Lawmakers Seek to Bar Unsolicited Loans

WASHINGTON — One type of check in the mail--a check from a bank for an unsolicited loan--would be banned under legislation proposed Wednesday by a House lawmaker.

Rep. Maurice Hinchey (D-N.Y.) said he took the action after investigating a complaint from one of his constituents that she had received in the mail, unsolicited, a $7,500 check that turned out to be a bank loan.

If the checks are endorsed, such loans carry interest rates of as high as 20%, said Hinchey, a member of the House Banking Committee.

“Some banks are preying on consumers and jeopardizing their financial security,” he said in a statement. “Banks should not be sending unsolicited loans through the mail where anyone can get their hands on them. Even if the loan check reaches its target, a trusting individual could sign it and wind up liable for an exorbitant amount.”

Rep. Henry B. Gonzalez of Texas, the Banking Committee’s senior Democrat, is co-sponsoring the Unsolicited Loan Consumer Protection Act of 1997 with Hinchey.

Representatives for the American Bankers Assn. could not be reached for comment.

With credit-card debt and personal bankruptcies both skyrocketing, lawmakers have begun concentrating more attention on consumer lending issues. Last week, Rep. Joe Kennedy (D-Mass.) introduced a bill to limit certain fees charged by credit-card companies.

The Hinchey-Gonzalez bill would amend the Truth in Lending Act to prohibit any creditor from sending a check or other negotiable financial instrument through the mail unless a consumer had applied for or requested such a loan.

The bill also would insulate consumers from fraudulent loans. The creditor would bear the burden of proof if a consumer denied having cashed the loan check.

A subcommittee of the House Banking Committee is expected to hold hearings later in the summer on the proposal, congressional staffers said.