I 
109TH CONGRESS 
1ST SESSION H. R. 1660 
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 
APRIL 14, 2005 
Mr. RUSH introduced the following bill; which was referred to the Committee 
on 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 2005’’. 
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 2005 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: 
‘‘(x) 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 interest rate applica-
ble with respect to such loan is less than 
36 percent (as determined without taking 
into account any administrative fee which 
meets 
the 
requirements 
of 
section 
4(b)(7)(E) of the Payday Borrowers Pro-
tection Act of 2003); 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) SITUS OF LOAN.—For purposes of para-
graph (1) and determining compliance with this sub-
section, the Truth in Lending Act, the Electronic 
Fund Transfer Act, and the law of any State, a de-
ferred deposit loan shall be considered to be made 
in the State in which the borrower receives the pro-
ceeds of the loan.’’.
SEC. 4. STATE LICENSING AND REGULATION OF PAYDAY 
LOANS. 
(a) IN GENERAL.—For purposes of protecting the 
payment system and protecting the consumers of payday 
loans from fraud, abuse, unfair practices, usurious rates 
of interest, and exorbitant fees, deferred deposit loans 
shall only be lawful in States in which laws and regula-
tions are in effect that meet the requirements described 
in subsection (b), as determined by the Board of Gov-
ernors of the Federal Reserve System. 
(b) MINIMUM REQUIREMENTS FOR DEFERRED DE-
POSIT LOANS.—The law of any State meets the require-
ments of this subsection if a statute in effect in such State 
includes the following: 
(1) LICENSING REQUIREMENTS.— 
(A) IN
GENERAL.—Subject to subpara-
graphs (B) and (C), a requirement that any 
payday lender, other than a depository institu-
tion (as defined in section 19(b)(1)(A) of the 
Federal Reserve Act), be licensed and regulated 
by an appropriate State agency in order to con-
duct any business within such State or make 
any deferred deposit loan within the State (as 
determined in accordance with paragraph (12)). 
(B) DEPOSITORY
INSTITUTIONS.—A re-
quirement that any depository institution which
makes deferred deposit loans in such State (as 
determined in accordance with paragraph (12)) 
shall be subject to such statute and regulated 
by an appropriate State agency with respect to 
such lending activity. 
(2) LICENSING
STANDARDS.—A requirement 
that— 
(A) in order for any person to be licensed 
in the State as a payday lender, the appropriate 
State agency shall review and approve— 
(i) the business record and the capital 
adequacy of the business seeking the li-
cense; and 
(ii) the competence, experience, char-
acter, integrity, and financial responsibility 
of each individual who— 
(I) is a director, officer, or super-
visory employee of such business; or 
(II) owns or controls, directly or 
indirectly, such business (including 
any person who directly or indirectly 
controls more than 5 percent of the 
shares or assets of the business;
(B) any record, on the part of any business 
seeking the license or any person referred to in 
subparagraph (A)(ii), of— 
(i) any criminal activity; 
(ii) any fraud or other act of personal 
dishonesty; 
(iii) any act, omission, or practice 
which constitutes a breach of a fiduciary 
duty; or 
(iv) any suspension or removal, by any 
agency or department of the United States 
or any State, from participation in the con-
duct of any federally or State licensed or 
regulated business, 
be grounds for the denial of any such license by 
the appropriate State agency; 
(C) the applicant establish to the satisfac-
tion of the appropriate State agency that the 
operation of the business at each authorized lo-
cation is in the public interest, taking into ac-
count the probable effect of such operation in 
promoting the convenience of, and meeting the 
credit needs of, the community in which such 
business is conducted;
(D) the applicant and licensed payday 
lender meet such surety bond requirements and 
minimum asset requirements as may be estab-
lished and maintained by the appropriate State 
agency; and 
(E) in order for an applicant to meet the 
requirements of subparagraph (D)— 
(i) the applicant maintain a minimum 
of $50,000 of surety bond coverage for 
each business location maintained by the 
applicant; and 
(ii) the proceeds of any such surety 
bond coverage be available to pay any con-
sumer for any violation of any Federal or 
State law relating to deferred deposit 
loans. 
