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Real Estate


Honing the Competitive Edge

Published: October 29, 2006

BORROWERS who believe their mortgage applications are private should think again. Other lenders, and their telemarketers, can easily find out that they have applied for a mortgage; in fact, consumer advocates say, unscrupulous businesses sometimes find out so quickly that borrowers should be on alert.

Stuart Pratt, president of the Consumer Data Industry Association, a trade group representing the major credit bureaus, said that in the last 18 months, Experian, Equifax and TransUnion had begun selling the names, detailed financial information and contact information of people who have completed mortgage applications.

They obtain the information through extensive relationships with financial institutions, which rely on them to compile credit histories and scores and thereby help lenders assess a borrower’s credit risk.

But when lenders ask the credit bureaus for an applicant’s credit score and other financial data, the bureaus gain a valuable asset: the name of someone who is ready to make a loan commitment. Mortgage brokers and loan officers pay thousands of dollars for the right to receive these “trigger leads,” as they are known in the industry, so that they can compete for the borrowers’ business.

State regulators and consumer advocates complain about the degree of personal information disseminated, but they admit that the practice, in theory, breaks no laws. In recent months, though, some lenders and regulators say that they have seen a rising number of complaints from borrowers and that the nature of the complaints suggests illegal use of trigger-lead services.

William N. Lund, the director of Maine’s Office of Consumer Credit Regulation, said, “Some consumers told us they literally applied for a loan at noon, and by the time they got home that evening they got calls from competitors of the lender with whom they applied.”

In some cases, Mr. Lund said, the callers implied that they were affiliated with the company that was processing the borrower’s application. “At least one said, ‘Your lender can’t help you, so your lender has given me your file to follow through,’ ” Mr. Lund said.

Such an approach, Mr. Lund said, arguably violates the state’s unfair trade practices law. But other problems with the telemarketers’ methods are more clearly illegal. For instance, he said, unless a lender makes a firm offer of credit — with a specific loan amount, a percentage rate and the length of the payoff term — the call violates the federal Fair Credit Reporting Act.

Mr. Lund said he had found at least one lender that had not complied with the “firm offer of credit” provision while calling borrowers whose names it had received from trigger-lead services. The lender has agreed not to use outside sources to find prospective customers in Maine “until further notice,” Mr. Lund said.

“There’s nothing inherently bad in these trigger leads,” Mr. Lund said. “But this is very potent information, and the temptation to misuse it has proven too great for some lenders.”

Mr. Pratt of the Consumer Data Industry Association contends that trigger-lead services “foster a whole lot more competition than would otherwise be the case.” He added, “There is fundamental consumer value that comes from this.”

Mr. Pratt said consumers who want to block solicitations from services that have received information about their finances from credit bureaus can do so at (888) 567-8688 or at

In the meantime, Mr. Pratt said, the burden of stopping trigger-lead abuses falls on lenders, who, he said, should educate their telemarketers more effectively.

But Roy DeLoach, the executive vice president of the National Association of Mortgage Brokers, disagreed. Credit bureaus, he said, have a duty not to furnish a credit report to anyone unless it is related to a firm offer of credit. “You would think with all the money the credit bureaus make off of selling consumers’ private financial information, they could hire legal advisers who understand the law,” he said.



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