II 

108TH CONGRESS 

1ST SESSION S. 1928

To amend 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 

NOVEMBER 21, 2003

Mr. SARBANES (for himself, Mr. SCHUMER, Ms. STABENOW, Mr. CORZINE, 

Mr. DURBIN, Mr. KERRY, Ms. MIKULSKI, Mrs. CLINTON, Mr. LEVIN, 

Mr. LEAHY, Mr. AKAKA, Mr. KENNEDY, Mr. LAUTENBERG, Mr. DAYTON, and Mr. DODD) 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 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 2003’’. 
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1 SEC. 2. TRUTH IN LENDING ACT DEFINITIONS. 

2 (a) HIGH COST MORTGAGES.—

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

4 103(aa) of the Truth in Lending Act (15 U.S.C. 

5 1602(aa)) that precedes paragraph (2) is amended 

6 to read as follows: 

7 ‘‘(aa) MORTGAGE REFERRED TO IN THIS SUB8 SECTION.—

9 ‘‘(1) DEFINITION.—

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

11 to in this subsection means a consumer credit 

12 transaction—

13 ‘‘(i) that is secured by the principal 

14 dwelling of the consumer, other than a re15 verse mortgage transaction; and 

16 ‘‘(ii) the terms of which provide 

17 that—

18 ‘‘(I) the transaction is secured by 

19 a first mortgage on the principal 

20 dwelling of the consumer, and the an21 nual percentage rate on the credit, at 

22 the consummation of the transaction, 

23 will exceed by more than 6 percentage 

24 points the yield on Treasury securities 

25 having comparable periods of maturity 

26 on the 15th day of the month imme-
3

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1 diately preceding the month in which 

2 the application for the extension of 

3 credit is received by the creditor; 

4 ‘‘(II) the transaction is secured 

5 by a junior or subordinate mortgage 

6 on the principal dwelling of the con7 sumer, and the annual percentage 

8 rate on the credit, at the consumma9 tion of the transaction, will exceed by 

10 more than 8 percentage points the 

11 yield on Treasury securities having 

12 comparable periods of maturity on the 

13 15th day of the month immediately 

14 preceding the month in which the ap15 plication for the extension of credit is 

16 received by the creditor; or 

17 ‘‘(III) the total points and fees 

18 payable on the transaction will exceed 

19 the greater of 5 percent of the total 

20 loan amount, or $1,000, excluding not 

21 more than 2 bona fide discount 

22 points. 

23 ‘‘(B) INTRODUCTORY RATES NOT TAKEN

24 INTO ACCOUNT.—For purposes of subparagraph 
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1 (A)(ii), the annual percentage rate of interest 

2 shall be determined—

3 ‘‘(i) in the case of a fixed-rate loan in 

4 which the annual percentage rate will not 

5 vary during the term of the loan, as the 

6 rate in effect on the date of consummation 

7 of the transaction; 

8 ‘‘(ii) in the case of a loan in which the 

9 rate of interest varies according to an 

10 index, or is less than the rate of interest 

11 which will apply after the end of an initial 

12 or introductory period, by adding the index 

13 rate in effect on the date of consummation 

14 of the transaction to the maximum margin 

15 permitted at any time during the loan 

16 agreement; and 

17 ‘‘(iii) in the case of any other loan in 

18 which the rate may vary at any time dur19 ing the term of the loan for any reason, by 

20 including in the finance charge component 

21 of the annual percentage rate—

22 ‘‘(I) the interest charged on the 

23 loan at the maximum rate that may 

24 be charged during the term of the 

25 loan; and 
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1 ‘‘(II) any other applicable 

2 charges that would otherwise be in3 cluded in accordance with section 

4 106.’’.

5 (2) TECHNICAL AND CONFORMING AMEND6 MENT.—Section 103(aa)(2) of the Truth in Lending 

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

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

9 (B) by redesignating subparagraph (C) as 

10 subparagraph (B). 

