The use of checks or other negotiable instruments in direct mail credit solicitations would be prohibited under a bill introduced last Thursday by Rep. John J. LaFalce (D-NY).
LaFalce said those solicitations usually target senior citizens and young families who need credit with offers of instant cash. The checks typically range between $1,500 and $3,000. Cashing the check, he added, results in “a fixed-term, high-cost loan with interest rates often as high as 25 percent” with fixed-loan payments for three or four years, with any default or late payment triggering high fees, higher interest charges and “demands for immediate payment in full.”
Besides prohibiting the use of checks or other instruments that can be turned into cash, the measure would also prohibit financial and credit granting companies from reporting adverse information about a consumer who cashes an unsolicited check and refuses to repay it.
The bill, an amendment to the Federal Truth In Lending Act that has been referred to the House Banking Committee for review, would give the Federal Reserve Board six months to develop implementing rules and regulations.
