[Congressional Record Volume 155, Number 122 (Thursday, August 6, 2009)]
[Senate]
[Page S9004]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. MERKLEY:
  S. 1595. A bill to amend the Truth in Lending Act to prohibit the 
distribution of any check or other negotiable instrument as part of a 
solicitation by a creditor for an extension of credit, to limit the 
liability of consumers in conjunction with such solicitations, and for 
other purposes; to the Committee on Banking, Housing, and Urban 
Affairs.
  Mr. MERKLEY. Mr. President, in recent years, consumer credit has gone 
from providing convenience and short-term financing to a game of tricks 
and traps that strips families of hard earned resources and locks the 
middle class into a vicious cycle of debt. Today, I introduce 
legislation to end one of those deceptive practices--the unsolicited 
mailing of ``live'' loan checks.
  Deceptive loan checks have afflicted consumers, especially seniors, 
for far too long. In these schemes, financial institutions send 
unsuspecting customers checks 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, fine print on these checks actually makes them high-
cost loans.
  Bank regulators have failed for years to rein in these deceptive 
products. In Oregon, one of my elderly constituents--a veteran of the 
Korean war--ended up in a subprime mortgage because he unknowingly 
deposited a deceptive loan check that he never requested. 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. As this case shows, deceptive products and 
practices lead our consumers into dangerous, high cost debt. If 
individuals wish to take out high cost loans, they should have every 
right to do so, but financial institutions should make those 
transactions plain and straightforward, not tricky and deceptive.
  To address this situation, I am introducing the Deceptive Loan Check 
Elimination Act. Under the act, financial institutions would be 
prohibited from sending a ``live'' loan check unless the consumer 
requested such a check in writing. Consumers would not be liable for 
any debt incurred in violation of the act. This common sense solution 
protects consumers without constricting credit for those who want it. 
The 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.
  I am hopeful that the Senate will act quickly to address this 
problem. In addition, the next step in restoring a fair playing field 
for working families is 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.
  I urge my colleagues to join me in this and future efforts to restore 
honesty and plain dealing to our consumer credit markets.
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