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

12 Truth in Lending Act (15 U.S.C. 1602(aa)(4)) is amend13 ed—

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

15 the following: 

16 ‘‘(B) all compensation paid directly or indi17 rectly by a consumer or a creditor to a mort18 gage broker;’’; 

19 (2) by redesignating subparagraph (D) as sub20 paragraph (G); and 

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

22 the following: 

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

24 106(e) (except an escrow for future payment of 

25 taxes and insurance); 
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1 ‘‘(D) the cost of all premiums financed by 

2 the lender, directly or indirectly, for any credit

3 life, credit disability, credit unemployment or 

4 credit property insurance, or any other life or 

5 health insurance, or any payments financed by 

6 the lender, directly or indirectly, for any debt 

7 cancellation or suspension agreement or con8 tract, except that, for purposes of this subpara9 graph, insurance premiums or debt cancellation 

10 or suspension fees calculated and paid on a 

11 monthly basis shall not be considered financed 

12 by the lender; 

13 ‘‘(E) the maximum prepayment penalties 

14 that may be charged or collected under the 

15 terms of the loan documents; 

16 ‘‘(F) all prepayment fees or penalties that 

17 are charged to the borrower if the loan refi18 nances a previous loan made by the same cred19 itor or an affiliate of that creditor; and’’. 

20 (c) HIGH COST MORTGAGE LENDER.—Section 

21 103(f) of the Truth in Lending Act (15 U.S.C. 1602(f)) 

22 is amended by striking the last sentence and inserting 

23 ‘‘Any person who originates 2 or more mortgages referred 

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

25 who originates 1 or more such mortgages through a mort-
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1 gage broker or acted as a mortgage broker between origi2 nators and consumers on more than 5 mortgages referred

3 to in subsection (aa) within the preceding 12-month pe4 riod, and any creditor-affiliated party shall be considered 

5 to be a creditor for purposes of this title.’’. 

6 (d) BONA FIDE DISCOUNT POINTS AND BENCHMARK

7 RATE DEFINED.—Section 103 of the Truth in Lending 

8 Act (15 U.S.C. 1602) is amended by adding at the end 

9 the following: 

10 ‘‘(cc) OTHER INTEREST RATE RELATED TERMS.—

11 ‘‘(1) BENCHMARK RATE.—The term ‘bench12 mark rate’ means an interest rate that the borrower 

13 may reduce by paying bona fide discount points, not 

14 to exceed the weekly average yield of United States 

15 Treasury securities having a maturity of 5 years, on 

16 the 15th day of the month immediately preceding 

17 the month in which the loan is made, plus 5 percent18 age points. 

19 ‘‘(2) BONA FIDE DISCOUNT POINTS.—The term 

20 ‘bona fide discount points’ means loan discount 

21 points which are—

22 ‘‘(A) knowingly paid by the borrower; 

23 ‘‘(B) paid for the express purpose of low24 ering the benchmark rate; 
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1 ‘‘(C) in fact reducing the interest rate or 

2 time-price differential applicable to the loan 

3 from an interest rate which does not exceed the 

4 benchmark rate; and 

5 ‘‘(D) recouped within the first 4 years of 

6 the scheduled loan payments. 

7 ‘‘(3) RECOUPMENT.—For purposes of para8 graph (2)(D), loan discount points shall be consid9 ered to be recouped within the first 4 years of the 

10 scheduled loan payments if the reduction in the in11 terest rate that is achieved by the payment of the 

12 loan discount points reduces the interest charged on 

13 the scheduled payments, such that the dollar amount 

14 of savings in payments made by the borrower over 

15 the first 4 years is equal to or exceeds the dollar 

16 amount of loan discount points paid by the bor17 rower.’’. 

18 SEC. 3. AMENDMENTS TO EXISTING REQUIREMENTS FOR 

19 HIGH COST CONSUMER MORTGAGES. 

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

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

22 amended by adding at the end the following: 

23 ‘‘(C) ‘The interest rate on this loan is 

24 much higher than most people pay. This means 

25 the chance that you will lose your home is much 
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1 higher if you do not make all payments under 

2 the loan.’. 

