I
106TH CONGRESS
2D SESSION
H. R. 3823
To amend the Federal Deposit Insurance Act and the Truth in Lending
Act to prohibit federally insured institutions from engaging in high-
cost payday loans, to expand protections for consumers in connection
with the making of such loans by uninsured entities, and for other
purposes.
IN THE HOUSE OF REPRESENTATIVES
MARCH 2, 2000
Mr. LAFALCE (for himself, Mr. KANJORSKI, Mrs. MALONEY of New York, Mr.
GUTIERREZ, Mr. MEEKS of New York, Ms. LEE, Ms. SCHAKOWSKY, Mr.
MOORE, Mr. GONZALEZ, Mrs. JONES of Ohio, Mr. CAPUANO, and Mr.
SANDERS) introduced the following bill; which was referred to the Com-
mittee on Banking and Financial Services
A BILL
To amend the Federal Deposit Insurance Act and the Truth
in Lending Act to prohibit federally insured institutions
from engaging in high-cost payday loans, to expand pro-
tections for consumers in connection with the making
of such loans by uninsured entities, and for other pur-
poses.
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 ‘‘Federal Payday Loan
Consumer Protection Amendments of 2000’’.
SEC. 2. FINDINGS AND PURPOSE.
(a) FINDINGS.—The Congress makes the following
findings:
(1) Payday lending is a rapidly expanding form
of high-cost, short-term credit that uses a borrower’s
personal check as collateral and targets individuals
with limited access to affordable credit who are in
desperate need of cash to meet immediate obliga-
tions.
(2) Consumer group studies indicate that the
average annual percentage rate on payday loans na-
tionally is 474 percent for a two-week loan, and that
a typical payday loan is renewed ten or more times
before repayment at equivalent annual interest rates
that exceed 1000 percent.
(3) While State law has traditionally prohibited
such high cost lending through usury limits, small
loan interest caps and other restrictions, these laws
have either been revised to exempt payday loan
transactions, or payday lenders have affiliated with
insured depository institutions to invoke the most fa-
vored lender principle under Federal law to cir-
cumvent interest rate regulation in State law.
(4) Lending that fails to assess borrowers abil-
ity to repay, that requires consumers to write checks
on insufficient funds, that encourages perpetual debt
or default on other obligations, and that facilitates
violations of State law, is an unacceptable banking
practice for insured depository institutions that
threatens the safety of the participating institution
and the broader banking system.
(5) While Congress clearly intended for the
credit protections of the Truth in Lending Act to
apply broadly to all credit transactions, including
payday loan transactions, and such application to
payday loan transactions has been correctly affirmed
in recent court decisions, the provision of Truth in
Lending credit disclosures is not standard practice
among payday lenders across the country and should
be a more explicit requirement in Federal statutes
and regulations.
(b) PURPOSE.—It is the purpose of this Act to en-
courage fair lending practices by prohibiting insured de-
pository institutions from engaging in any form of payday
lending, by restricting the use of personal checks drawn
on, or forms of withdrawals from, accounts at insured de-
pository institutions for purposes of making payday loans,
and by clarifying what the Congress has always intended
by explicitly stating in the Truth in Lending Act that ap-
propriate interest rate disclosure and other consumer pro-
tections of the Act do apply to all payday loans.
SEC. 3. FEDERAL DEPOSIT INSURANCE ACT AMENDMENT.
Section 18 of the Federal Deposit Insurance Act (12
U.S.C. 1828) is amended by adding at the end the fol-
lowing new subsection:
‘‘(v) PROHIBITION ON CERTAIN UNSAFE AND UN-
SOUND BANKING PRACTICES.—
‘‘(1) IN GENERAL.—An insured depository in-
stitution may not—
‘‘(A) make any payday loan, either directly
or indirectly; or
‘‘(B) make any loan to any other lender
for purposes of financing a payday loan or refi-
nancing or extending any payday loan.
‘‘(2) PAYDAY LOAN DEFINED.—For purposes of
this subsection, the term ‘payday loan’ means any
transaction in which a short-term cash advance is
made to a consumer in exchange for—
‘‘(i) a consumer’s personal check or
share draft, in the amount of the advance
plus a fee, where presentment or negotia-
tion of such check or share draft is de-
ferred by agreement of the parties until a
designated future date; or
‘‘(ii) a consumer’s authorization to
debit the consumer’s transaction account,
in the amount of the advance plus a fee,
where such account will be debited on or
after a designated future date.’’.
