Recently, the State Senate unanimously, and in a bipartisan fashion, passed a bill I filed to protect consumers from unknowingly entering a credit contract and to limit instances of fraud resulting from the mailing of unsolicited and often predatory loans.
Every day, residents across Massachusetts find what appear to be normal checks in their mailboxes for large sums of money with their names on it. When cashed, these checks activate a high-interest consumer loan. These loans have been known by other names, including “instant loan checks,” and “live checks,” and they most often take the form of a check or other negotiable instrument with routing numbers, account numbers, and all the standard features of a regular check.
Many immediately tear up these checks out of justified suspicion. Some unwittingly cash the checks during times of financial desperation. Still others discover someone else fraudulently cashed a check in their name only after reading a tarnished credit report.
Senate Bill 2194 “An Act Relative to Unsolicited Loans,” is a commonsense measure to protect consumers from predatory lending and identity fraud. This legislation prohibits banks, mortgage lenders, or any other entity from issuing an unsolicited negotiable check, money order, or other instrument that can be used to activate a loan. An exception is made in cases where a financial institution advances credit to a customer with whom they have a preexisting relationship. The bill also removes liability for debts incurred if a party other than the addressee fraudulently cashes a loan check.
In the event of such an unauthorized use of an unsolicited loan instrument, the issuing institution would provide the addressee with a written statement releasing them of liability from the debt and would take steps to repair any adverse effect to their credit rating as a result of the unauthorized use.
Additionally, anyone who cashes an unsolicited loan check without understanding the terms and conditions buried in the legalese that accompany the check has the right to rescind the credit contract within ten days of cashing the check by notifying the lender and returning the loan amount in full.
A financial institution that improperly sends an unsolicited loan instrument may face a fine of up to $5,000 for each violation, and a party that engages in an unauthorized use of a loan check may be punished by up to five years in state prison or be issued a fine of up to $25,000.
The bill now moves to the Massachusetts House of Representatives for their consideration.
Senator O’Connor Ives can be reached at KATHLEEN.OCONNORIVES@MASENATE.GOV.