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Broker trade group calls for ban on 'trigger leads'

Last year’s massive data breach at Equifax put a national spotlight on how the credit bureaus manage the sensitive information on millions of consumers. It has also given the mortgage-broker lobby an opportunity to renew a longstanding quest to ban so-called “mortgage trigger leads.”

The National Association of Mortgage Brokers (NAMB) wants Congress to stop, in most cases, the credit bureaus from selling people’s names and personal information on lists used to generate mortgage leads.

mortbrokeEvery time a person applies for a mortgage, a loan officer will request a profile from the credit bureaus. That “triggers” a lead that can be sold by one or more of the major credit bureaus, which, in addition to Equifax, also include Experian and TransUnion.

Normally the information is purchased by lead-generation companies, which screen and repackage the information into targeted lists, and sell it to mortgage companies.

This usually happens quickly, within a day of the application. The mortgage company — now armed with the knowledge that the borrower is shopping for a mortgage — can use the lead to pry away the customer. The case for allowing trigger leads is that encourages competition. Consumers with multiple offers might get a better rate and lesser fees.  Consumer advocacy groups tend to frown on the practice, however.

For more than a decade, NAMB has advocated for a ban on trigger leads, claiming they harm consumers and disrupt the mortgage process. Earlier this month, NAMB called on Congress to add language into the PROTECT Act of 2017 [Promoting Responsible Oversight of Transactions and Examinations of Credit Technology Act], which was introduced in the wake of Equifax breach. NAMB favors a near all-out ban on mortgage trigger leads, with one exception. A lead could be sold to a company, if that company holds the consumer’s existing mortgage in its servicing portfolio.

“Our concern here is that this is a direct, consumer damaging practice,” said John Stevens, president of NAMB, in a telephone interview. “If the American people knew that if they took a credit application that information was being sold without their knowledge, it would be a huge public outcry. We are here to help consumers, preventing that loss, preventing the damage from happening to them.”

Once the information is sold, consumers are almost immediately called by telemarketers. Stevens said sometimes consumers are misled with promises of better terms in the sales pitch, but these don’t materialize. NAMB is concerned about identity theft and loan churning scams. Stevens said consumers are at a heightened risk of having their identities stolen or being subjected to aggressive sales tactics, when their information is put on lists and sold.

Limiting competition 

The Consumer Data Industry Association, which represents the credit bureaus, says a ban would lock out competition.

“We support a vibrant, competitive marketplace,” said Eric Ellman, senior vice president for public policy and legal affairs at the Consumer Data Industry Association.

“One of the ways to keep that competitive marketplace is through trigger leads,” he told Scotsman Guide News. “It can save consumers a lot of money, and sometimes it is even big money. If you can save a quarter of a point off of a $300,000 home over the course of 30 years, that is big money.”

Ellman also noted that companies who misuse trigger leads by lying to mortgage customers can be sued for unfair and deceptive trade practices in the 50 states. He said that some states have also adopted specific regulations on the users of trigger leads.  

Mortgage lender trade groups, including the Mortgage Bankers Association, have been silent on this issue. Not all mortgage brokers agree with NAMB’s position, however.

“Many wholesale lenders provide trigger leads to mortgage brokers on past customers delivered to that lender by a mortgage broker,” said Anthony Casa, a broker and president of Garden State Home Loans. “This helps mortgage brokers stay in touch with those past customers when they re-enter the market for a new mortgage.”

Casa is the president of the broker trade group the Association of Independent Mortgage Experts (AIME), founded recently after a split with NAMB. Casa said AIME’s members do support preventing the sale of a trigger lead to companies with no prior relationship whatsoever with a customer. He said trigger leads can promote competition, however. Casa said some large lenders have been mining their servicing portfolios and using high-pressure sales tactics on their existing customers to generate refinances.  

“If the existence of triggers leads were not in place over the last several years, the damages from lenders with predatory churning practices would have been more severe,” Casa said. “Many of those customers were intercepted by the original mortgage broker that worked with those customers before they could be taken advantage of by these lenders.”

Stevens said, however, that NAMB’s call for stricter controls on how consumer information is distributed has a good chance of gaining traction in the wake of the Equifax breach, where the personal information on an estimated 145.5 million consumers was compromised.

“Nothing is guaranteed in life, but we have tremendous support from consumer-advocacy groups; we have tremendous support from Congress,” Stevens said. “Both parties, and both the House of Representatives and the Senate, are showing tremendous support for this. So, I believe, that this is something the American population not only needs, but wants. Our Congress understands that. Consumer advocacy groups understand that, as well as other trade associations who have an understanding of how the industry works.” 

This story was updated to include a comment from the Consumer Data Industry Association. 


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