transaction;

20 ‘‘(B) the creditor advised or encouraged

21 the consumer to waive such right of the con22 sumer; or

23 ‘‘(C) the creditor had any discussion with

24 the consumer about a waiver of such right dur25 ing the period beginning when the consumer
25

•S 2415 IS

1 provides written acknowledgement of the receipt

2 of the disclosures and the delivery of forms and

3 information required to be provided to the con4 sumer under paragraph (1) and ending at such

5 time as the Board determines, by regulation, to

6 be appropriate.’’.

7 (b) NONCOMPLIANCE WITH REQUIREMENTS AS

8 RECOUPMENT IN FORECLOSURE PROCEEDING.—Section

9 130(e) of the Truth in Lending Act (15 U.S.C. 1640(e))

10 is amended by inserting after the 2d sentence the following

11 new sentence: ‘‘This subsection also does not bar a person

12 from asserting a rescission under section 125, in an action

13 to collect the debt as a defense to a judicial or nonjudicial

14 foreclosure after the expiration of the time periods for af15 firmative actions set forth in this section and section

16 125.’’.

17 SEC. 6. AMENDMENTS TO CIVIL LIABILITY PROVISIONS.

18 (a) INCREASE IN AMOUNT OF CIVIL MONEY PEN19 ALTIES FOR CERTAIN VIOLATIONS.—Section 130(a) of

20 the Truth in Lending Act (15 U.S.C. 1640) is amended—

21 (1) in paragraph (2)(A)(iii), by striking

22 ‘‘$2,000’’ and inserting ‘‘$10,000’’; and

23 (2) in paragraph (2)(B), by striking ‘‘lesser of

24 $500,000 or 1 percentum of the net worth of the

25 creditor’’ and inserting ‘‘the greater of—
26

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1 ‘‘(i) the amount determined by multi2 plying the maximum amount of liability

3 under subparagraph (A) for such failure to

4 comply in an individual action by the num5 ber of members in the certified class; or

6 ‘‘(ii) the amount equal to 2 percent of

7 the net worth of the creditor.’’.

8 (b) STATUTE OF LIMITATIONS EXTENDED FOR SEC9 TION 129 VIOLATIONS.—Section 130(e) of the Truth in

10 Lending Act (15 U.S.C. 1640(e)) (as amended by section

11 5(b) of this Act) is amended—

12 (1) in the 1st sentence, by striking ‘‘Any ac13 tion’’ and inserting ‘‘Except as provided in the sub14 sequent sentence, any action’’; and

15 (2) by inserting after the 1st sentence the fol16 lowing new sentence: ‘‘Any action under this section

17 with respect to any violation of section 129 may be

18 brought in any United States district court, or in

19 any other court of competent jurisdiction, before the

20 end of the 3-year period beginning on the date of the

21 occurrence of the violation.’’.

22 SEC. 7. AMENDMENT TO FAIR CREDIT REPORTING ACT.

23 Section 623 of the Fair Credit Reporting Act (15

24 U.S.C. 1681s–2) is amended by adding at the end the fol25 lowing new subsection:
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1 ‘‘(e) DUTY OF CREDITORS WITH RESPECT TO HIGH

2 COST MORTGAGES.—

3 ‘‘(1) IN GENERAL.—Each creditor who enters

4 into a consumer credit transaction which is a mort5 gage referred to in section 103(aa), and each suc6 cessor to such creditor with respect to such trans7 action, shall report the complete payment history,

8 favorable and unfavorable, of the obligor with re9 spect to such transaction to a consumer reporting

10 agency that compiles and maintains files on con11 sumers on a nationwide basis at least quarterly, or

12 more frequently as required by regulation or in

13 guidelines established by participants in the sec14 ondary mortgage market, while such transaction is

15 in effect.

16 ‘‘(2) DEFINITIONS.—For purposes of paragraph

17 (1), the terms ‘credit’ and ‘creditor’ have the same

18 meanings as in section 103.’’.

19 SEC. 8. REGULATIONS.

20 The Board of Governors of the Federal Reserve Sys21 tem shall publish regulations implementing this Act, and

22 the amendments made by this Act, in final form before

23 the end of the 6-month period beginning on the date of

24 the enactment of this Act.

Æ