Updated May 2007

 

washingtonpost.com

 

FTC Says It Can't Protect Mortgage-Seekers From 'Trigger Lists'

By Kenneth R. Harney
Saturday, March 24, 2007; F04

When you apply for a mortgage and get a barrage of irritating and confusing phone calls from competing lenders before noon the next day, can you turn to the government for help?

The Federal Trade Commission issued a long-awaited answer to that question recently, and the decision is attracting criticism. The FTC, which has regulatory oversight concerning consumer credit, says it lacks the legal authority to crack down on unwanted "trigger-list" phone solicitations to consumers who have applied for mortgages within the preceding 24 hours.

Trigger-list pitches to mortgage applicants have become hot issues in recent months as new mortgage volume declined nationwide in softening housing markets. With fewer people buying homes or refinancing, some lenders have begun investing heavily in leads -- contact information for consumers in the market for loans.

Trigger leads come with much more than phone numbers. Lenders can customize their orders on such leads to provide credit scores of a certain level, open loan balances, credit card debts, estimated home values and the like. When they call to pitch you, in other words, they know a lot about your finances.

"Lead generator" companies hawk such lists to lenders at hefty prices on the Internet. The lists are based on consumer information sold by the big three credit bureaus -- Equifax, Experian and TransUnion -- after they get inquiries from mortgage brokers or loan officers.

Say you apply for a new loan with a local mortgage broker. The broker orders a composite report on your credit information on file with the three bureaus. That inquiry, in turn, sets off bells at the big credit bureaus. Now they know you're interested in getting a mortgage, and they know that lenders will pay plenty -- thousands of dollars a month in some cases -- to find out.

Critics argue that trigger lists open the door to bait-and-switch schemes, where lenders dangle falsely discounted rates to pull in unsuspecting customers who have just applied to local brokers and have received higher quotes. Weeks later, the trigger-list marketer can't deliver the low-ball rates, and borrowers are stuck with either higher costs or no loans at all -- classic bait and switch.

Harry H. Dinham, president of the National Association of Mortgage Brokers, charges that mass distribution of loan applicants' financial information opens the door to identity theft, with supposedly private data floating far and wide around the Internet.

"This is a big, gaping hole in the system, and we'd like to see it shut," he said in an interview.

Dinham also argued that trigger-list telemarketers' loan deals often do not meet the Fair Credit Reporting Act's criteria for "pre-screened" firm offers because the telemarketers lack crucial information necessary to extend mortgages, such as appraisal and documentation of income and assets. Nor do the lead generators who sell the trigger lists meet the law's strict standards for receiving access to consumers' personal information.

Finally, to constitute "firm offers of credit," Dinham said, "mortgage offers need to be in writing, so that the consumer can review it, and understand whether there are problems."

Rebecca E. Kuehn, the FTC's assistant director for privacy and identity protection, said the fair credit law, which allows firm offers of credit using prescreened lists, does not specifically prohibit telephone offers. Nor does it require lenders to know every detail of a consumer's credit situation to make a firm offer. It allows some "post-screening" -- verification of income and assets, for example.

Kuehn said that even though the FTC lacks statutory authority to ban pre-screened telemarketed mortgage offers, it does have enforcement authority against bait-and-switch scams and misuse of consumers' credit information. Consumers who experience such problems connected with trigger-list marketing can file complaints with the FTC online ( http://www.ftc.gov).

Better yet, any consumer can cut off all potential prescreened credit solicitations -- whether for mortgages or credit cards -- by opting out. That means prohibiting the credit bureaus from ever selling your personal information to lenders for marketing campaigns.

You can do that by visiting http://www.optoutprescreen.com or calling 888-567-8688. Your request, according to the FTC, should be processed within five days, although it may take 60 days before all prescreened offers cease.

Mortgage applicants can also block trigger-list telemarketing pitches by making sure their phone numbers are on the National Do Not Call Registry ( http://www.donotcall.gov or 888-382-1222).

From FDR:

 

 It may be a good idea to inform your client BEFORE you run their credit that they be solicited in this way.

