Sometimes I am absolutely certain that I have covered a consumer finance topic—only to realize after diligently searching, that I have not. The subject of Loans-By-Mail (also known as Live Checks and Checks-in-the-Mail) is such a topic. It is an important one, and I am remiss in just now covering it!

Building a book of business by utilizing Live Checks is not new. Consumer finance companies have used this technique for many years. What creates the opportunity for this type of solicitation is the Guaranteed Offer of Credit exception to the Fair Credit Reporting Act. See Back to Basics Continued—The Guaranteed Offer of Credit! for an explanation of how a consumer finance company may obtain a list of non-customers from a Credit Reporting Agency and solicit them, without violating the Fair Credit Reporting Act.

The return rate on Live Checks may be very small. But, it is a tried and true entrée into a market that may be new to a creditor. 

The American Financial Services Association (AFSA) has recently published a White Paper addressing the history of Live Checks. For AFSA members, the link to the White Paper is https://afsaonline.org/afsa_resource/loans-by-mail-aka-marketing-checks-wp/.* This is an interesting history of the ups and downs of Live Checks over the years.

What I found particularly interesting in the AFSA history is that the rate of fraud in connection with Live Checks is actually very low—almost to the point of being negligible.

Different states have enacted laws and regulations addressing Live Checks. None of Congress, the CFPB nor the FTC have yet adopted special loan disclosure rules.

Practice Pointer: If your Live Checks are to be mailed into a jurisdiction that has adopted disclosure requirements, be certain that your forms are in compliance.

*This link is only accessible for AFSA members. Readers who are interested in reviewing the White Paper, but who are not AFSA members, should contact Edwin Portugal eportugal@afsamail.org or Danielle Arlowe dfagre@afsamail.org. 

Please Note: This is the two hundred-thirty-first blog in a series of Back to Basics blogs, in which relevant and resourceful information can be easily accessed by clicking Dentons - Consumer Finance Report.