II 

111TH CONGRESS 

2D SESSION S. 3245 

To establish rules for small denomination, short-term, unsecured cash 

advances, such as ‘‘payday loans’’. 

IN THE SENATE OF THE UNITED STATES 

APRIL 22, 2010 

Mrs. HAGAN (for herself, Mr. DURBIN, and Mr. SCHUMER) introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs 

A BILL 

To establish rules for small denomination, short-term, 

unsecured cash advances, such as ‘‘payday loans’’. 

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 ‘‘Payday Lending Limi5 tation Act of 2010’’. 

6 SEC. 2. REGULATION OF COVERED LOANS. 

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

8 1638) is amended by adding at the end the following: 

9 ‘‘(e) TERMS AND CONDITIONS FOR COVERED

10 LOANS.— 


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1 ‘‘(1) DEFINITIONS.—As used in this sub2 section— 

3 ‘‘(A) the term ‘covered’ loan— 

4 ‘‘(i) means a consumer credit trans5 action in which the loan amount, or, in the 

6 case of a line of credit, the credit limit, is 

7 $3,000 or less that— 

8 ‘‘(I) in the case of a closed-end 

9 credit transaction, has a term of 91 

10 days or less and an annual percentage 

11 rate exceeding 36 percent (include all 

12 cost elements (other than the min13 imum deposit amount necessary to 

14 open a secured card account) associ15 ated with the extension of credit, in16 cluding fees, service charges, renewal 

17 charges, credit insurance premiums, 

18 and any other charge or premium 

19 with respect to the extension of con20 sumer credit); 

21 ‘‘(II) in the case of an open-end 

22 credit transaction, has an amortiza23 tion period of 91 days or less and the 

24 annual percentage rate exceeds 36 

25 percent (calculated as though the 


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1 transaction were a closed-end trans2 action pursuant to subclause (I)); or 

3 ‘‘(III) in the case of an open-end 

4 credit transaction, the cost elements 

5 associated with the extension of credit 

6 and due in the first 91 days, including 

7 finance charges, fees, service charges, 

8 renewals, credit insurance premiums, 

9 and any other charge or premium 

10 with respect to consumer credit, ex11 ceed 25 percent of the line of credit; 

12 and 

13 ‘‘(ii) does not include— 

14 ‘‘(I) a credit transaction that is 

15 secured by an interest in real estate, 

16 a vehicle, or other goods both listed 

17 and valued individually over $3,000; 

18 ‘‘(II) overdraft services that are 

19 not covered by this title; or 

20 ‘‘(III) an extension of credit in 

21 which a consumer sells an item of 

22 goods to a pawn-broker creditor and 

23 retains the right to redeem the item 

24 for a greater sum within a specified 

25 time, provided that the consumer has 


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1 no obligation to repay the credit, and 

2 the creditor takes no security other 

3 than the goods and makes no effort to 

4 collect the credit; and 

5 ‘‘(B) the term ‘extended payment plan’ 

6 means an amendment to the covered loan that 

7 is signed in person or electronically by both the 

8 consumer and the creditor reflecting an agree9 ment that the consumer pay the outstanding 

10 balance on a covered loan in not fewer than 4 

11 equal payments, where the period between each 

12 payment may not be less than the duration of 

13 the original covered loan. 

14 ‘‘(2) LIMITS ON BORROWER INDEBTEDNESS.— 

15 Notwithstanding any other provision of law, no cov16 ered loan may be extended to any individual, if such 

17 individual, considering all covered loans by the con18 sumer during such time period, in the aggregate, 

19 has had— 

20 ‘‘(A) 6 covered loans extended during the 

21 preceding 12-month period; or 

22 ‘‘(B) covered loan obligations of 90 days or 

23 longer during the preceding 12-month period. 

24 ‘‘(3) BOARD RULEMAKING REQUIRED.—Not 

25 later than 180 days after the date of enactment of 


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1 this subsection, the Board shall issue final rules with 

2 respect to covered loans, which rules shall— 

3 ‘‘(A) require each issuer of a covered 

4 loan— 

5 ‘‘(i) to offer extended repayment 

6 plans, if the borrower is unable to pay 

7 under the terms of the original loan; 

8 ‘‘(ii) to accept equal payments over a 

9 series of pay checks or pay periods of the 

10 consumer; 

11 ‘‘(iii) to obtain a surety bond, in such 

12 amounts as the Board determines appro13 priate; and 

14 ‘‘(iv) to comply with appropriate li15 censing requirements established by the 

16 Board; 

17 ‘‘(B) create a mechanism for lenders to de18 termine whether a potential borrower is eligible 

19 for a covered loan; 

20 ‘‘(C) provide for enforcement by State at21 torneys general; 

22 ‘‘(D) prohibit the purchase or sale, at the 

23 same location at which covered loans are of24 fered, of other products or services; and 


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1 ‘‘(E) prohibit the imposition of any fee or 

2 penalty for the early repayment of the obliga3 tion, including under any extension described in 

4 subparagraph (A)(i). 

5 ‘‘(4) NONENFORCEABILITY OF CONTRACTS.— 

6 No contract made in violation of this Act may be en7 forced with respect to any consumer. 

8 ‘‘(5) OTHER FEES.—The Board may impose 

9 such fees on issuers of covered loans under this sub10 section as may be necessary to pay the administra11 tive costs of the Board in carrying out and enforcing 

12 this subsection. 

13 ‘‘(6) TREATMENT OF STATE LAW.—Nothing in 

14 this subsection may be construed as— 

15 ‘‘(A) preempting any provision of State 

16 law, to the extent that such State law provides 

17 greater protection to consumers than is pro18 vided under this subsection; 

19 ‘‘(B) preventing any State from enacting 

20 any provision of law that provides greater pro21 tection to consumers than is provided under 

22 this subsection; 

23 ‘‘(C) authorizing covered loans to be made 

24 in a State where they are otherwise not per25 mitted under State law; or 


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1 ‘‘(D) authorizing an extension of credit at 

2 an annual percentage rate that would be pro3 hibited by applicable State law.’’. 

Æ 


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