SEC. 4. TRUTH IN LENDING ACT AMENDMENTS.
(a) CLARIFICATION
OF APPLICATION
TO PAYDAY
LOANS.—For purposes of clarifying that payday loans
have always been within the definition of credit, section
103(e) of the Consumer Credit Protection Act (15 U.S.C.
1602(e)) is amended, effective as of the date of the enact-
ment of this Act, by inserting before the period at the end
‘‘, including any payday loan (as defined in section
18(v)(2) of the Federal Deposit Insurance Act)’’.
(b) PROHIBITION ON CERTAIN UNSAFE AND UN-
SOUND LENDING PRACTICES.—Section 128 of the Truth
in Lending Act (15 U.S.C. 1638) is amended by adding
at the end the following new subsection:
‘‘(e) PROHIBITION ON PAYDAY LOANS BASED ON
CHECKS DRAWN ON, OR AUTHORIZED WITHDRAWALS
FROM, INSURED DEPOSITORY INSTITUTIONS.—
‘‘(1) IN GENERAL.—A creditor may not make a
payday loan to any person if the creditor knows or
has reasonable cause to believe that—
‘‘(A) the personal check or share draft the
creditor receives from the person, in exchange
for the loan, is drawn on an insured depository
institution or insured credit union; or
‘‘(B) the account the creditor receives per-
mission from the person to debit, in exchange
for the loan, is a transaction account or share
draft account at an insured depository institu-
tion or an insured credit union.
‘‘(2) DEFINITIONS.—For purposes of this sub-
section, the following definitions shall apply:
‘‘(A) INSURED CREDIT UNION.—The term
‘insured credit union’ has the meaning given
the term in section 101 of the Federal Credit
Union Act.
‘‘(B) 
INSURED
DEPOSITORY
INSTITU-
TION.—The term ‘insured depository institu-
tion’ has the meaning given the term in section
3 of the Federal Deposit Insurance Act.
‘‘(C) PAYDAY LOAN DEFINED.—The term
‘payday loan’ means any transaction in which a
short-term cash advance is made to a consumer
in exchange for—
‘‘(i) a consumer’s personal check or
share draft, in the amount of the advance
plus a fee, where presentment or negotia-
tion of such check or share draft is de-
ferred by agreement of the parties until a
designated future date; or
‘‘(ii) a consumer’s authorization to
debit the consumer’s transaction or share
draft account, in the amount of the ad-
vance plus a fee, where such account will
be debited on or after a designated future
date.’’.
(c) CIVIL LIABILITY.—
(1) IN
GENERAL.—Section 130(a)(2) of the
Truth in Lending Act (15 U.S.C. 1640(a)(2)) is
amended—
(A) in subparagraph (A)—
(i) by inserting ‘‘clauses (i) and (ii)
of’’ after ‘‘except that the liability under’’;
(ii) by striking ‘‘$100’’ and inserting
‘‘$200’’; and
(iii) by striking ‘‘$1,000’’ and insert-
ing ‘‘$10,000’’; and
(B) in subparagraph (B), by striking ‘‘
lesser of $500,000 or’’ and inserting ‘‘greater of
(i) the maximum amount of liability determined
under subparagraph (A) for each member of
the class multiplied by the number of members
of the class or (ii)’’.
(2) TECHNICAL
AND
CONFORMING
AMEND-
MENTS.—Section 130(a) of the Truth in Lending
Act is amended—
(A) in the matter preceding paragraph (1),
by striking ‘‘equal to the sum of—’’ and insert-
ing ‘‘equal to the sum of amounts determined
under the following paragraphs, whichever
apply:’’; and
(B) in the 4th sentence which begins after
the end of paragraph (4) by striking ‘‘disclo-
sures referred to in section 128’’ and inserting
‘‘disclosures referred to in section 128(a)’’.
SEC. 5. EFFECTIVE DATE.
Except as provided in section 4(a), which is a clari-
fication of existing law, the requirements of this Act and
the amendments made by this Act shall take effect at the
end of the 90-day period beginning on the date of the en-
actment of this Act and shall apply to payday loans initi-
ated on or after such date and to an extension or renewal
of a payday loan made on or after such date.
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