3 ‘‘(D) ‘You may be able to get a loan with 

4 a much lower interest rate. Before you sign any 

5 papers, you have the right to go see a housing 

6 or consumer credit counseling agency, as well 

7 as to consult other lenders to find ways to get 

8 a cheaper loan.’. 

9 ‘‘(E) ‘If you are taking out this loan to 

10 repay other loans, look to see how many months 

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

12 total amount is that you will have to pay before 

13 this loan is repaid. Even though the total 

14 amount you will have to pay each month for 

15 this loan may be less than the total amount you 

16 are paying each month for those other loans, 

17 you may have to pay on this loan for many 

18 more months than those other loans which will 

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

20 (b) PREPAYMENT PENALTY PROVISIONS.—Section 

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

22 is amended to read as follows: 

23 ‘‘(c) PREPAYMENT PENALTY PROVISIONS.—

24 ‘‘(1) NO PREPAYMENT PENALTIES AFTER END

25 OF 24-MONTH PERIOD.—A mortgage referred to in 
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1 section 103(aa) may not contain terms under which 

2 a consumer must pay any prepayment penalty for

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

4 period beginning on the date the mortgage is con5 summated. 

6 ‘‘(2) NO PREPAYMENT PENALTIES IF MORE

7 THAN 3 PERCENT OF POINTS AND FEES WERE FI8 NANCED.—Subject to subsection (l)(1), a mortgage 

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

10 under which a consumer must pay any prepayment 

11 penalty for any payment made at or before the end 

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

13 if the creditor financed points or fees in connection 

14 with the consumer credit transaction in an amount 

15 equal to or greater than 3 percent of the total 

16 amount of credit extended in the transaction. 

17 ‘‘(3) LIMITED PREPAYMENT PENALTY FOR

18 EARLY REPAYMENT UNDER CERTAIN CIR19 CUMSTANCES.—Subject to paragraph (2), the terms 

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

21 contain terms under which a consumer must pay a 

22 prepayment penalty for any payment made at or be23 fore the end of the 24-month period referred to in 

24 paragraph (1) to the extent that the sum of the total 

25 amount of points or fees financed by the creditor, if 
11

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1 any, in connection with the consumer credit trans2 action and the total amount payable as a prepay3 ment penalty does not exceed the amount which is 

4 equal to 3 percent of the total amount of credit ex5 tended in the transaction. 

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

7 subsection, any method of computing a refund of un8 earned scheduled interest is a prepayment penalty if 

9 it is less favorable to the consumer than the actu10 arial method (as that term is defined in section 

11 933(d) of the Housing and Community Development 

12 Act of 1992). 

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

14 term ‘prepayment penalty’ means any monetary pen15 alty imposed on a consumer for paying all or part 

16 of the principal with respect to a consumer credit 

17 transaction before the date on which the principal is 

18 due.’’. 

19 (c) ALL BALLOON PAYMENTS PROHIBITED.—Section 

20 129(e) of the Truth in Lending Act (15 U.S.C. 1639(e)) 

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

22 years’’.

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

24 129(h) of the Truth in Lending Act (15 U.S.C. 1639(h)) 

25 is amended—
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•S 1928 IS 

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

2 inserting ‘‘CONSUMER.—

3 ‘‘(1) PROHIBITION ON PATTERNS AND PRAC4 TICES.—A creditor’’; and 

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

6 ‘‘(2) CASE-BY-CASE ASSESSMENTS OF CON7 SUMER ABILITY TO PAY REQUIRED.—

8 ‘‘(A) IN GENERAL.—In addition to the pro9 hibition in paragraph (1) on engaging in certain 

10 patterns and practices, a creditor may not ex11 tend any credit in connection with any mort12 gage referred to in section 103(aa) unless the 

13 creditor has determined, at the time such credit 

14 is extended, that 1 or more of the resident obli15 gors, when considered individually and collec16 tively, will be able to make the scheduled pay17 ments under the terms of the transaction based 

18 on a consideration of the current and expected 

19 income, current obligations, employment status, 

20 and other financial resources of any such obli21 gor, without taking into account any equity of 

22 any such obligor in the dwelling which is the se23 curity for the credit. 

