SENATE DOCKET, NO. 1306 FILED ON: 1/14/2009
SENATE . . . . . . . . . . . . . . No. 447
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The Commonwealth of Massachusetts
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In the Year Two Thousand Nine
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An Act protecting consumers from unsolicited loans..
Be it enacted by the Senate and House of Representatives in General Court assembled, and by the authority of the same, as follows:
SECTION 1. The General Laws are hereby amended by inserting after chapter 140E the following chapter:-
CHAPTER 140FUNSOLICITED LOAN CONSUMER PROTECTION
Section 1. For the purposes of this chapter the following words shall have the following meanings:- “Addressee”, the intended recipient of an unsolicited loan instrument. “Commissioner”, the commissioner of banks. “Unauthorized use”, negotiation of an unsolicited loan instrument by a person other than the addressee who does not have actual, implied, or apparent authority for the negotiation and from which the addressee receives no benefit. “Unsolicited loan instrument”, a negotiable check, money order, draft, or other instrument that may be used by a consumer to activate a loan which was not solicited by the consumer. Section 2. A financial institution or lender shall not solicit a loan by mailing an unsolicited loan instrument unless: (1) the instrument is not negotiable more than 30 days after the date shown on the instrument; (2) the financial institution or lender has prominently disclosed in easily understood language on the front or back of the instrument clearly and conspicuously the amount financed, the current annual percentage rate, the number of installments to be paid and the amount of each installment to be paid. The financial institution shall also print on the front and back of the instrument the following statements in 14 point type using capital letters: “THIS IS A SOLICITATION FOR A LOAN-- PLEASE READ ALL DISCLOSURES BEFORE SIGNING AND CASHING THIS INSTRUMENT. IF THIS INSTRUMENT IS NOT CASHED, PLEASE DESTROY. BY ENDORSING THIS INSTRUMENT, YOU BECOME LEGALLY LIABLE FOR REPAYING MONEYS, INCLUDING INTEREST, AS SPECIFIED IN THE ENCLOSED LOAN AGREEMENT”.Section 3. A financial institution or lender shall mail any unsolicited loan instrument in a plain envelope upon which there shall be no indication that an unsolicited loan instrument is enclosed. The envelope shall be marked with instructions for the postal service not to forward if the intended recipient is no longer at the address on the envelope. Section 4. A financial institution or lender shall provide the addressee of any unsolicited loan instrument with the option to be excluded from future solicitations for unsolicited loan instruments by providing a telephone number and address to contact for that purpose. Section 5. If a an unsolicited loan instrument is negotiated, the obligor shall have the right to rescind the transaction within 10 days of the date a negotiable instrument is cashed, by notifying the financial institution or lender and returning the entire amount of the negotiable instrument. Section 6. An addressee shall not be held liable for any debt incurred by any unauthorized use or fraudulent negotiation of an unsolicited loan instrument by a party other than the addressee. In the event of an unauthorized use or fraudulent negotiation of an unsolicited loan instrument, the issuing institution shall: (1) provide the addressee with a written statement relieving the addressee of liability for the debt; (2) take steps in accordance with the rules and regulations of the commissioner to repair an adverse effect to the addressee’s credit rating as a result of the unauthorized use or fraudulent negotiation; and (3) provide the addressee with a written statement informing the addressee that the steps have been or will be taken. Section 7. (a) A financial institution or lender shall not transfer funds held in an account of the addressee in the financial institution as a consequence of a default of a debt owed to the institution as a result of the unauthorized use or fraudulent negotiation of an unsolicited loan instrument.(b) Nothing in this chapter shall prohibit a financial institution from advancing money or credit in accordance with law and pursuant to a customer relationship, as defined in the Gramm-Leach-Bliley Act of 1999, 15 U.S.C. section 6809 (11), or a valid mortgage or loan agreement.Section 8: Any person or entity that willfully or knowingly gives false or inaccurate information or fails to provide information required to be disclosed or enclosed under this chapter or any regulation issued thereunder, or sends an unsolicited loan instrument after an addressee has notified the person or entity of his request not to be subjected to future solicitations as provided under section 4 shall be fined not more than $5000 for each such violation. Section 9. The commissioner shall adopt such rules and regulations as are necessary to implement this chapter. Section 10. A violation of this chapter, or any rule or regulation issued hereunder, shall constitute a violation of chapter 93A.
SECTION 2. Chapter 266 of the General Laws is hereby amended by inserting after section 33A the following section:- Section 33B. (a) For purposes of this section, the following words shall have the following meanings:-“Negotiates”, to convert into cash or equivalent value. “Unsolicited loan instrument”, a negotiable check, money order, draft or other instrument that may be used by a person to activate a loan which was not solicited by such person. Whoever knowingly and fraudulently negotiates an unsolicited loan instrument shall be punished by imprisonment in the house of correction for not more than 2 ½ years or in the state prison for not less than 3 years nor more than 5 years, or by a fine of not more than $25,000, or both.
SECTION 3. Chapter 140F of the General Laws shall apply to all unsolicited loan instruments issued on or after the effective date of this act.