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.
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