Merkley Introduces Bill to Stop Deceptive Loan Checks

Legislation Will Protect Consumers From Fine Print on Unsolicited Checks from Banks

Thursday, August 6, 2009

Washington, D.C. – Oregon’s Senator Jeff Merkley introduced the Deceptive Loan Check Elimination Act Thursday to prohibit companies from sending “live” loan checks to consumers.  In these schemes, financial institutions send unsuspecting customers a check made out to them for some amount.  Customers often assume that their financial institutions have sent refunds or some other business-related sum and unknowingly deposit the checks.  However, the fine print on these checks actually make them high-cost loans. 

“Without fair rules of the road, American consumers are being tricked into unwanted loans that lead to dangerous, high cost debt.  Financial traps like ‘live’ loan checks have stripped wealth from our families and contributed to the current financial crisis,” Merkley said.  “One of my constituents, a Korean War veteran, ended up in a subprime mortgage because he deposited one of these unsolicited loan checks without knowing it was a scam.  Sadly, instead of being able to cancel the loan, he was pushed into rolling this unwanted loan into his mortgage, which was then transformed from a safe, fixed rate mortgage that had nearly been paid off, into a brand new, subprime mortgage. 

 

“The legislation I’m introducing today will protect consumers from getting caught up in expensive loans that they never wanted in the first place.  The next step in restoring a fair playing field for working families is for Congress to move ahead quickly to create the Consumer Financial Protection Agency, a body with the authority to review and regulate financial tricks and traps like ‘live’ loan checks.”

Merkley’s Deceptive Loan Check Elimination Act will prohibit financial institutions from sending a “live” loan check unless the consumer requested such a check in writing, and consumers would not be liable for any debt incurred in violation of the Act.  This common sense solution protects consumers without constricting credit for consumers who want it.

Merkley’s legislation is endorsed by Consumer Action, Consumers Federation of America, Consumers Union, the National Consumer Law Center (on behalf of its low income clients), and the U.S. Public Interest Research Group.