Text of The Payday Lending Limitation Act of 2010

Here is the text of the Payday Lending Limitation Act of 2010, S.3245.


To establish rules for small denomination, short-term, unsecured cash advances, such as `payday loans’.

    Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,


    This Act may be cited as the `Payday Lending Limitation Act of 2010′.


    Section 128 of the Truth in Lending Act (15 U.S.C. 1638) is amended by adding at the end the following:

    `(e) Terms and Conditions for Covered Loans-

      `(1) DEFINITIONS- As used in this subsection–

          `(A) the term `covered’ loan–

                `(i) means a consumer credit transaction in which the loan amount, or, in the case of a line of credit, the credit limit, is $3,000 or less that–

                        `(I) in the case of a closed-end credit transaction, has a term of 91 days or less and an annual percentage rate exceeding 36 percent (include all cost elements (other than the minimum deposit amount necessary to open a secured card account) associated with the extension of credit, including fees, service charges, renewal charges, credit insurance premiums, and any other charge or premium with respect to the extension of consumer credit);

                                `(II) in the case of an open-end credit transaction, has an amortization period of 91 days or less and the annual percentage rate exceeds 36 percent (calculated as though the transaction were a closed-end transaction pursuant to subclause (I)); or

                                        `(III) in the case of an open-end credit transaction, the cost elements associated with the extension of credit and due in the first 91 days, including finance charges, fees, service charges, renewals, credit insurance premiums, and any other charge or premium with respect to consumer credit, exceed 25 percent of the line of credit; and

                                              `(ii) does not include–

                                                      `(I) a credit transaction that is secured by an interest in real estate, a vehicle, or other goods both listed and valued individually over $3,000;
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                                                              `(II) overdraft services that are not covered by this title; or

                                                                      `(III) an extension of credit in which a consumer sells an item of goods to a pawn-broker creditor and retains the right to redeem the item for a greater sum within a specified time, provided that the consumer has no obligation to repay the credit, and the creditor takes no security other than the goods and makes no effort to collect the credit; and

                                                                          `(B) the term `extended payment plan’ means an amendment to the covered loan that is signed in person or electronically by both the consumer and the creditor reflecting an agreement that the consumer pay the outstanding balance on a covered loan in not fewer than 4 equal payments, where the period between each payment may not be less than the duration of the original covered loan.

                                                                            `(2) LIMITS ON BORROWER INDEBTEDNESS- Notwithstanding any other provision of law, no covered loan may be extended to any individual, if such individual, considering all covered loans by the consumer during such time period, in the aggregate, has had–

                                                                                `(A) 6 covered loans extended during the preceding 12-month period; or

                                                                                    `(B) covered loan obligations of 90 days or longer during the preceding 12-month period.

                                                                                      `(3) BOARD RULEMAKING REQUIRED- Not later than 180 days after the date of enactment of this subsection, the Board shall issue final rules with respect to covered loans, which rules shall–

                                                                                          `(A) require each issuer of a covered loan–

                                                                                                `(i) to offer extended repayment plans, if the borrower is unable to pay under the terms of the original loan;

                                                                                                      `(ii) to accept equal payments over a series of pay checks or pay periods of the consumer;

                                                                                                            `(iii) to obtain a surety bond, in such amounts as the Board determines appropriate; and

                                                                                                                  `(iv) to comply with appropriate licensing requirements established by the Board;

                                                                                                                      `(B) create a mechanism for lenders to determine whether a potential borrower is eligible for a covered loan;

                                                                                                                          `(C) provide for enforcement by State attorneys general;
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                                                                                                                              `(D) prohibit the purchase or sale, at the same location at which covered loans are offered, of other products or services; and

                                                                                                                                  `(E) prohibit the imposition of any fee or penalty for the early repayment of the obligation, including under any extension described in subparagraph (A)(i).

                                                                                                                                    `(4) NONENFORCEABILITY OF CONTRACTS- No contract made in violation of this Act may be enforced with respect to any consumer.

                                                                                                                                      `(5) OTHER FEES- The Board may impose such fees on issuers of covered loans under this subsection as may be necessary to pay the administrative costs of the Board in carrying out and enforcing this subsection.

                                                                                                                                        `(6) TREATMENT OF STATE LAW- Nothing in this subsection may be construed as–

                                                                                                                                            `(A) preempting any provision of State law, to the extent that such State law provides greater protection to consumers than is provided under this subsection;

                                                                                                                                                `(B) preventing any State from enacting any provision of law that provides greater protection to consumers than is provided under this subsection;

                                                                                                                                                    `(C) authorizing covered loans to be made in a State where they are otherwise not permitted under State law; or

                                                                                                                                                        `(D) authorizing an extension of credit at an annual percentage rate that would be prohibited by applicable State law.’.


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