24 ‘‘(B) REGULATIONS.—The Board shall 

25 prescribe, by regulation, the appropriate format 
13

•S 1928 IS 

1 for determining the ability of a consumer to 

2 make payments and the criteria to be consid3 ered in making that determination. 

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

5 of this paragraph, the term ‘resident obligor’ 

6 means an obligor for whom the dwelling secur7 ing the extension of credit is, or upon the con8 summation of the transaction will be, the prin9 cipal residence. 

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

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

12 been met unless any information relied upon by the 

13 creditor for purposes of any such paragraph has 

14 been verified by the creditor independently of infor15 mation provided by any resident obligor.’’. 

16 (e) REQUIREMENTS RELATING TO HOME IMPROVE17 MENT CONTRACTS.—Section 129(i) of the Truth in Lend18 ing Act (15 U.S.C. 1639(i)) is amended—

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

20 A creditor’’ and inserting ‘‘IMPROVEMENT CON21 TRACTS.—

22 ‘‘(1) IN GENERAL.—A creditor’’; and 

23 (2) by adding at the end the following: 

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

25 Notwithstanding any other provision of law, any as-
14

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1 signee or holder, in any capacity, of a mortgage re2 ferred to in section 103(aa) which was made, ar3 ranged, or assigned by a person financing home im4 provements to the dwelling of a consumer shall be 

5 subject to all affirmative claims and defenses which 

6 the consumer may have against the seller, home im7 provement contractor, broker, or creditor with re8 spect to such mortgage or home improvements.’’. 

9 (f) CLARIFICATION OF RESCISSION RIGHTS.—Sec10 tion 129(j) of the Truth in Lending Act (15 U.S.C. 

11 1639(j)) is amended to read as follows: 

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

13 ‘‘(1) IN GENERAL.—The consummation of a 

14 consumer credit transaction resulting in a mortgage 

15 referred to in section 103(aa) shall be treated as a 

16 failure to deliver the material disclosures required 

17 under this title for the purpose of section 125, if—

18 ‘‘(A) the mortgage contains a provision 

19 prohibited by this section or does not contain a 

20 provision required by this section; or 

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

22 comply with the provisions of this section, 

23 whether by an act or omission, with regard to 

24 such mortgage at any time. 
15

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1 ‘‘(2) RULE OF APPLICATION.—In any applica2 tion of section 125 to a mortgage described in sec3 tion 103(aa) under circumstances described in para4 graph (1), paragraphs (2) and (4) of section 125(e) 

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

6 SEC. 4. ADDITIONAL REQUIREMENTS FOR HIGH COST CON7 SUMER MORTGAGES. 

8 (a) SINGLE PREMIUM CREDIT INSURANCE.—Section 

9 129 of the Truth in Lending Act (15 U.S.C. 1639) is 

10 amended—

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

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

13 (2) by inserting after subsection (j), the fol14 lowing: 

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

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

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

18 no creditor or other person may require or allow in 

19 connection with any such mortgage, whether paid di20 rectly by the consumer or financed by the consumer 

21 through such mortgage—

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

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

24 credit disability, credit unemployment, or credit 
16

•S 1928 IS 

1 property insurance, and any analogous product; 

2 or

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

4 debt cancellation or suspension agreement or 

5 contract. 

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

7 shall not be construed as affecting the right of a 

8 creditor to collect premium payments on insurance 

9 or debt cancellation or suspension fees referred to in 

10 paragraph (1) that are calculated and paid on a reg11 ular monthly basis, if the insurance transaction is 

12 conducted separately from the mortgage transaction, 

13 the insurance may be canceled by the consumer at 

14 any time, and the insurance policy is automatically 

15 canceled upon repayment or other termination of the 

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

17 (b) RESTRICTION ON FINANCING POINTS AND

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

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

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

21 ‘‘(l) RESTRICTION ON FINANCING POINTS AND

22 FEES.—

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

24 THAT MAY BE FINANCED.—Subject to paragraphs 

25 (2) and (3) of subsection (c), no creditor may, in 
17

•S 1928 IS 

1 connection with the formation or consummation of a 

2 mortgage referred to in section 103(aa), finance, di3 rectly or indirectly, any portion of the points, fees, 

4 or other charges payable to the creditor or any third 

5 party in an amount in excess of the greater of 3 per6 cent of the total loan amount or $600. 

