Section 1 Short title
This Act may be cited as the “Stopping Abuse and Fraud in Electronic Lending Act of 2016” or the “SAFE Lending Act of 2016”.
Stopping Abuse and Fraud in Electronic Lending Act of 2016
A BILL
To amend the Truth in Lending Act to address certain issues related to the extension of consumer credit, and for other purposes.
Sec. 2 Consumer control over bank accounts
Prohibiting unauthorized remotely created checks— Section 905 of the Electronic Fund Transfer Act (15 U.S.C. 1693c) is amended by adding at the end the following:
“(d) Limitations on remotely created checks
“(1) Definition—In this subsection, the term remotely created check means a check, including a paper or electronic check and any other payment order that the Bureau, by rule, determines is appropriately covered by this subsection, that—
“(A) is not created by the financial institution that holds the customer account from which the check is to be paid; and
“(B) does not bear a signature applied, or purported to be applied, by the person from whose account the check is to be paid.
“(2) Limitations—Subject to the limitations in paragraph (3) and any additional limitations that the Bureau may establish, by rule, a remotely created check may only be issued by a person designated in writing by the consumer with the designation specifically provided in writing by the consumer to the insured depository institution at which the consumer maintains the account from which the check is to be drawn.
“(3) Additional limitations
“(A) In general—An authorization provided under paragraph (2) may be revoked at any time by the consumer.
“(B) Consumer financial protection laws—No payment order, including a remotely created check, may be issued by any person in response to the exercise of, or attempt to exercise, any rights by a consumer under any Federal consumer financial law, as defined in section 1002 of the Consumer Financial Protection Act of 2010 (12 U.S.C. 5481), or any other provision of any law or regulation within the jurisdiction of the Bureau.”
Consumer Protections for Certain One-Time Electronic Fund Transfers— Section 913 of the Electronic Fund Transfer Act (15 U.S.C. 1693k) is amended—
by inserting “(a) In general.—” before “No person”;
in subsection (a)(1), as so designated, by striking “preauthorized electronic fund transfers” and inserting “an electronic fund transfer”; and
by adding at the end the following:
“(b) Treatment for electronic fund transfers in credit extensions—If a consumer voluntarily agrees to repay an extension of a small-dollar consumer credit transaction, as defined in section 110(a) of the Truth in Lending Act, by means of an electronic fund transfer, the electronic fund transfer shall be treated as a preauthorized electronic fund transfer subject to the protections of this title.”
Sec. 3 Transparency and consumer empowerment in small-dollar lending
Small-Dollar consumer credit transactions— The Truth in Lending Act (15 U.S.C. 1601 et seq.) is amended—
by inserting after section 109 (15 U.S.C. 1608) the following:
“110. Registration requirement for small-dollar lenders
“(a) Definition—In this section, the term small-dollar consumer credit transaction means any transaction that extends, facilitates, brokers, arranges, or gathers applications for credit that is—
“(1) made to a consumer in an amount of not more than $5,000, or such greater amount as the Bureau may, by rule, determine, with the amount to be adjusted annually to reflect changes in the Consumer Price Index for all urban consumers published by the Department of Labor; and
“(2) extended pursuant to an agreement that is—
“(A)
“(i) other than an open-end credit plan; and
“(ii) payable in 1 or more installments of less than 12 months (or such longer period as the Bureau may, by rule, determine);
“(B) an open-end credit plan in which each advance is fully repayable within a defined time or in connection with a defined event, or both; or
“(C) any other plan as the Bureau determines, by rule.
“(b) Registration requirement—A person shall register with the Bureau before issuing credit in a small-dollar consumer credit transaction.”
in section 173 (15 U.S.C. 1666j), by adding at the end the following:
“(d) Notwithstanding any other provisions of this title, any small-dollar consumer credit transaction, as defined in section 110(a), shall comply with the laws of the State in which the consumer resides with respect to annual percentage rates, interest, fees, charges, and such other similar or related matters as the Bureau may, by rule, determine if the small-dollar consumer credit transaction is—
“(1) made over—
“(A) the Internet;
“(B) telephone;
“(C) facsimile;
“(D) mail;
“(E) electronic mail; or
“(F) other electronic communication; or
“(2) conducted by a national bank.”
in the table of sections of chapter 1, by inserting after the item relating to section 109 the following:
Prohibition on certain fees— Section 915 of the Electronic Fund Transfer Act (15 U.S.C. 1693l–1) is amended—
by redesignating subsection (d) as subsection (e); and
by inserting after subsection (c) the following:
“(d) Additional fees prohibited
“(1) Definition—In this subsection, the term general-use prepaid card has the meaning given the term—
“(A) in subsection (a)(2); or
“(B) by rule of the Bureau.
