[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[H.R. 8338 Introduced in House (IH)]
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118th CONGRESS
2d Session
H. R. 8338
To regulate small-dollar, short-term credit products, to protect the
privacy of lenders, and to improve the unfair, deceptive, or abusive
acts or practices authority of the Bureau of Consumer Financial
Protection, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
May 10, 2024
Mrs. Kim of California introduced the following bill; which was
referred to the Committee on Financial Services
_______________________________________________________________________
A BILL
To regulate small-dollar, short-term credit products, to protect the
privacy of lenders, and to improve the unfair, deceptive, or abusive
acts or practices authority of the Bureau of Consumer Financial
Protection, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Clarity in Lending
Act''.
(b) Table of Contents.--The table of contents for this Act is as
follows:
Sec. 1. Short title; table of contents.
TITLE I--SMALL-DOLLAR CREDIT PRODUCTS
Sec. 101. Safe harbor for small-dollar credit products.
TITLE II--RECTIFYING UNDEFINED DESCRIPTIONS OF ABUSIVE ACTS AND
PRACTICES
Sec. 201. Mitigating factors in assessing civil penalties.
Sec. 202. Rulemaking relating to unfair, deceptive or abusive acts or
practices.
Sec. 203. Authority to declare an act unlawful based on discrimination
or service as government contractor.
Sec. 204. Clarifying the abusive standard for the Bureau of Consumer
Financial Protection.
Sec. 205. Notice and opportunity to cure.
Sec. 206. Abusive, unfair, or deceptive acts or practices enforcement
actions.
Sec. 207. Look-back provisions for the Bureau of Consumer Financial
Protection.
TITLE III--SMALL LENDERS EXEMPT FROM NEW DATA AND EXCESSIVE REPORTING
Sec. 301. Small business loan data collection.
TITLE IV--BANK LOAN PRIVACY
Sec. 401. Rulemaking requirement.
TITLE I--SMALL-DOLLAR CREDIT PRODUCTS
SEC. 101. SAFE HARBOR FOR SMALL-DOLLAR CREDIT PRODUCTS.
(a) In General.--The Truth in Lending Act (15 U.S.C. 1601 et seq.)
is amended by inserting after section 109 the following:
``Sec. 110. Safe harbor for small-dollar credit products
``(a) In General.--If a covered entity complies with the
requirements set forth in subsections (b), (c), and (e) with respect to
the offering of a small-dollar product to a consumer, such covered
entity shall not be liable in connection with such offering of a small-
dollar product, for--
``(1) any civil money penalties from any enforcement action
brought by the Bureau, the appropriate Federal banking agency,
or the National Credit Union Administration for a violation of
this title; or
``(2) any damages or other monetary relief through a
private right of action brought under this title.
``(b) Product Structure Requirements.--
``(1) In the case of an installment loan.--If a small-
dollar credit product is structured by a covered entity as an
installment loan--
``(A) the repayment term shall be more than 45
days;
``(B) payments shall be fully amortized across more
than one payment;
``(C) rollovers into new small-dollar credit
products shall be prohibited; and
``(D) the covered entity may not issue any small-
dollar credit product to a consumer if such consumer
has a small-dollar credit product open with such
covered entity at the time such consumer applies for a
small-dollar credit product.
``(2) In the case of a line of credit.--If a small-dollar
credit product is structured by a covered entity as a line of
credit--
``(A) the repayment term for each draw shall be
more than 45 days unless a single payment is used and
the draw is not more than 10 percent of the lesser of
$3,500 or 20 percent of the total amount of a
consumer's average monthly direct deposits during the
preceding six months; and
``(B) payments for each draw shall be fully
amortized across more than one payment, except in the
case of any single-payment loans.
``(3) Rules of construction.--
``(A) In general.--Nothing in this subsection may
be construed to prohibit the Bureau, a Federal banking
agency, or the National Credit Union Administration
from issuing a cease-and-desist order or restitution
order under this title against a covered entity.
``(B) Enforcement of other statutes.--Nothing in
this subsection may be construed to prohibit the
Bureau, a Federal banking agency, or the National
Credit Union Administration from enforcing any
provision of law not contained within this title
against a covered entity.
``(c) Underwriting Requirements.--When considering whether to offer
a small-dollar credit product to a specific consumer, a covered
entity--
``(1) shall use sound underwriting processes; and
``(2) may analyze internal or external data sources,
including consumer deposit account activity, to assess the
creditworthiness of a consumer.
