Senator DiDomenico Votes to Pass Legislation to Regulate Unsolicited Loans

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BOSTON – Senator Sal DiDomenico and his colleagues in the Massachusetts Senate recently voted to unanimously pass legislation to protect consumers from unknowingly entering a credit contract and to limit instances of fraud resulting from the mailing of unsolicited and often predatory loans.


The bill, “An Act relative to unsolicited loans,” regulates the issuing of unsolicited loan instruments to residents by banks, mortgage lenders, or any other institution authorized to do business in the Commonwealth. Taking the appearance of a check, these documents, also known as “instant loan checks,” or “live checks,” appear in the mail and, if cashed, can trigger a loan with high interest rates.


This legislation prohibits a person or entity from issuing an unsolicited negotiable check, money order, or other instrument that can be used to activate a loan, except in cases where a financial institution advances credit to a customer with whom they have a preexisting relationship. The bill also removes liability for debts incurred if a party other than the addressee fraudulently cashes a loan check.


“By taking advantage of unsuspecting or financially strained consumers, these unsolicited loans can destroy a person’s financial stability and put people at risk of identity fraud,” said Senator DiDomenico. “This legislation plays a key role in protecting the people of the Commonwealth, and I am proud to support this critical consumer protection bill.”  


In the event of an unauthorized use of an unsolicited loan instrument, the issuing institution will provide the addressee with a written statement releasing the addressee of liability from the debt and will take steps to repair any adverse effect to the addressee’s credit rating as a result of the unauthorized use.


Additionally, anyone who chooses to cash an unsolicited loan check has the right to rescind the credit contract within ten days of cashing the check by notifying the lender and returning the loan amount in full.


A financial institution that improperly sends an unsolicited loan instrument may face a fine of up to $5,000 for each violation, and a party that engages in an unauthorized use of a loan check may be punished by up to five years in state prison or be issued a fine of up to $25,000.


The bill now moves to the Massachusetts House of Representatives for their consideration.

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