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   ARTICLE   |   From Scotsman Guide Residential Edition   |   February 2015

Give Your Marketing a Shot in the Arm

Prescreening potential customers can enhance your direct-mail campaigns

For years, credit card issuers have known that direct mail can be a powerful channel for finding new customers. Even with the emergence of digital marketing capabilities and a steady decline in mail volume, direct mail still works for these companies, and the same is often true for mortgage banks and brokerages.

What makes direct mail work so well is not necessarily the printed piece, the tactile experience or the long form of message delivery. In many cases, what makes direct mail work is prescreening, which allows marketers to select consumers based on their credit profiles.

Definition

The Fair Credit Reporting Act (FCRA) defines prescreening as the process by which marketers can use credit bureau data to target potential borrowers for direct-mail pieces. This data can include credit scores, current mortgage balances, monthly payments, open dates for mortgages, and more. The FCRA permits this process as long as the marketer makes a “firm offer of credit.”

In other words, in return for accessing the credit data up front, lenders must be prepared to approve the given customer’s application for credit, provided that the customer’s credit data has not deteriorated between the time of selection and the time of application. These tight restrictions on credit reviews aside, lenders should know that the FCRA does allow for certain non-credit based information to be used in review of an application.

Accessing data

Many large banks have their own custom data-bases fed by the three major credit bureaus, but these expensive databases aren’t the only path to finding success with prescreening. Service bureaus also exist that offer turnkey access to the credit data. These services allow lenders of all sizes to access prescreening data according to their own criteria. Credit data service bureaus strive to help lenders deliver their products to consumers in an efficient, safe and compliant environment.

The primary regulatory requirements are disclosures, which have a particular form in which they must be delivered, and credit reviews, which must use the same criteria that was used for targeting. As is the case with any marketing campaign, banks and brokerages interested in prescreening potential customers should be certain they’re well-prepared for this type of direct mailing.

Process

In practice, lenders and originators can follow this three-step process to use prescreened names and direct mail as a reliable marketing channel:

  1. Ensure your compliance from the start: Begin by mapping out the exact processes you’ll follow with your targeting. Focus first on your selection criteria — that is, the exact credit profile you’re seeking. This profile will be reapplied to consumers once they respond, and you cannot decline an application for credit reasons other than the ones you use for selection, so it’s vital to be careful in this step of the process. Consider starting with your underwriting criteria as a template.
  2. Test your way in: As you begin your campaign, use small samples randomly selected from all the consumer profiles that are in your footprint and meet your criteria. It can be helpful to send out small mailings and watch what comes in. This testing allows  you to tweak the criteria and process as needed before investing substantially in the campaign.
  3. Carefully manage disclosures and opt-outs: In addition to defining the permissions for prescreening, the Fair Credit Reporting Act also defines some requirements — namely disclosures and opt-outs. These disclosures are well-defined by regulators and straightforward to implement. Another requirement is that any consumer who receives a prescreened offer must be given an opportunity to opt out of future prescreened offers. This detail must be coordinated with the service bureau you’re using to avoid future legal problems.

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As rates drop, refinance offers become more attractive, and credit bureau data can help originators pinpoint the best prospects. With proper preparation and coordination, prescreened direct mail can be a great way to promote your organization’s services to potential customers. These campaigns can allow you to put the best possible offer in front of qualified prospects, which is a boon to lenders and homebuyers alike.


 


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