``(d) Rule of Construction.--Nothing in this title may be construed
to prohibit a covered entity from offering a small-dollar product that
does not comply with the safe harbor requirements set forth under this
section.
``(e) Additional Limitations and Requirements.--
``(1) Balloon payments.--No payment required in association
with a small-dollar credit product offered by a covered entity
may be greater than double the amount of any other payment
required in association with such product.
``(2) Disclosures.--Each covered entity that offers a
small-dollar credit product shall comply with all disclosure
requirements set forth by this title.
``(3) Penalties and fees.--A covered entity may not impose
any prepayment penalty, overdraft fee, or nonsufficient funds
fee in connection with a small-dollar credit product.
``(4) Transfer of amounts.--Amounts made available to a
consumer through a small-dollar credit product offered by a
covered entity shall be disbursed to the account of such
consumer by such covered entity not later than 5 days after the
approval of the consumer for the small-dollar credit product.
``(f) Definitions.--In this section:
``(1) Covered entity.--The term `covered entity' means--
``(A) an insured depository institution;
``(B) an insured credit union;
``(C) a third-party with whom an insured depository
institution has contracted for products or services
related to origination, servicing, or administrative
management of a small-dollar credit product; or
``(D) a third-party with whom an insured credit
union has contracted for products or services related
to origination, servicing, or administrative management
of a small-dollar credit product.
``(2) Federal banking agency definitions.--The terms
`appropriate Federal banking agency' and `Federal banking
agency' have the meaning given those terms, respectively, in
section 3 of the Federal Deposit Insurance Act.
``(3) Insured credit union.--The term `insured credit
union' has the meaning given the term in section 101 of the
Federal Credit Union Act.
``(4) Insured depository institution.--The term `insured
depository institution' has the meaning given the term in
section 3 of the Federal Deposit Insurance Act.
``(5) Small-dollar credit product.--The term `small-dollar
product' means a loan or line of credit with a value of $3,500
or less.''.
(b) Clerical Amendment.--The table of contents for chapter 1 of the
Truth in Lending Act is amended by striking the item relating to
section 110 and inserting the following:
``110. Safe harbor for Small-dollar credit products.''.
TITLE II--RECTIFYING UNDEFINED DESCRIPTIONS OF ABUSIVE ACTS AND
PRACTICES
SEC. 201. MITIGATING FACTORS IN ASSESSING CIVIL PENALTIES.
Section 1055(c) of the Consumer Financial Protection Act of 2010
(12 U.S.C. 5565(c)) is amended by adding at the end the following:
``(6) Rulemaking.--The Bureau shall, not later than 180
days after the date of the enactment of this paragraph, issue a
rule that establishes policies and procedures relating to the
imposition of civil monetary penalties sought under this
subsection, including the application of the mitigating factors
described in paragraph (3).''.
SEC. 202. RULEMAKING RELATING TO UNFAIR, DECEPTIVE OR ABUSIVE ACTS OR
PRACTICES.
(a) In General.--Section 1031 of the Consumer Financial Protection
Act of 2010 (12 U.S.C. 5531) is amended by striking subsection (b) and
inserting the following:
``(b) Rulemaking.--
``(1) In general.--The Bureau may prescribe rules
applicable to a covered person or service provider identifying
as unlawful unfair, deceptive, or abusive acts or practices in
connection with any transaction with a consumer for a consumer
financial product or service, or the offering of a consumer
financial product or service. Rules under this section may
include requirements for the purpose of preventing such acts or
practices.
``(2) Cost-benefit analysis required.--Any final rule
issued by the Bureau relating to abusive, unfair, or deceptive
acts or practices shall include a cost-benefit analysis.
``(3) Definition of abusive act or practice.--The Bureau
shall, not later than 180 days after the date of the enactment
of this subsection, issue a rule that defines the term `abusive
act or practice' for the purposes of this section.''.
(b) Opportunity for Comment.--The Bureau of Consumer Financial
Protection shall, not later than 180 days after the date of the
enactment of this subsection, allow the public to submit comments with
respect to any confusion about how the Bureau of Consumer Financial
Protection uses its authority with respect to unfair, deceptive, or
abusive acts or practices.
SEC. 203. AUTHORITY TO DECLARE AN ACT UNLAWFUL BASED ON DISCRIMINATION
OR SERVICE AS GOVERNMENT CONTRACTOR.