 Failing to protect your applicants from the abuses of trigger leads often results in the belief "you" were the source of their personal information being provided to dozens of other brokers and  lenders.

There is an Opt-Out process whereby a consumer can remove themselves from most marketing programs (888-5-OPTOUT or https://www.optoutprescreen.com ) however, this process takes up to 30 days to become effective – so it is of little value in protecting mortgage applicants from trigger leads. We are now seeing complaints from consumers that indicate they followed the opt-out process and were still subject to unsolicited contacts through trigger leads.

 

 

Realty Times

March 13, 2006

Credit Bureaus Hawking Confidential Info
by Kenneth R. Harney

Behind your back -- and probably without the knowledge or consent of your mortgage loan officer -- the national credit bureaus have begun hawking your personal financial details within 24 hours of your making a loan application, a rate inquiry or a request for a mortgage preapproval letter.

They are selling what they call "trigger" lists of people who just contacted a mortgage lender and gave permission for the loan officer to check their credit.

Who's buying the information? Little-known marketing data intermediaries who resell the fresh leads to competing lenders who want to know your name, credit and financial details and your phone number and address so that they can hit you with their own offers.

Companies like Mortgage Inquiry Data, Inc., of Coral Springs, Florida, boast that they can provide "access to everyone in your city who applied for a mortgage loan within the past 24 hours. You can contact these people the next day and offer them a preapproval for a better loan with your company."

A competing marketer, Intellidyn Corp. of Hingham, Mass., offers what it calls its "IntelliAlert" program. "Imagine the value of knowing what prospects have inquired or submitted an application with your competition" within hours. Intellidyn's hot leads don't come cheap: For "platinum" level clients, who agree to buy at least $31,395 worth of overnight trigger alerts every month, Intellidyn promises to keep them informed of any mortgage inquiry or application anytime, in any designated area in the U.S.

Home mortgage lenders themselves are angry about the new hot leads programs. Dan Hughes, a loan officer for Summit Mortgage Corp. in Edina, Minn., told Realty Times that "as a traditional loan officer who gets most of my business from referrals from Realtors and past customers, I take a dim view of anyone who buys leads from any source" -- but worst of all from "overnight" data purveyors "who are feeding off my own clients' personal information."

Pat Barney, another Summit Mortgage loan officer, recalls recently applying for a home equity credit line from a large New York-based bank. Within a day or two, he got a call from a competing lender trying to persuade him to cancel his application with the New York bank and switch to her company. A day later, he got another call, this time from a lender who claimed that "I've been notified by your lender that you're looking for a home equity line."

Barney knew that could not be true. After all, "why would (the New York bank) want to let anyone else know about my application?"

What sort of personal data is being siphoned out of applications and repackaged and sold by the credit bureaus? It gets pretty scary: According to Mortgage Inquiry Data, hot leads include individuals' credit scores, open mortgage balances, current monthly mortgage payments, loan-to value ratios of their homes, revolving debt balances and other personal data.

Ginny Ferguson, a California mortgage broker and a credit expert for the National Association of Mortgage Brokers, asks "where is the line here? When do you begin to violate individuals' privacy rights?" She said her group plans to investigate the overnight sale of fresh mortgage application data for possible violations of the Fair Credit Reporting Act.

Ferguson and other lenders are especially galled by the fact that the credit bureaus are marketing confidential information that lenders or brokers often pay for themselves -- credit inquiries by potential loan applicants. Then they are turning around and selling it to direct competitors of the lenders who made the credit inquiries in the first place.

For their part, two of the national credit bureaus -- Equifax and Experian -- confirmed that they sell overnight "trigger" lists. TransUnion did not comment. But Equifax and Experian spokesmen said their list sales violate no laws, and are simply speedier versions of their traditional "preapproved credit" lists they routinely sell to lenders.

If you object to such hawking and 24-hour distribution of your private financial data, you currently have no "opt-out" rights. But some state consumer protection agencies say they are looking into the issue, and you can express your concerns to them or to the Federal Trade Commission, which oversees the credit industry.