(3) PUBLIC
HEARINGS.—A requirement that 
any application for a payday lender license be the 
subject of a public hearing before any final deter-
mination is made with regard to such application by 
the appropriate State agency. 
(4) ADMINISTRATIVE
ACTION.—Authority for 
the appropriate State agency to issue regulations to 
carry out the purposes of such statute, investigate 
and enforce compliance with the statute and such
regulations, handle complaints, suspend or revoke li-
censes issued to payday lenders and impose civil 
money penalties for violations of such statute or reg-
ulations, and make public the results of any such in-
vestigations or enforcement actions and the records 
of any complaints. 
(5) REPORTS
AND
RECORDS.—A requirement 
that licensed payday lenders— 
(A) maintain such records as the appro-
priate State agency determines are necessary to 
enforce compliance with the statute; and 
(B) submit annual reports to the appro-
priate State agency containing such information 
as the agency determines to be appropriate to 
allow the agency to enforce compliance with the 
statute and regulations prescribed by the agen-
cy under the statute, including a copy of all 
loan documents used by the payday lender in 
connection with deferred deposit loans and a fee 
schedule. 
(6) PROHIBITIONS.—A prohibition on— 
(A) the initiation of any criminal action or 
any civil proceeding, or use of any threat of ini-
tiating any such criminal action or civil pro-
ceeding, in connection with the failure of any
borrower to repay any deferred deposit loan in 
accordance with the terms of the loan (other 
than a proceeding directly related to the collec-
tion of such debt and actual damages), includ-
ing any criminal action or civil proceeding, or a 
threat of any such action or proceeding, relat-
ing to the act of a customer in drawing a check 
or authorizing an electronic fund transfer which 
formed the basis for a payday loan and is 
drawn on an account with insufficient funds; 
(B) any practice which is prohibited under 
section 808 of the Fair Debt Collection Prac-
tices Act for a debt collector (as defined in such 
Act); 
(C) extending credit under any loan agree-
ment which includes any terms which are un-
conscionable or against the public interest; 
(D) engaging in any unfair or deceptive 
practice; 
(E) accepting the repayment of any de-
ferred deposit loan if the payday lender knows 
or has any reason to believe that the funds 
proffered by the borrower were acquired from 
the proceeds of another deferred deposit loan;
(F) refinancing or rolling over any deferred 
deposit loan, or initiating a new deferred de-
posit loan unless 30 days has elapsed from the 
termination of any prior deferred deposit loan 
from that payday lender (or any affiliate or 
other associate of the payday lender) to the cus-
tomer; 
(G) imposing any additional fee or any 
premium for any credit insurance offered in 
conjunction with any deferred deposit loan; and 
(H) including any clause in the note or 
other document related to the deferred deposit 
loan which requires the consumer to submit any 
claim or defense relating to the transaction to 
binding arbitration or other nonjudicial pro-
ceeding. 
(7) REQUIREMENTS RELATING TO TERMS AND 
CONDITIONS.—A requirement that— 
(A) the period to maturity of any deferred 
deposit loan may not be less than 2 weeks for 
each $50 of loan principal; 
(B) the principal amount of any deferred 
deposit loan may not exceed $300; 
(C) any check which forms the basis of a 
deferred deposit loan be stamped on the back
with an endorsement that the check has been 
received and is being negotiated in connection 
with a deferred deposit loan and any subse-
quent holder of the check takes it subject to all 
claims and defenses of the maker; 
(D) the annual interest rate applicable to 
any deferred deposit loan may not exceed the 
lesser of— 
(i) 36 percent; or 
(ii) the maximum annual percentage 
rate allowable in such State for comparable 
small loans; 
(E) the amount of any administrative fee 
imposed in connection with making a deferred 
deposit loan may not exceed $5; 
(F) any unearned interest on deferred de-
posit loans which are paid before the due date 
shall be repaid to the borrower on an actuarial 
basis; and 
(G) the amount of any fee imposed for any 
check made or any electronic fund transfer au-
thorized by a borrower in connection with any 
deferred deposit loan which is returned unpaid 
to the payday lender due to insufficient funds