SENATE DOCKET, NO. 686        FILED ON: 1/15/2015

SENATE  .  .  .  .  .  .  .  .  .  .  .  .  .  .  No. 499

The Commonwealth of Massachusetts

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PRESENTED BY:

Linda Dorcena Forry

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To the Honorable Senate and House of Representatives of the Commonwealth of Massachusetts in General
Court assembled:

The undersigned legislators and/or citizens respectfully petition for the adoption of the accompanying bill:

An Act protecting consumers from unsolicited loans.

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PETITION OF:

SENATE DOCKET, NO. 686        FILED ON: 1/15/2015

SENATE  .  .  .  .  .  .  .  .  .  .  .  .  .  .  No. 499

[SIMILAR MATTER FILED IN PREVIOUS SESSION
SEE HOUSE, NO. 908 OF 2013-2014.]

The Commonwealth of Massachusetts

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In the One Hundred and Eighty-Ninth General Court
(2015-2016)

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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 140F  UNSOLICITED LOAN CONSUMER PROTECTION

Section 1. For the purposes of this chapter the following words shall have the following meanings, unless the context clearly requires otherwise:- “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. No unsolicited loan instrument shall be issued except in response to a request or application; provided, however, that this section shall not 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 3. If a an unsolicited loan instrument is negotiated, the obligor shall have the right to rescind the contract within 10 days of the date that a negotiable instrument is cashed by notifying the financial institution or lender and returning the entire amount of the loan pursuant to the negotiable instrument. 

Section 4. An addressee shall not be held liable for any debt incurred by an 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 releasing 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 5. 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.

Section 6.  A person or entity that knowingly sends an unsolicited loan instrument as provided under section 2 shall be punished by a fine of not more than $5,000 for each violation. 

Section 7. The commissioner shall adopt rules and regulations as are necessary to implement this chapter. 

Section 8.  A violation of this chapter, or any rule or regulation issued hereunder, shall constitute an unfair or deceptive act under 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, unless the context clearly requires otherwise:- “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 consumer to activate a loan which was not solicited by the consumer.               

(b) 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 more than 5 years or by a fine of not more than $25,000, or by both such fine and imprisonment.