7 ‘‘(2) PROHIBITION ON FINANCING CERTAIN

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

9 connection with the formation or consummation of a 

10 mortgage referred to in section 103(aa), finance, di11 rectly or indirectly, any of the following fees or other 

12 charges payable to the creditor or any third party: 

13 ‘‘(A) Any prepayment fee or penalty re14 quired to be paid by the consumer in connection 

15 with a loan or other extension of credit which 

16 is being refinanced by such mortgage if the 

17 creditor, with respect to such mortgage, or any 

18 affiliate of the creditor, is the creditor with re19 spect to the loan or other extension of credit 

20 being refinanced. 

21 ‘‘(B) Any points, fees, or other charges re22 quired to be paid by the consumer in connection 

23 with such mortgage if—

24 ‘‘(i) the mortgage is being entered 

25 into in order to refinance an existing mort-
18

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1 gage of the consumer that is referred to in 

2 section 103(aa); and

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

4 such new mortgage, or any affiliate of the 

5 creditor, is the creditor with respect to the 

6 existing mortgage which is being refi7 nanced.’’. 

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

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

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

11 of this section) the following: 

12 ‘‘(m) CREDITOR CALL PROVISION.—

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

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

15 the indebtedness may be accelerated by the creditor, 

16 in the sole discretion of the creditor. 

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

18 apply when repayment of the loan has been acceler19 ated as a result of a bona fide default.’’. 

20 (d) PROHIBITION ON ACTIONS ENCOURAGING DE21 FAULT.—Section 129 of the Truth in Lending Act (15 

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

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

24 ‘‘(n) PROHIBITION ON ACTIONS ENCOURAGING DE25 FAULT.—No creditor may make any statement, take any 
19

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

2 with the formation or consummation of any mortgage re3 ferred to in section 103(aa) to refinance all or any portion 

4 of an existing loan or other extension of credit, if the state5 ment, action, or failure to act has the effect of encour6 aging or recommending the consumer to default on the 

7 existing loan or other extension of credit at any time be8 fore, or in connection with, the closing or any scheduled 

9 closing on such mortgage.’’. 

10 (e) MODIFICATION OR DEFERRAL FEES.—Section 

11 129 of the Truth in Lending Act (15 U.S.C. 1639) is 

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

13 subsection (d) of this section) the following: 

14 ‘‘(o) MODIFICATION OR DEFERRAL FEES.—

15 ‘‘(1) IN GENERAL.—Except as provided in para16 graph (2), a creditor may not charge any consumer 

17 with respect to a mortgage referred to in section 

18 103(aa) any fee or other charge—

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

20 such mortgage, or any provision of the terms of 

21 the mortgage; or 

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

23 under the terms of the mortgage. 

24 ‘‘(2) EXCEPTION FOR MODIFICATIONS FOR THE

25 BENEFIT OF THE CONSUMER.—Paragraph (1) shall 
20

•S 1928 IS 

1 not apply with respect to any fee imposed in connec2 tion with any action described in subparagraph (A) 

3 or (B) if—

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

5 to the consumer; and 

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

7 not exceed—

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

9 the total loan amount; or 

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

11 loan amount of the mortgage does not ex12 ceed $60,000, an amount in excess of 

13 $300.’’. 

