Ed's Blog

Credit Bureaus Let Wrongdoers Run Amok, Disrupt Mortgage-Seekers

By Ed Mierzwinski
Senior Director, Federal Consumer Program

The Big 3 credit bureaus aren't just known for making mistakes and failing to fix them, in their guise as self-appointed, but sloppy, gatekeepers to financial and employment opportunity. In the run-up to the 2006-2007 mortgage bubble that led to the total collapse of our financial system in 2008, the Big 3 credit bureaus sold products known as "trigger lists" that aided sketchy companies in disrupting consumer transactions. The lists were "credited" with making the situation worse. Guess what? Longtime syndicated housing columnist Ken Harney warns: "they're back." 

From his Washington Post Writers Group column running across the country this month:

"So what’s a trigger lead? When you apply for a home mortgage or a preapproval, the loan officer pulls your credit from the national credit bureaus. One or more of the bureaus then convert the fact that you are shopping for a mortgage into a commercial product — a trigger lead — for immediate sale to competing lenders. This allows those competitors to contact you and solicit your business before you get locked into the lender to whom you’ve applied. Trigger leads are created and sold super fast — often within 24 hours of your loan application. Out of the blue, your phone might ring and you’re the target of a new pitch from a competitor offering a deal that may be real, deceptive or no better than the one you’ve been quoted."

The credit reporting laws allow the use of credit reports for only two types of marketing: credit or insurance. Since the passage of the Fair Credit Reporting Act in 1970, the Federal Trade Commission and bank regulators have interpreted the law to allow creditors (and later, insurers) to ask the bureaus for lists of consumers meeting certain criteria that they could then make marketing offers to. Consumers have a strong right to opt-out of these "pre-approved" (or "pre-screened") offers (but only when they come from credit bureaus). Remember, when you use your ANYBank credit card to buy anything (retail goods, airline tickets, etc.), then that retailer or airline can market their own card to you also, so while opting out of credit bureau offers is a good thing, it tightens, but does not shut off, the marketing spigot.

In the 2000s, the bureaus convinced the Federal Trade Commission that their own aggressive push-sale of "trigger leads" to any firm was the same thing as a creditor or insurer purchasing a custom list. As I wrote in the Suffolk University Law Review in 2013 (see pages 8-13):

"So a consumer could be negotiating with a lender for a refi, which placed an “inquiry” on her credit report, which made her a hot lead for instant sale to other lenders, who would then carpet bomb her email or overload her phone lines. [...] The development of “trigger lists” by the Big Three in 2005 was an important bridge between traditional FCRA-regulated “prescreening” and the new system of lead generation. The Big Three credit bureaus continue as important players in the “lead generation” marketplace.""

Ken Harney goes on to explain that the National Association of Mortgage Brokers is asking Congress to shut down "trigger leads." A credit bureau lobbyist claims the broker concerns are overblown, that the leads are a "valuable tool" especially for less "savvy" consumers and that "protections" exist.

My view is that the brokers have a very strong point. How can a less "savvy" consumer be helped by being blitzed by confusing offers, mostly from bottom-feeders? As for the credit bureau claims, remember who is making them. The credit bureaus have never treated consumers as customers, nor have they treated our personal information as if it were their own. Actually, wait, in the case of Equifax, didn't they trash our personal information? Now the bureaus and their lobby association are in Congress and in state legislatures opposing reasonable relief, such as strong and non-preemptive free credit freeze and temporary lift laws for their victims.

Trigger leads are just another example of the Big 3 credit bureaus' disdain for consumers. They're selling a product that allows wrongdoers to run amok. In future columns, I will point out that the Internet marketing ecosystem has unfortunately adopted and built on the notion of automated "lead generation." It isn't good for consumers.

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