Statements On Introduced Bills And Joint Resolutions

Floor Speech

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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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