When you apply for a mortgage and get a barrage of irritating and confusing phone calls from competing lenders before noon the next day, can you turn to the government for help?
The Federal Trade Commission issued its long-awaited answer to that question this month, and it's already attracting criticism.
The agency, which has regulatory oversight powers concerning consumer credit, says it lacks the legal authority to crack down on unwanted "trigger list" phone solicitations to consumers who've applied for mortgages within the preceding 12 to 24 hours.
Trigger list pitches to mortgage applicants have become hot issues in recent months as new mortgage volume has declined nationwide in softening housing markets.
With fewer people buying homes or refinancing, some lenders have begun investing heavily in leads - the identities and contact information of consumers actively in the market for a loan.
Trigger leads come with much more than phone numbers.
Lenders can customize their orders on such leads to provide FICO credit scores of a certain level, open loan balances, credit-card debts, estimated home values and the like.
When they call to pitch you, in other words, they know a lot about you financially.
"Lead generator" companies hawk such lists to lenders at hefty prices on the Internet.
The lists are based on consumer information sold by the big three credit bureaus - Equifax, Experian and TransUnion - after their receipt of an inquiry by a mortgage broker or loan officer.
Say you apply for a new loan with a local mortgage broker. The broker orders a composite credit report of your personal information on file with the three bureaus.
That inquiry, in turn, sets off bells at the big credit bureaus. Now they know you're interested in getting a new mortgage, and they know that lenders will pay plenty - thousands of dollars a month in some cases - to find out.
Critics argue that trigger lists open the door to bait-and-switch schemes, where lenders dangle falsely discounted rates to pull in unsuspecting customers who've just applied to a local broker and got a higher, fair market rate quote. Weeks later, the trigger list marketer can't deliver the low-ball rate, and the borrower is stuck with either higher costs or no loan at all - classic bait and switch.
Harry Dinham, president of the National Association of Mortgage Brokers, charges that mass distribution of loan applicants' financial information opens the door to identity theft, with supposedly private data floating far and wide around the Internet. "This is a big, gaping hole in the system," he said in an interview, "and we'd like to see it shut."
Dinham also argued that trigger list telemarketers' loan deals often do not meet the Fair Credit Reporting Act's criteria for "prescreened" firm offers because the telemarketers lack crucial information necessary to extend a mortgage, such as appraisal and documentation of income and assets. Nor do the lead generators who sell the trigger lists meet the law's strict standards for receiving access to consumers' personal information.
Finally, to truly constitute "firm offers of credit," said Dinham, "mortgage offers need to be in writing, so that the consumer can review it, and understand whether there are problems."
Rebecca E. Kuehn, the FTC's assistant director for privacy and identity protection, said, "I've heard the debate [over trigger lists] and I think there are fair points on both sides." However, she said, the fair credit law, which allows firm offers of credit using prescreened lists, does not specifically prohibit telephone offers. Nor does it require lenders to know every last detail of a consumer's credit situation to make a firm offer. It allows some "post-screening" - verification of income and assets, for example.
Kuehn said that even though the FTC lacks statutory authority to ban prescreened telemarketed mortgage offers, it does have enforcement authority against bait-and-switch scams and misuse of consumers' credit information. Consumers who experience such problems connected with trigger list marketing can file complaints at www.ftc.gov.
Better yet, any consumer can cut off all potential prescreened credit solicitations - whether for mortgages or credit cards - by opting out. That means prohibiting the credit bureaus from ever selling your personal information to lenders for marketing campaigns.
You can do that by visiting www.optoutprescreen.com or calling 1-888-5-OPTOUT. Your request, according to the FTC, should be processed within five days, although it may take 60 days before all prescreened offers cease.
Mortgage applicants can also block trigger list telemarketing pitches by making sure their phone numbers are on the National Do Not Call Registry, which can be accessed at www.donotcall.gov or at 1-888-382-1222.