“(2) Prohibition—With respect to the use of a general-use prepaid card by a consumer—
“(A) it shall be unlawful for any person to charge the consumer a fee for an overdraft, including a shortage of funds or a transaction processed for an amount exceeding the account balance on the general-use prepaid card;
“(B) any transaction for an amount exceeding the account balance on the general-use prepaid card may be declined, except that the consumer may not be charged a fee for that purpose; and
“(C) the Bureau may, by rule, prohibit the charging of any fee so that the Bureau may—
“(i) prevent unfair, deceptive, or abusive practices; and
“(ii) promote the ability of the consumer to understand and compare the costs of general-use prepaid cards.”
Sec. 4 Restrictions on lead generation in small-dollar consumer credit transactions
Chapter 2 of the Truth in Lending Act (15 U.S.C. 1631 et seq.) is amended by adding at the end the following:
“140B. Restrictions on lead generation in small-dollar consumer credit transactions
“(a) Definitions—In this section—
“(1) the term sensitive personal financial information means the social security number, financial account number, bank routing number, bank account number, or any required security or access code that is immediately necessary to permit access to the financial account of an individual; and
“(2) the term small-dollar consumer credit transaction has the meaning given the term in section 110(a).
“(b) Identification information—Any person facilitating, brokering, arranging, gathering applications for, or distributing sensitive personal financial information in connection with a small-dollar consumer credit transaction shall prominently disclose information by which the person may be contacted or identified, including for service of process and for identification of the registrant of any domain name registered or used.
“(c) Prohibition on lead generation in small-Dollar consumer credit transactions—No person may facilitate, broker, arrange, gather applications for, or distribute sensitive personal financial information in connection with a small-dollar consumer credit transaction, unless the person is directly providing the small-dollar consumer credit to the consumer.
“(d) Rule of construction
“(1) In general—Nothing in this section may be interpreted to limit the authority of the Bureau to further restrict activities covered by this section.
“(2) Clarification—It shall not be considered “facilitating” in connection with a small-dollar consumer credit transaction to be engaged solely in 1 of the following activities:
“(A) The provision of a telecommunications service, or of an Internet access service or Internet information location tool (as those terms are defined in section 231 of the Communications Act of 1934 (47 U.S.C. 231)).
“(B) The transmission, storage, retrieval, hosting, formatting, or translation (or any combination thereof) of a communication, without selection or alteration of the content of the communication, except that deletion of a particular communication or material made by another person in a manner consistent with section 230(c) of the Communications Act of 1934 (47 U.S.C. 230(c)).”
Sec. 5 Studies
In general— Not later than 180 days after the date of enactment of this Act, the Government Accountability Office (in this section referred to as the GAO) shall conduct a study regarding—
the availability of capital on reservations of Indian tribes (as defined in section 4 of the Indian Self-Determination and Education Assistance Act (25 U.S.C. 450b)); and
the impact that small-dollar consumer credit extended through Internet and non-Internet means to members of Indian tribes has had on economic opportunity and wealth for members of Indian tribes.
Consultation— In conducting the study described in subsection (a), the GAO shall consult, as appropriate, with—
the Bureau of Consumer Financial Protection;
the Board of Governors of the Federal Reserve System;
the Bureau of Indian Affairs;
federally recognized Indian tribes; and
community development financial institutions operating in Indian lands.
Congressional consideration— The study described in subsections (a) and (b) shall be presented to the Committee on Banking, Housing, and Urban Affairs and the Committee on Indian Affairs of the Senate and the Committee on Financial Services and the Committee on Natural Resources of the House of Representatives.
Sec. 6 Rulemaking
Not later than 1 year after the date of enactment of this Act, the Bureau of Consumer Financial Protection shall adopt any final rules necessary to implement the provisions of this Act and the amendments made by this Act.