Have you ever received a pre-filled-in unsolicited paper check in the mail and wondered what it was? Chances are, it’s what is often referred to as a ‘Live Check.’
A live check is a form of sales tactics that used to be called ‘Puppy Dogging.’
Imagine this scenario; a ‘friend’ of yours has a dog with a litter of new puppies old enough to find new homes. This friend wants you to take one of them off their hands, but you don’t want to. Finally, the friend asks you to do them a favor and keep the puppy for two weeks, at the end of which you will give it back. So, you agree to help them out, and after a week goes by, you fall in love with the pup and decide to keep it.
Well, if you don’t immediately throw the check away, it amounts to the same thing. The mind will ponder, cashing the check. Wouldn’t it be handy to pay for that remodel you’ve been dreaming about or taking that vacation? At some point, a reasonable person will understand that there is a catch. Immediately upon cashing the check, you enter into a loan agreement; to repay a loan according to the terms of the financial institution that issued it.
Why Do Companies Send Live Checks?
Companies that send out live checks are looking for a specific sort of new client or maybe soliciting previous clients to come back. So, if you’ve proven your credit-worthiness in the past, lenders view you as a good customer. That raises the chances of receiving a live check. Companies send out live checks during periods when consumer spending increases, such as Christmas. It may well turn out that you would like to spend more than you have for the season, and if not, then “oh well,” it only cost them the paper and ink it took to print the offer.
What if You Need a Different Amount of Money Than What the Check Is For?
You can visit the issuing office in this case and ask for a change of the agreement. They can decide if you qualify for a higher amount and provide different options. In any case, they got you to come into their office whereas otherwise, you wouldn’t have.
First of all, this payment must fit into your budget. One of the reasons you received the live check is that you’ve shown that you are a reliable customer. Live checks can be a plus when you know what they are and understand your obligations once cashed or deposited.
What’s the Flip Side of the Coin?
Now that’s the good news for intelligent, hardworking financial consumers. However, as with anything, Live Checks also have a dark side. Some financial institutions are less scrupulous and offer Live Checks to people who haven’t been screened for their ability to repay the loan. This practice can cause severe problems and sometimes results in what regulators call predatory practices.
Carolyn Carter, deputy director at the National Consumer Law Center, a nonprofit consumer advocacy organization, said, “Pushing credit on people when they haven’t asked for it can easily lead them to be overextended.”
U.S. senators Doug Jones (D-Ala.), Tom Cotton (R-Ark.), and Jeff Merkley (D-Ore.) think that sending Live Checks to people who haven’t asked for credit and can’t repay a loan is a predatory practice. They introduced a bill to the U.S. Senate in 2018, putting limits on this practice.
APR (Annual Percentage Rates) on such loans have been known to be as high as 42% in the long term but are seldom presented that way to the victim.
In addition to taking unfair advantage of people, there are some other characteristics of Live Checks’ to note.
Credit Insurance is offered in case of death, involuntary unemployment, or disability. That’s all good and fine, but lenders fail to point out that it’s unnecessary if the person has a death or disability insurance. Refinancing is usually offered if the alternative is to default on the loan. This, of course, includes extra interest and sometimes an origination fee. This type of loan can turn into an endless loop of perpetual indebtedness that can only result in financial ruin.
Finally, lenders can charge attorney fees to cover their legal action.
What Should You Do?
Read the Loan Agreement
Understanding the loan’s rates and terms can help you decide how affordable it is. The agreement must detail the total annual cost of borrowing, show it as an annual percentage rate, tell about any costs or fees, how many payments are needed, and their amounts.
Compare rates and terms at credit unions, banks, and online lenders. Federal Credit Unions offer rates with an 18% limit to people with bad credit.
Find Long-Term Solutions
Make a budget that records the spending that can identify unnecessary spending and help you eliminate debt. Create an emergency fund and spend from it rather than go into debt.
If You Don’t Want It, Tear It Up!
Throw that check in the trash or burn it if you don’t want the offer. Treat it like any sensitive mail, and be sure to block out any identifiable data. Someone could steal your check, sign and cash it in your name, making you a victim of identity theft.
If you don’t ever want to be solicited for live checks again, then opt-out of such mail.