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Credit Fees, Inquiries to Rise

Experian, Equifax to charge new fees

December 26, 2006


photo of Patrick Crowley
Subprime mortgage prospects may soon find it more expensive to qualify for a loan because of new credit reporting charges which will result in more credit report inquiries.

Equifax and Experian will begin charging higher fees on Jan. 1.

Industry observers say the fees will particularly impact subprime borrowers and brokers because the companies will levy a charge each time a borrower's credit report is accessed.

Subprime loans are affected because brokers often have to shop loans to several lenders. Currently, brokers only pay one fee for the report, according to the National Association of Mortgage Brokers.

"Starting next year Experian and Equifax will charge you for each submission and release of your consumer's credit report," NAMB said in a recent industry email alert to its members. The association provided the alert to MortgageDaily.com.

"This significant increase in costs will ultimately limit consumers' ability to comparison shop for loans and will likely have a profound effect on marginal borrowers' access to credit," the NAMB said. "Experian and Equifax will be the only beneficiaries of the revenue generated by this shift in policy ... because of their dominant status in the marketplace."

Experian spokesman Donald Girard said in an e-mail to MortgageDaily.com that today's technology "makes it possible for data to move quickly and seamlessly from reseller to broker to lender."

"We need to know who all secondary recipients of our reports are so that we can accurately post inquires on the consumer files," Girard said. "We will charge an additional fee for this as Experian believes it should be fairly compensated for all appropriate and authorized uses of its data."

Girard said Experian's average report cost brokers $2. The new secondary fee will be smaller, but he did not say how much. Girard also said that published reports indicating the fees will result in $100 to $200 in extra charges "is not reflective of the incremental charges Experian is assessing."

Equifax charges $2.50 for a single file and $5 for a joint application, spokesman David Rubinger told MortgageDaily.com.

But brokers often sell the information to what Rubinger described as "resellers" who set their own price for the information.

By charging the secondary fee Equifax is being paid for the information it provides, Rubinger said.

"Within the mortgage industry people are taking liberties to distribute the same credit report without permission," he said.

The move could also help cut down on identity theft because Equifax and Experian will have more access to the reports as they flow between brokers, lenders and others.

"This is first and foremost a compliance issue," Girard said. "Experian has always been committed to the secure transmission of credit data to qualified end users. This new program is but the latest extension of this effort."

"We want to know who is looking at these reports," Rubinger said. "That will help reduce identity theft."

But John Taylor, CEO of the National Community Reinvestment Coalition, told MortgageDaily.com the companies are "price gouging" by charging the fees.

"They are squeezing people at the margins," said Taylor, who called for the federal government to takeover credit monitoring and reporting in the country.

"It's just unfair," he said.

Rubinger disagreed, saying the increase will not likely prevent someone from buying a home.

"A credit report is a very small portion of the overall cost of closing on a home," he said.

Patrick Crowley is a feature journalist and blogger for MortgageDaily.com. He is also a reporter, blogger and columnist for The Cincinnati Enquirer.
e-mail Patrick at: [email protected]

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