14 (f) CONSUMER COUNSELING REQUIREMENTS.—Sec15 tion 129 of the Truth in Lending Act (15 U.S.C. 1639) 

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

17 subsection (e) of this section) the following: 

18 ‘‘(p) CONSUMER COUNSELING REQUIREMENT.—

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

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

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

22 has provided to the consumer, at such time before 

23 the consummation of the mortgage and in such man24 ner as the Board shall provide by regulation—
21

•S 1928 IS 

1 ‘‘(A) all warnings and disclosures regard2 ing the risks of the mortgage to the consumer;

3 ‘‘(B) a separate written statement recom4 mending that the consumer take advantage of 

5 available home ownership or credit counseling 

6 services before agreeing to the terms of any 

7 mortgage referred to in section 103(aa); and 

8 ‘‘(C) a written statement containing the 

9 names, addresses, and telephone numbers of 

10 counseling agencies or programs reasonably 

11 available to the consumer that have been cer12 tified or approved by the Secretary of Housing 

13 and Urban Development, a State housing fi14 nance authority (as defined in section 1301 of 

15 the Financial Institutions Reform, Recovery, 

16 and Enforcement Act of 1989), or the agency 

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

18 108 with jurisdiction over the creditor as quali19 fied to provide counseling on—

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

21 loan transaction; and 

22 ‘‘(ii) the appropriateness of a high 

23 cost loan for the consumer. 

24 ‘‘(2) COMPLETE AND UPDATED LISTS RE25 QUIRED.—Any failure to provide as complete or up-
22

•S 1928 IS 

1 dated a list under paragraph (1)(C) as is reasonably 

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

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

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

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

6 section) the following: 

7 ‘‘(q) ARBITRATION.—

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

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

10 arbitration or any other nonjudicial procedure as the 

11 method for resolving any controversy or settling any 

12 claims arising out of the transaction. 

13 ‘‘(2) POST-CONTROVERSY AGREEMENTS.—Sub14 ject to paragraph (3), paragraph (1) shall not be 

15 construed as limiting the right of the consumer and 

16 the creditor to agree to arbitration or any other non17 judicial procedure as the method for resolving any 

18 controversy at any time after a dispute or claim 

19 under the transaction arises. 

20 ‘‘(3) NO WAIVER OF STATUTORY CAUSE OF AC21 TION.—No provision of any mortgage referred to in 

22 section 103(aa) or any agreement between the con23 sumer and the creditor shall be applied or inter24 preted so as to bar a consumer from bringing an ac25 tion in an appropriate district court of the United 
23

•S 1928 IS 

1 States, or any other court of competent jurisdiction, 

2 pursuant to section 130 or any other provision of

3 law, for damages or other relief in connection with 

4 any alleged violation of this section, any other provi5 sion of this title, or any other Federal law.’’. 

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

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

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

9 of this section) the following: 

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

11 TRANSACTIONS, AND RECIPROCAL ARRANGEMENTS.—

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

13 any action—

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

15 circumvent or evade any requirement of this 

16 title, including entering into a reciprocal ar17 rangement with any other creditor or affiliate of 

18 another creditor or dividing a transaction into 

19 separate parts, for the purpose of evading or 

20 circumventing any such requirement; or 

21 ‘‘(B) with regard to any other loan or ex22 tension of credit for the purpose or with the in23 tent to evade the requirements of this title, in24 cluding structuring or restructuring a consumer 
24

•S 1928 IS 

1 credit transaction as another form of loan, such 

2 as a business loan. 

3 ‘‘(2) OTHER ACTIONS.—In addition to the ac4 tions prohibited under paragraph (1), a creditor may 

5 not take any action which the Board determines, by 

6 regulation, constitutes a bad faith effort to evade or 

7 circumvent any requirement of this section with re8 gard to a consumer credit transaction. 

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

10 such regulations as the Board determines to be ap11 propriate to prevent circumvention or evasion of the 

12 requirements of this section or to facilitate compli13 ance with the requirements of this section.’’. 

