I
106TH CONGRESS
1ST SESSION
H. R. 1684
To amend the Consumer Credit Protection Act and other banking laws
to protect consumers who avail themselves of payday loans from usurious
interest rates and exorbitant fees, perpetual debt, the use of criminal
actions to collect debts, and other unfair practices by payday lenders,
to encourage the States to license and closely regulate payday lenders,
and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
MAY 5, 1999
Mr. RUSH introduced the following bill; which was referred to the Committee
on Banking and Financial Services
A BILL
To amend the Consumer Credit Protection Act and other
banking laws to protect consumers who avail themselves
of payday loans from usurious interest rates and exorbi-
tant fees, perpetual debt, the use of criminal actions
to collect debts, and other unfair practices by payday
lenders, to encourage the States to license and closely
regulate payday lenders, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Payday Borrower Pro-
tection Act of 1999’’.
SEC. 2. PAYDAY LOANS PROHIBITED UNLESS AUTHORIZED
PURSUANT TO STATE LAW THAT LICENSES
AND REGULATES PAYDAY LENDERS.
(a) IN GENERAL.—Section 128 of the Truth in Lend-
ing Act (15 U.S.C. 1638) is amended by adding at the
end the following new subsection:
‘‘(e) DEFERRED DEPOSIT LOANS.—
‘‘(1) DEFINITIONS.—For purposes of this sub-
section, the following definitions shall apply:
‘‘(A) CHECK.—The term ‘check’ means
any negotiable demand draft drawn on or pay-
able through an office of a depository institu-
tion (as defined in section 19(b)(1)(A) of the
Federal Reserve Act) located in the United
States.
‘‘(B) DEFERRED
DEPOSIT
LOAN.—The
term ‘deferred deposit loan’ means a trans-
action in which credit is extended by a payday
lender, for a specified period of time, upon re-
ceipt by the lender of—
(i) a check made by the borrower for
the amount of the credit extended, the pre-
sentment or negotiation of which, by mu-
tual agreement of the lender and borrower,
will be deferred for such specified period;
or
(ii) authorization from the borrower
for the payday lender to initiate an elec-
tronic fund transfer at the end of the spec-
ified period from the account of the bor-
rower for the amount of the credit ex-
tended.
‘‘(C) PAYDAY LENDER.—The term ‘payday
lender’ means any person who extends credit to
any other person through a deferred deposit
loan.
‘‘(2) PAYDAY LOANS PROHIBITED UNLESS AU-
THORIZED UNDER STATE LAWS THAT LICENSE AND
REGULATE SUCH LENDING.—No person may engage
in the business of making deferred deposit loans in
any State unless—
‘‘(A) expressly authorized to do so under a
law of such State that the Board determines at
least meets, if not exceeds, all the requirements
described in section 4(b) of the Payday Bor-
rower Protection Act of 1999 with respect to
deferred deposit loans; and
‘‘(B) such person maintains policies and
procedures designed to prevent such person
from violating any requirement of this title with
regard to such loans or with regard to applica-
tions, solicitations, or advertisements relating to
such loans.
‘‘(3) SITUS OF LOAN.—For purposes of para-
graph (2), a deferred deposit loan shall be consid-
ered to be made in the State in which the borrower
receives the proceeds of the loan.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply after the end of the 10-day pe-
riod beginning on the date of the enactment of this Act.
SEC. 3. REGULATION OF INVOLVEMENT OF DEPOSITORY
INSTITUTIONS IN PAYDAY LENDING.
Section 18 of the Federal Deposit Insurance Act (12
U.S.C. 1828) is amended by adding at the end the fol-
lowing new section:
‘‘(t) PAYDAY LOANS.—
‘‘(1) LOANS TO NONCOMPLIANT PAYDAY LEND-
ERS PROHIBITED.—An insured depository institution
may not—
‘‘(A) make any deferred deposit loan, ei-
ther directly or through any agent, unless—
‘‘(i) such loan is in full compliance
with the law of the State in which such
loan is made; and
‘‘(ii) the annual percentage rate (as
determined in accordance with section 107
of the Truth in Lending Act) applicable
with respect to such loan is less than 36
percent; or
‘‘(B) make any loan to any payday lender
for purposes of financing deferred deposit loans
unless the depository institution ascertains that
such lender is in full compliance with the Truth
in Lending Act, the Electronic Fund Transfer
Act, and the law of the State in which any bor-
rower from such payday lender will receive the
proceeds of any such deferred deposit loan.
‘‘(2) COMPLIANCE WITH STATE LAW.—For pur-
poses of determining compliance with this sub-
section, the Truth in Lending Act, the Electronic
Fund Transfer Act, and the law of any State with
regard to any deferred deposit loan made by any in-
sured depository institution or payday lender.
‘‘(3) SITUS
OF
LOAN.—For purposes of this
subsection, a deferred deposit loan shall be consid-