BOSTON – Senator Michael O. Moore (D-Millbury) announced that the Senate passed legislation to help protect consumers from unknowingly entering into credit contracts associated with unsolicited, and often predatory, loans.
The bill, which passed the Senate unanimously, restricts banks, mortgage lenders, or any other authorized lender in the Commonwealth from issuing an unsolicited loan instrument. These so-called “instant loan checks” or “live checks” typically feature routing numbers, account numbers, and all the standard features of a regular check. When cashed, the checks activate a high-interest consumer loan.
This legislation prohibits a person or entity from issuing an unsolicited negotiable check, money order, or other instrument that can be used to activate a loan, except 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. Additionally, anyone who chooses to cash an unsolicited loan 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.
“This legislation is yet another step forward in strengthening consumer protection laws and addressing the issue of deceptive lending practices,” said Senator Moore. “While some folks dispose of these types of lending materials without a second thought, others have fallen victim to high interest rates by cashing the checks or by fraudulent activation of the loan.”
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 large amounts of credit extended through unsolicited loan checks and the ease in which they can be misdirected in the mail make them easy targets for identity fraud. This bill is a commonsense measure to protect consumers,” said Senator Kathleen O’Connor Ives (D-Newburyport) who is the primary sponsor of the bill.
The legislation now moves to the House of Representatives for consideration.