14 SEC. 5. AMENDMENTS RELATING TO RIGHT OF RESCIS15 SION. 

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

17 125(a) of the Truth in Lending Act (15 U.S.C. 1635(a)) 

18 is amended—

19 (1) by striking ‘‘(a) Except as otherwise pro20 vided’’ and inserting ‘‘(a) RIGHT ESTABLISHED.—

21 ‘‘(1) IN GENERAL.—Except as otherwise pro22 vided’’; and 

23 (2) by adding at the end the following: 

24 ‘‘(2) TIMING OF ELECTION OF WAIVER BY CON25 SUMER.—No election by a consumer to waive the 
25

•S 1928 IS 

1 right established under paragraph (1) to rescind a 

2 transaction shall be effective if—

3 ‘‘(A) the waiver was required by the cred4 itor as a condition for the transaction; 

5 ‘‘(B) the creditor advised or encouraged 

6 the consumer to waive such right of the con7 sumer; or 

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

9 the consumer about a waiver of such right dur10 ing the period beginning when the consumer 

11 provides written acknowledgement of the receipt 

12 of the disclosures and the delivery of forms and 

13 information required to be provided to the con14 sumer under paragraph (1) and ending at such 

15 time as the Board determines, by regulation, to 

16 be appropriate.’’. 

17 (b) NONCOMPLIANCE WITH REQUIREMENTS AS

18 RECOUPMENT IN FORECLOSURE PROCEEDING.—Section 

19 130(e) of the Truth in Lending Act (15 U.S.C. 1640(e)) 

20 is amended by inserting after the second sentence the fol21 lowing: ‘‘This subsection also does not bar a person from 

22 asserting a rescission under section 125, in an action to 

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

24 foreclosure after the expiration of the time periods for af-
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1 firmative actions set forth in this section and section 

2 125.’’.

3 SEC. 6. AMENDMENTS TO CIVIL LIABILITY PROVISIONS. 

4 (a) INCREASE IN AMOUNT OF CIVIL MONEY PEN5 ALTIES FOR CERTAIN VIOLATIONS.—Section 130(a) of 

6 the Truth in Lending Act (15 U.S.C. 1640(a)) is amend7 ed—

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

9 ‘‘$2,000’’ and inserting ‘‘$10,000’’; and 

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

11 $500,000 or 1 percentum of the net worth of the 

12 creditor’’ and inserting ‘‘the greater of—

13 ‘‘(i) the amount determined by multi14 plying the maximum amount of liability 

15 under subparagraph (A) for such failure to 

16 comply in an individual action by the num17 ber of members in the certified class; or 

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

19 the net worth of the creditor.’’. 

20 (b) STATUTE OF LIMITATIONS EXTENDED FOR SEC21 TION 129 VIOLATIONS.—Section 130(e) of the Truth in 

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

23 5(b) of this Act) is amended—
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•S 1928 IS 

1 (1) in the first sentence, by striking ‘‘Any ac2 tion’’ and inserting ‘‘Except as provided in the sub3 sequent sentence, any action’’; and 

4 (2) by inserting after the first sentence the fol5 lowing: ‘‘Any action under this section with respect 

6 to any violation of section 129 may be brought in 

7 any United States district court, or in any other 

8 court of competent jurisdiction, before the end of the 

9 3-year period beginning on the date of the occur10 rence of the violation.’’. 

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

12 Section 623 of the Fair Credit Reporting Act (15 

13 U.S.C. 1681s–2) is amended by adding at the end the fol14 lowing: 

15 ‘‘(e) DUTY OF CREDITORS WITH RESPECT TO HIGH

16 COST MORTGAGES.—

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

18 into a consumer credit transaction which is a mort19 gage referred to in section 103(aa), and each suc20 cessor to such creditor with respect to such trans21 action, shall report the complete payment history, 

22 favorable and unfavorable, of the obligor with re23 spect to such transaction to a consumer reporting 

24 agency that compiles and maintains files on con25 sumers on a nationwide basis at least quarterly, or 
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1 more frequently as required by regulation or in 

2 guidelines established by participants in the sec3 ondary mortgage market, while such transaction is 

4 in effect. 

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

6 (1), the term ‘credit’ and ‘creditor’ have the same 

7 meanings as in section 103 of the Truth in Lending 

8 Act (15 U.S.C. 1602).’’. 

9 SEC. 8. REGULATIONS. 

10 The Board of Governors of the Federal Reserve Sys11 tem shall publish regulations implementing this Act and 

12 the amendments made by this Act in final form before 

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

14 enactment of this Act.

Æ