If you’ve ever received a check in the mail that looks authentic from your bank or another financial institution, but you aren’t sure why you received it — it is most likely a “live” check, which is actually a high-interest loan.
Not knowing where the check comes from stops some consumers from doing anything with it. But many others assume it’s a legitimate check, cash it, and unwittingly enter into an unwanted financial agreement with the lender. In the eyes of the law, cashing the check is the same things as opening a loan.
U.S. Sen. Doug Jones has taken notice of this predatory practice and has introduced bipartisan legislation to try and stop it. On Monday, Jones along with his colleagues, Sen. Tom Cotton (R-Ark.), and Sen. Jeff Merkley (D-Ore.) introduced a bill that would halt the predatory practice of mailing high-interest loans to consumers in the form of “live” checks.
The Unsolicited Loan Act of 2018 would prohibit this practice and ensure that consumers access loans only when they proactively apply for them. This legislation mirrors the decades old prohibition on the mailing of live credit cards.
“As working Americans look to make ends meet, lenders will often target cash-strapped families with these mailings. It is unconscionable that someone would take advantage of another person’s dire financial situation to make a quick buck for themselves. We need to end this predatory lending tactic and pass this legislation to protect consumers and their pocketbooks,” said Jones.
It has been long recognized by Congress that consumer loans should require an application by a customer. In fact, Congress banned the mailing of unsolicited live credit cards nearly 50 years ago. In modern lending, a formal loan application can often take just minutes. The bill does not prohibit the direct marketing or mailing of a loan application, but rather provides common-sense consumer protections without limiting access to credit for consumers who willingly apply and seek lending products.This legislation would provide common-sense consumer protections without limiting access to credit for consumers who willingly apply and seek lending products.
“People should understand clearly when they are taking on debt. But because ‘live’ checks mailed directly to consumers don’t require an application or any previous relationship with the consumer, many individuals don’t realize that these checks are actually high-interest loans until it’s too late. Just like Congress ended the practice of mailing ‘live’ credit cards nearly 50 years ago, Congress should pass our bill now to stop this underhanded practice,” explained Cotton.
The bill would also ensure that companies cannot shift from the mailing of live checks to other forms of transfer, such as a gift card or an “e-check.” In addition, it would ensure that customers are not liable for debt incurred from an illegal, unsolicited live check loan.
“When you receive a check in the mail, it’s natural to assume that depositing it will help—not hurt—your bottom line,” added Merkley. “But these checks don’t pad consumers’ pocketbooks; instead, they send them into a vortex of debt. The practice of mailing high-interest loans disguised as checks is unconscionable and clearly predatory. Today, we’re sending a bipartisan message that this unacceptable practice must end.”
The National Consumer Law Center has endorsed this legislation on behalf of its low-income clients.