Do you know what a “live check” is? You should!

Picture this: a mysterious loan check arrives in your mailbox. You are not exactly rolling in the dough so the figure of eight thousand dollars immediately catches your eye ($8,000.00). All you have to do is endorse it and deposit it into your bank account. Sounds like a great idea, right?

The mantra of ages is applicable yet again: If something sounds too good to be true, it probably is.

John (not his real name) received his live check for $8000 and, feeling the economic crunch, deposited the check into his bank account. He knew the interest rate wouldn’t be that great, but figured the payments – around $200 – would be doable. He was also thinking like many with poor credit that this would be a way to build additional positive credit history.

What he failed to do was investigate the “loan” fully. By depositing a “live check” into his account, he effectively gave an institution permission to dip in at will, sort of similar to a living document.

Four months into his repayment plan, and by this time he’d been sending in extra money on top of the $200 monthly payments, he looks at his statement and was shocked to discover that out of $270 he’d sent in the prior month, only $36 had been applied toward the principle.

Sending in additional money doesn’t even begin to help; the only way to release yourself from one of these predatory loans is the pay the whole thing off. If you don’t have that kind of money, you are basically screwed. You can try getting a loan from a reputable bank to pay off the scam loan, but that’s highly questionable since most of the targets of these scams have poor credit to begin with.

The scam is that most of one’s payment goes toward exorbitant interest and fees. A very small percentage – so small as to be negligible – goes toward the principle. At this rate, it could very well take a lifetime to pay one of these scam loans off. What you are basically doing is giving the scammers money each month, and it’s legal because you endorsed the live check and deposited.

Household International was a major provider of this type of predatory consumer loan and credit cards in the United States, Canada and the United Kingdom. In October 2002, Household International settled for $486 million charges of predatory lending by attorneys general in 46 U.S. states.

This may put of these scammers out of business but certainly not all them. True, the financial meltdown put many on caution to these types of predatory loans, but they are still out there. Your best defense is a good offense. If you really need a loan, approach a lending institution known to be reputable. Do not answer one that approaches you, especially if you have a poor credit history.

If you have fallen for one of these scams, and are lucky enough to secure another, legitimate loan to pay off the sharks, make sure you send all payments and/or correspondences via certified mail, return receipt requested so you’ll have a verifiable paper trial. And never accept a loan that just shows up one day in your mailbox – that should set of an immediate red flag no matter how desperate you are for the money.

The same holds true for unsolicited checks arriving from credit card companies. Always read the fine print, and make sure you have all conditions in writing to avoid these unpleasant surprises.

If you are a victim, document every phone call, letter, any type of correspondence with names, dates, times. Turn this information over to your local Better Business Bureau, or

In 2003 HSBC Bank bought disgraced predatory lender Household International, but the same predatory tactics remain. Predatory lending and shady tactics by HSBC Finance Corporation dragged down HSBC worldwide. Be cautious of merchants, such as Best Buy Stores Inc. and Cotsco, who continue to use HSBC Finance Corporation as their backer for private label in-store credit cards. Make sure to read everything before agreeing to anything. And ensure you have a copy of all documentation yourself.

The HSBC Monitor (not officially associated with HSBC Finance Corporation) monitors trends for violations and other possible illegal actions using individual company complaints and merchant complaints. Household Watch is a consumer watchdog and consumer activist coalition, and is recognized by the Federal Trade Commission.

In a maze of holding companies you may see HSBC, HSBC Holdings, HSBC North America, Retail Services, HSBC NV, or other variations that defy and confuse customers and regulators. That’s the way they want it.

Federal Trade Commission online complaint form

HSBC

HSBC Monitor (not associated with HSBC, Household International, or their merchants—this is a consumer watch dog group.)

Send a complaint to the HSBC Monitor

By, Identity Theft Secrets, guest writer, Sami K. Hartsfield, ACP,  a paralegal in Houston with experience in commercial litigation and tax law. She holds a degree in paralegal studies and a Bachelor of Science degree in political science. After interning with Texas’ 14th Court of Appeals under Chief Justice Adele Hedges and completing the University of Houston Law Center’s Summer 2008 Prelaw Institute, she is preparing to enter law school this fall. Sami holds a national advanced paralegal certification, and four specialty certifications: Discovery; Trial Practice; Contracts Management; and Social Security Disability Law.  More helpful tax information can be found at her National Tax Law Examiner page.