Section 1031 of the Consumer Financial Protection Act of 2010 (12
U.S.C. 5531) is amended by adding at the end the following:
``(h) Authority To Declare an Act Unlawful Based on Discrimination
or Service as Government Contractor.--The Bureau may not interpret the
authority of the Bureau relating to unfair, deceptive, or abusive acts
and practices to include--
``(1) discriminatory practices; or
``(2) acts or practices by a covered person performing the
acts or practices pursuant to and in compliance with a contract
with a Federal agency (as defined under section 701(b) of title
5, United States Code).''.
SEC. 204. CLARIFYING THE ABUSIVE STANDARD FOR THE BUREAU OF CONSUMER
FINANCIAL PROTECTION.
Section 1031 of the Consumer Financial Protection Act of 2010 (12
U.S.C. 5531) is amended--
(1) by redesignating subsections (e) and (f) as subsections
(f) and (g); and
(2) by striking subsection (d) and inserting the following:
``(d) Abusive.--
``(1) In general.--The Bureau shall have no authority to
declare an act or practice of a covered person abusive in
connection with the provision of a consumer financial product
or service, unless the act or practice--
``(A) intentionally and materially interferes with
the ability of a consumer to understand a term or
condition of a consumer financial product or service;
or
``(B) takes unreasonable advantage of--
``(i) a lack of understanding by the
consumer with respect to the possible impact,
material risks, costs, or conditions of the
product or service, or the likelihood of the
risks, costs, or conditions of the product or
service negatively affecting the consumer; and
``(ii) the reasonable reliance the consumer
places on an affirmative action or
representation of such covered person to induce
such consumer to rely on such action or
representation.
``(2) Abusive actions.--An act or practice shall not be
considered abusive if the act or practice--
``(A) is also unfair or deceptive; or
``(B) is otherwise prohibited by Federal consumer
financial law.
``(e) Good-Faith Effort To Comply.--
``(1) In general.--The Bureau may not seek monetary relief
from a covered person under this section unless the covered
person has not established by a preponderance of the evidence
that they made a good-faith effort to comply.
``(2) Authority to seek legal or equitable remedies.--The
limitation described in paragraph (1) shall not restrict the
authority of the Bureau to seek legal or equitable remedies,
such as damages and restitution, to redress an identifiable
consumer injury caused by the abusive acts or practices of such
covered person.''.
SEC. 205. NOTICE AND OPPORTUNITY TO CURE.
Section 1031 of the Consumer Financial Protection Act of 2010 (12
U.S.C. 5531), as amended by section 403, is further amended by adding
at the end the following:
``(i) Notice and Opportunity To Cure.--
``(1) In general.--If a covered person self-identifies a
potential unfair, deceptive, or abusive act or practice carried
out by such covered person, the Bureau shall, not later than 90
days after such self-identification, provide a written notice
in the form of a potential action and request for response
letter or a notice and opportunity to respond and advise letter
of the potential unfair, deceptive, or abusive act or practice
to such covered person and inform the covered person that such
person has 180 days after the date the covered person receives
such notice to cure such potential unfair, deceptive, or
abusive act before the Bureau may pursue other legal action.
``(2) Tolling of statute of limitations.--Any applicable
statute of limitations that applies to conduct under which the
Bureau has given notice and an opportunity to cure shall not
toll until--
``(A) the covered person cures the potential
unfair, deceptive, or abusive act or practice and
notifies the Bureau that such act or practice has been
cured;
``(B) the covered person notifies the Bureau that
such covered person will not cure the act or practice;
or
``(C) the 180-day period to cure ends.''.
SEC. 206. ABUSIVE, UNFAIR, OR DECEPTIVE ACTS OR PRACTICES ENFORCEMENT
ACTIONS.
(a) Actions Under Section 1031.--Section 1031 of the Consumer
Financial Protection Act of 2010 (12 U.S.C. 5531), as amended by
section 405, is further amended by adding at the end the following:
``(j) Unfair, Deceptive, or Abusive Acts or Practices Enforcement
Actions.--Enforcement actions brought by the Bureau under this section
shall be brought in--
``(1) the United States district court located where the
covered person has its headquarters location; or
``(2) the United States District Court for the District of
Columbia.
``(k) Enforcement Actions.--
``(1) In general.--If the Bureau brings an enforcement
action under this section, the Bureau shall state with
particularity the circumstances that the Bureau alleges
constitute a violation of this section.
