United States Government Publishing Office publisher pbl distributor dst United States Government Accountability Office General Government Division author aut Government Organization text government publication eng GAOREPORTS Legislative Agency Publications gao legislative 2010-08-12 U.S. Government Printing Office 1998-08-14 monographic deposited born digital 16 p. GA 1.13:GGD-98-176 https://www.govinfo.gov/app/details/GAOREPORTS-GGD-98-176 P0b002ee180375c33 f:gg98176 DGPO 2010-08-12 2011-03-28 GAOREPORTS-GGD-98-176 machine generated eng fdlp REPORT GAOREPORTS-GGD-98-176 GGD-98-176 Lending institutions Losses Debt Credit Financial management Personal loans Bank loans Negotiable instruments Letter Report GGD

Pursuant to a congressional request, GAO provided information on live loan checks, focusing on the: (1) characteristics of live loan checks and the major organizations that provide unsolicited loan checks; (2) volume of live loan checks in 1995, 1996, and 1997 and the expected volume in 1998; and (3) benefits and risks of live loan checks for the borrowers and lenders.<p/>GAO noted that: (1) once cashed, live loan checks result in unsecured consumer loans; (2) bank officials GAO interviewed told it that live loan checks are aimed at the most creditworthy customers--that is, those least likely to be delinquent or in default in making loan payments; (3) according to bank officials, such loans are made at interest rates ranging from 12.9 percent to 15.9 percent, compared to an average 16 percent for credit cards; (4) Fleet Bank officials told GAO that it has sent potential borrowers live loan checks ranging from $3,000 to $10,000 based on its estimate of the borrower's ability to repay the loan; (5) the repayment terms for these loans ranged from 48 months to 60 months, and the loans were amortized; (6) Fleet officials stated that borrowers generally have used the loan amounts for expenses such as home improvements, debt consolidation, and school expenses; (7) according to bank officials GAO interviewed, at least eight financial institutions have offered live loan checks; (8) of these eight financial institutions, six were banks: Chase Manhattan, Fleet, First USA Bank, Signet Bank, BancOne Corporation, and First Chicago NBD; (9) two were nonbanks: Capital One and Beneficial Corporation; (10) First Chicago stopped offering these loans after suffering a level of losses that it considered not acceptable during a pilot program; (11) public- and private-sector officials told GAO that comprehensive data on the volume of data were not available; (12) Fleet provided GAO with quantitative data on its live loan check program; (13) between 1995 and 1997, Fleet mailed 4.35 million live loan checks; (14) of these, approximately 155,000 borrowers cashed the checks and accepted the loans; (15) Fleet made over $680 million in loans through this program; (16) Fleet officials told GAO that it experienced 68 confirmed cases of fraud, which generally involved someone other than the intended recipient cashing the check; (17) public- and private-sector officials identified benefits and risks associated with live loan checks; (18) borrowers benefit from live loan checks because these checks meet their needs for immediate access to funds at interest rates competitive with those offered by credit cards; (19) risks to the borrowers include the potential for these loans to compound problems associated with high levels of consumer borrowing; and (20) Fleet and Chase informed GAO that, while loans initiated from cashing live loan checks were a small percentage of their bank assets, the programs thus far have been profitable, with manageable risks. https://www.govinfo.gov/content/pkg/GAOREPORTS-GGD-98-176/html/GAOREPORTS-GGD-98-176.htm https://www.govinfo.gov/content/pkg/GAOREPORTS-GGD-98-176/pdf/GAOREPORTS-GGD-98-176.pdf GAO/GGD-98-176 https://www.govinfo.gov/app/details/GAOREPORTS-GGD-98-176 Letter Report GAO/GGD-98-176; Live Loan Checks: Information on Unsolicited Consumer Loans for Preapproved Borrowers; Lending institutions Losses Debt Credit Financial management Personal loans Bank loans Negotiable instruments Title 15 Section 1601et seq. 15 U.S.C. 1601et seq. Title 12 Part 226 12 CFR Part 226