"Live Checks"

In today’s faltering economy, subprime lending, both within and outside the mortgage industry, is becoming increasingly scrutinized for its deceitful business practices. One aspect of subprime financing that even the large financial institutions are guilty of continually utilizing is the mailing of unsolicited, so-called ‘live checks’ that, when cashed, become high-interest loans. Legal in most states, these live loan checks often deceive consumers regarding the precise conditions of the loan, weighted with the promise of thousands of dollars that can be easily and instantly deposited into personal checking accounts with no more than a signature.

Bank officials contend that the mailing of live loan checks is perfectly ethical, as it’s similar to mailing credit card applications, a practice that’s rarely called into question (Adcox, “SC”). However, the practice has been debated significantly during recent years, with several bills introduced that would ban live-loan checks on the federal level (Caputo, “When”). Additionally, unsolicited checks are a frequent vehicle for mail fraud and identity theft, often costing unwitting consumers their credit rating, at the very least (“HSBC”). Undoubtedly a predatory practice, live check lending is likely soon to become a thing of the past, with the recent economic downturn placing an irrevocable spotlight on less-than-ethical lending.

By Brian Redhead

Works Cited

http://www.scnow.com/scp/news/politics/south_carolina/article/sc_senate_debates_banning_so-called_live_checks/33617/

http://www.bankrate.com/brm/news/cc/19990830.asp

http://householdwatch.com/news/interactive/196

http://www.bankrate.com/brm/news/cc/19990830.asp