Maine Targets Trigger Leads

Leads generated whenever a 3-bureau or tri-merge credit report is pulled for a mortgage loan applicant, dubbed “trigger leads,” are causing problems for mortgage borrowers and lenders in Maine.

Its become such a concern that William Lund, director of the state’s Office of Consumer Credit Regulation, said his office is drafting a legislative proposal to help resolve the problems that ambiguity in the law has caused.

The Fair Credit Reporting Act’s prescreening law passed in 2003 allows credit bureaus to sell the consumer’s name, address and other critical information so long as it does not name the creditor, Lund told MortgageDaily.com in a phone interview.

For example, the fact that the consumer holds $100,000 in debt can be released but not the name of the mortgage or debt holder.

This rule also applies to credit scores, debt-to-income ratios and other sensitive financial information, Lund said.

“We followed these changes (to the federal law) when they were being debated and discussed,” Lund said. “Most consumer advocates were operating under the assumption that subscribers would be permitted to receive a consumer’s name, address and, perhaps, a phone number — period.”

The changes left what Lund called a “loophole big enough to drive a truck through.”

Several lenders in the last few months have reported that consumers are wrongly accusing them of giving out their personal information without their permission, Lund said. And other lenders said that competitors using “trigger” leads are promising undeliverable terms to entice the borrower into applying with them and then reneging on the deal.

Lund added that these misleading phone solicitations are tough to prosecute because it is difficult to prove what has transpired in a telephone call unless it is recorded.

Other consumer complaints include the caller telling the consumer that the company they just filled out their mortgage application with is unable to fund their loan, and therefore, they need to apply with them, he said. Or the consumer is told that “information about your application has come across my desk” and additional information is requested.

The implication is that the caller is from the company the consumer had just visited, thus tricking them into giving sensitive information over the phone. The information is then used at a later time.

“My proposal would prohibit loan officers from using unfair and deceptive practices,” Lund said.

Although the proposal would have to be based on Maine’s unfair trade practices statutes, as states are preempted from affecting federal laws dealing with prescreened credit reports, Lund said “it would apply to those who originate or arrange mortgage loans in the state of Maine.”

It would require the caller reveal to the prospective borrower that they are not affiliated with the lender they just applied with; that they make a firm offer of credit to the consumer; that they “scrub” the list against those who have opted-out or who are included on the federal “do not call” list; and that they do not use ‘bait and switch’ tactics, Lund said.

Credit reporting agencies that provide these prescreened products, for their own protection must apply certain standards and they do that by contract,” Lund said. However, “the primary responsibility would fall to the subscribers who use these trigger leads.”

Experian spokeswoman Susan Henson told MortgageDaily.com that subscribers of its Prospect Triggers lead program are contractually obligated to abide by the law and that compliance is vigorously monitored.

“As with all Experian products, Prospect Triggers was subject to an extensive compliance and legal review process prior to development to ensure it met all requirements under the federal Fair Credit Reporting Act and Fair and Accurate Credit Transactions Act requirements,” Henson said. “Experian also requires all products are scrutinized as assurance that we are meeting our high standards for fair information practices.”

Henson said the company also “scrubs” against more lists than they are required to and maintains that subscribers are obligated to reveal to the consumer what company they represent and in no way should they mislead consumers.

“We don’t tolerate deception.”