A recent letter-to-the-editor of American Banker by AFSA’s Bill Himpler dealt with the issue of so-called “live checks” otherwise known, more accurately, as loans-by-mail:
January 2, 2019
One State Street Plaza, 27th Floor
New York, NY 10004
To the Editor,
A recent story published in American Banker (“Will Congress move to outlaw ‘live’ checks?” by Andy Peters, December 27, 2018) makes a number of salient points about the consumer loan products sometimes called “live checks.” While the article points out that these products fill a recognized need in the marketplace, it also includes false claims from an activist group hostile to financial services.
As the article states, live checks are in demand as customers with less than perfect credit face difficulty borrowing from traditional banks. Contrary to the claim by the activist group, the National Consumer Law Center (NCLC), the checks themselves are clearly and transparently marketed in accordance with federal and state truth in lending laws. Moreover, the consumer finance companies themselves have every incentive to ensure their practices are fully compliant with relevant regulations.
NCLC also erroneously claims that it has been “getting more complaints about live checks, from both lawyers on the ground and the Consumer Financial Protection Bureau’s [CFPB] complaint database.”
However, NCLC offers no hard basis for the first part of that claim, and the second part is demonstrably false. As can be easily confirmed on CFPB’s own website, there have been fewer than 100 out of over a million complaints – that’s 0.008% – to CFPB in the last five years. In contrast, there are over 20,000 complaints about federal student loans. In fact, the article cites a former CFPB acting deputy enforcement director who says that she is, “not sure how big of a problem this is.”
Limiting the use of live checks would harm consumers. The Federal Reserve has been clear that pre-screened offers of credit, including live checks, benefit consumers who need access to credit.
The public and lawmakers alike both deserve a clear picture of our industry’s products and practices as they consider new legislation, and we hope this letter will help dispel false claims.
American Financial Services Association
The letter can be viewed on the AFSA website HERE.