Terry Wyatt called his mortgage broker one morning about refinancing - and within hours began getting calls from other brokers and lenders he's never heard of.
"I'm getting calls pretty much all day long. It just doesn't stop. It goes into the evening," says the Elkridge resident, who's been dodging calls for the past two weeks. "They call and tell me they can beat this guy's rate and they can beat anybody's rate."
So how did brokers and lenders as far away as New York and Florida know - and know so fast - that Wyatt wants to refinance?
Thank the credit bureaus.
When a lender or broker checks someone's credit report, it signals that person is in the market for a mortgage or to refinance. The credit bureaus turn around and sell that contact information to others in the mortgage business looking for leads.
The use of these so-called "trigger leads" has heated up in the past year as the demand for mortgages and refinancing has cooled. And plenty of people are angry about it. "This is ridiculous," Wyatt says.
Consumers often are outraged that their privacy has been violated. Some accuse their lender of divulging their personal information. One broker told me that a Maryland client got 67 calls in four hours. Lenders and brokers don't necessarily like it either; some complain that the credit bureaus are helping competitors poach their clients. Privacy and consumer advocates worry predatory players are using the leads to fish for prospects to push into high-priced loans.
"I don't understand why the FTC isn't even investigating this," says Evan Hendricks, editor of the Privacy Times newsletter.
The reason, according to the Federal Trade Commission, is that the practice is legal. Trigger leads are permitted under the same law that allows you to get those preapproved credit-card offers.
The idea is that consumers will receive a variety of mortgage offers so they can comparison shop before making one of the largest purchases in their lives, says Rebecca Kuehn, assistant director of the FTC's privacy and identity protection division.
Mortgage lenders and brokers buying trigger leads don't get your Social Security number. But they can tell the credit bureaus what sort of leads they want. For instance, a lender might request information on mortgage applicants in Maryland with a credit score of at least 650.
Consumers who don't want to hear about these offers can always stop them the same way they opt out of credit-card offers and telemarketing calls, the FTC says.
All three major credit-reporting agencies sell trigger leads. Consumers benefit, says Stuart Pratt, president of the Consumer Data Industry Association, a trade group.
A consumer, say, might go to a broker who deals only with sub-prime lenders, Pratt says. But because of trigger leads, that consumer may hear from other lenders and find out that she qualifies for a much better rate.
"For consumers, it offers them more choices and ultimately can save them money. Competition is good for the consumer," says Colleen Ryan, a spokeswoman for credit reporting agency TransUnion.
"We hold lenders accountable for using them properly," adds David Rubinger, a spokesman for Equifax, another leading credit bureau.
Lenders and brokers are the biggest buyers, but they're also among the most vocal opponents of trigger leads.
"We hate them," says Neil Sweren, president of Allymac Mortgage Services in Owings Mills. Sweren says his company experimented with trigger leads a year ago. But within a week, Allymac asked for its money back. "All my people said, 'I have never been yelled at like that in all my entire life,'" Sweren says. "People don't want to hear from us. ... No one is happy."
Sweren now warns new customers that they are likely to get phone calls once a credit check is run and provides them with information on how to opt out of those calls.
Some opponents want a legislative fix.
Harry Dinham, president of the National Association of Mortgage Brokers, advocates for an opt-in system, where consumers who want to hear offers can sign up for them.
The Maryland Association of Mortgage Brokers considered pushing for legislation to rein in trigger leads earlier this year, says Tom Shaner, the group's executive director. David Pulford, president of the Maryland Mortgage Bankers Association, says his group would support a ban.
That's happening in Minnesota. Beginning in August, the state will ban credit-reporting agencies from selling information gleaned from a mortgage application, including the fact that a consumer is applying for a loan.
Consumers should shop around for credit when they are refinancing or taking out a mortgage. But that doesn't mean you want dozens of strangers calling you out of the blue. Use the tools available to opt out.
You can opt out of credit offers by calling 1-888-567-8688 or visiting www.optoutprescreen.com. You'll need to supply identifying information, including your Social Security number. It may take up to five days to process your request.
To reduce calls, also add your phone number to the National Do Not Call Registry by calling 1-888-382-1222 or going online at www.donotcall.gov. The registry is supposed to keep most telemarketers at bay. You still may get letters about mortgage deals.
Maybe you want to hear the offers. Just make sure you know whom you're dealing with and exactly what's being offered.
Brokers and lenders contacting you through a trigger lead must make a "firm offer of credit" based on the information they have on you so far, says the FTC's Kuehn. They're allowed to gather information that's not on the report when you apply for the loan. And if you don't meet the underwriting criteria - maybe you don't have a job or your debt is overwhelming - the original offer can be changed or withdrawn, Kuehn says.
On the other hand, they can't bait you with ultra-low interest rates with the intention of switching you to a higher rate later when you're unlikely to back out, she says.
"Ask for everything in writing. You just don't know who is on the other end of the line," advises Pam Dixon, executive director of the World Privacy Forum. Seeing the terms in writing will make it easier for you to compare offers and check the background of those making them.
Wyatt, the Elkridge resident, says he doesn't know when the calls will stop. "I was lucky to reach him by phone on the first try.
"If you had said anything about mortgages," he says with a laugh, "I would have hung up on you."
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