``(2) Alternative claims.--If the Bureau brings an
enforcement action under this section--
``(A) claiming that an activity is unfair or
deceptive, the Bureau may not claim in the alternative
that the activity is abusive; and
``(B) claiming that an activity is abusive, the
Bureau may not claim in the alternative that the
activity is unfair or deceptive.''.
(b) Clerical Amendment.--The table of contents in section 1(b) of
the Dodd-Frank Wall Street Reform and Consumer Protection Act is
amended by inserting after the item relating to section 1058 the
following:
``Sec. 1059. Unfair, deceptive, or abusive acts or practices
enforcement actions.''.
SEC. 207. LOOK-BACK PROVISIONS FOR THE BUREAU OF CONSUMER FINANCIAL
PROTECTION.
(a) In General.--Subtitle B of title X of the Consumer Financial
Protection Act of 2010 (12 U.S.C. 5511 et seq.) is amended by adding at
the end the following new section:
``SEC. 1029B. EXAMINATION PERIOD LIMITATIONS.
``(a) In General.--When enforcing Federal consumer financial laws,
the Bureau may not seek a civil money penalty for any violation that
occurred prior to the most recent assignment of a consumer compliance
rating that had not been identified in writing as a material finding or
supervisory concern at the time the rating was assigned.
``(b) Exception in Cases of Fraud or a Material
Misrepresentation.--Subsection (a) shall not apply to a violation that
involved fraud or a material misrepresentation.
``(c) Rule of Construction.--The limitation described in subsection
(a) may not be construed to restrict the ability of the Bureau to seek
other forms of legal or equitable relief available under subparagraphs
(A) through (G) of section 1055(a)(2).''.
(b) Clerical Amendment.--The table of contents in section 1(b) of
the Dodd-Frank Wall Street Reform and Consumer Protection Act is
amended by inserting after the item relating to section 1029 the
following:
``Sec. 1029B. Examination period limitations,''.
TITLE III--SMALL LENDERS EXEMPT FROM NEW DATA AND EXCESSIVE REPORTING
SEC. 301. SMALL BUSINESS LOAN DATA COLLECTION.
Section 704B of the Equal Credit Opportunity Act (15 U.S.C. 1691c-
2) is amended--
(1) in subsection (g), by adding at the end the following:
``(4) Compliance.--
``(A) In general.--With respect to any rules or
guidance issued under this subsection on or after the
date of the enactment of this paragraph, the Bureau
shall provide a financial institution a 3-year period
to comply with such rule or guidance, regardless of the
date on which such financial institution began its
operations.
``(B) Safe harbor.--With respect to any rules or
guidance issued under this subsection on or after the
date of the enactment of this paragraph, beginning on
the date after the last day of the 3-year period
described in subparagraph (A), the Bureau shall provide
a 2-year safe harbor to financial institutions during
which each such financial institution is required to
comply with the rule or guidance but not subject to any
penalties for failure to comply.''; and
(2) in subsection (h)--
(A) by striking paragraph (1) and inserting the
following:
``(1) Financial institution.--The term `financial
institution' means--
``(A) any partnership, company, corporation,
association (incorporated or unincorporated), trust,
estate, cooperative organization, or other entity that
engages in any financial activity; and
``(B) in each of the two calendar years preceding
the first day of the safe harbor period described in
subsection (g)(4)(B), originated not less than 500
credit transactions for small businesses.''; and
(B) by striking paragraph (2) and inserting the
following:
``(2) Small business.--The term `small business' means any
entity with gross annual revenues of $1,000,000 or less in the
most recently completed fiscal year preceding the first day of
the safe harbor period described in subsection (g)(4)(B).''.
TITLE IV--BANK LOAN PRIVACY
SEC. 401. RULEMAKING REQUIREMENT.
Section 704B(e)(4) of the Equal Credit Opportunity Act (15 U.S.C.
1691c-2(e)(4)) is amended--
(1) by striking ``The Bureau may,'' and inserting:
``(A) In general.--The Bureau may,''; and
(2) by adding at the end the following:
``(B) Rulemaking requirement.--The Bureau shall,
before deleting or modifying data under this paragraph
issue, through advance notice and comment, a rule that
includes a description of what modifications and
deletions the Bureau intends to make to the data and
how such modifications and deletions will advance a
privacy interest.''.
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