[Congressional Record Volume 143, Number 120 (Thursday, September 11, 1997)]
[Senate]
[Pages S9198-S9199]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. BRYAN:
  S. 1163. A bill to amend the Truth in Lending Act to prohibit the 
distribution of any negotiable check or other instrument with any 
solicitation to a consumer by a creditor to open an account under any 
consumer credit plan or to engage in any other credit transaction which 
is subject to that Act, and for other purposes; to the Committee on 
Banking, Housing, and Urban Affairs.


              the unsolicited loan consumer protection act

  Mr. BRYAN. Mr. President, I rise today to introduce legislation that 
will protect consumers from a new, egregious banking practice that 
gives new meaning to the old expression, ``The check's in the mail.''
  This practice involves financial institutions sending unsolicited 
checks to consumers, some of whom have no prior relationship with the 
financial institution at all. These checks in fact obligate the 
recipient to a loan with interest rates as high as 25 percent.
  I invite my colleagues' attention to a format that is frequently 
used. This check is sent in a window envelope in which the recipient 
sees his or her name, opens it up and believes that indeed a check has 
been sent to him or to her.
  What may at first appear to be pennies from Heaven is in reality a 
loan backed by exorbitant interest rates and punitive loan terms, but 
these details are only found in the fine print often on the back of the 
check.
  While only a few banks are engaged in this practice, it is 
nevertheless a growing practice and needs to be stopped before it gets 
completely out of hand. For example, one bank has booked $1 billion of 
these unsolicited loans in a period of 18 months.
  At a time when personal bankruptcies are at an all-time high --many 
attribute that to easy credit-card debt--the practice in which 
consumers are enticed into taking a loan that they really have not 
sought should concern all Americans.
  I fear for the long-term consequence of these loans should the 
economy take a sudden downturn and these loans are left in default.
  The bottom line, Mr. President, is loans should only be issued when 
an application has been made and approved, with the consumer fully 
understanding the terms of the loan. In the case of these loans, all 
the pertinent information consumers need to know about

[[Page S9199]]

fees, charges, interest rates is in microscopic print and most 
frequently on the back of the check itself.
  Mr. President, banks are trying the patience of the American consumer 
with their ever increasing use of fees and questionable market 
practices.
  My State of Nevada has gone through a series of bank mergers that 
have left customers frustrated and confused. Service has been 
downgraded, accounts lost and fees increased. According to one report, 
the number of types of fees charged by banks increased from 96 to 250 
while the banking industry itself continues to earn record profits--
surpassing $50 billion.
  These unsolicited checks are setting rates right up against the usury 
ceilings with some carrying rates as high as 25 percent. Adding insult 
to injury, these checks are targeted to people who can least afford to 
pay these exorbitant rates but are easily tempted by the lure of easy 
money.
  Mr. President, I want to commend Congressmen Hinchey and Gonzalez in 
the House for raising this issue. I look forward to the Banking 
Committee holding hearings on this important legislation. The 
distinguished chairman of the subcommittee has indicated that it is his 
intention to hold hearings on this issue. I look forward to processing 
this legislation as quickly as possible.
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