A Marketing Idea Gone Wrong?
Legislation has been introduced that would make issuing loan checks to solicit the opening of a credit account illegal.
The terms on the back of the check, once the check is endorsed by the payee, are considered by the financial institution to be a binding contract. The disclosure and other information regarding the check are attached to the check, which has to be torn off in order to be deposited.
Both the Senate and the House are now considering a law that would stop what one Representative termed a "creative way to put people into debt."
The measure, in part, states that consumers would not be liable for any debt created by the loan checks unless the lending financial institution which issued the check can prove the customer actually got the proceeds, and understood the terms of the negotiation.
Copyright © 1997 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 7, No. 10, 8/97
First published on 08/01/1997