Trigger Leads have become a hot issue in the mortgage industry. Many people believe that telemarketers and junk mail simply happen and there's little or nothing they can do about it. Most people are familiar with the do-not-call list, but many are unaware of opt-out-pre-screen. The reason is simple. Many don't even know what pre-screened offers are, much less how they are primarily responsible for many of the dinnertime telemarketing calls and endless piles of junk mail.
Pre-screened offers are UNSOLICITED credit offers made by a variety of lenders who purchase leads from the consumer credit reporting companies (Equifax, Experian and TransUnion). That's right. The credit reporting companies sell consumers' personal information to all kinds of companies, especially mortgage lenders, insurance companies and credit card issuers. This whole concept began years ago and has escalated into a situation that many feel is now out of control.
Initially, this information was mainly sold to credit card companies: most "pre-approved" credit card offers that come in the mail are the result of pre-screened offers. But in 2004, the Federal Reserve sent a report to Congress called "The Benefits of Receiving Written Offers of Credit or Insurance". In this report, they attributed the lowering of average credit card rates to pre-screened offers and mainly ignored the effect of many other factors, such as a significant lowering of all interest rates after 9/11 by the Federal Reserve itself and increased competition and advertising among banks and lenders.
The conclusions of this report, which many feel was heavily influenced by lobbyists, led The Federal Reserve to recommend that Congress not seek any additional restrictions on the practice of selling pre-screened leads. This resulted in the proliferation of a new product sold by the credit reporting companies called "Trigger Leads". Trigger Leads are "hot leads" that are sold at the moment (sometimes literally THE EXACT moment) a borrower applies for a mortgage loan. And they may sell the same individual's information to multiple lenders at the same time.
In other words, if I, as a mortgage lender, request a copy of a perspective borrower's credit report, one or more of the credit reporting companies may sell that as a "hot lead" to other mortgage companies, which may result in several telemarketing phone calls to the borrower if they have not already elected to opt out of this process.
I learned this the hard way. A few years ago, I pre-qualified a client who angrily called me back a few hours later with a choice array of four letter words. He was pummeled with several telemarketing calls from lenders right after I pulled his credit, and thought I was the one who had sold his personal information! Then it happened again to another loan officer at our company the very next day. We thought for a while we had a computer hacker who had breached our firewall, but learned about Trigger Leads a few weeks later from an industry newsletter.
I'm all for competition, but this raises some interesting privacy questions and concerns. Do consumers mind having their personal information sold when applying for a loan, unknowingly opening up a potential floodgate of junk mail and telemarketing calls? Are most consumers smart enough to understand they have the right and ability to shop around on their own, or do they need government and corporate intervention to help with the process? Do consumers realize the potential for dishonest manipulation by unscrupulous lenders armed with the knowledge that they applied for a loan only an hour ago? Are most consumers even aware that this practice occurs, and would most prefer to opt IN to a service like this rather than be forced to OPT OUT?
And what about the companies that are buying these leads and calling consumers? I can't speak for all of them, but I can share some experiences of past clients. One story in particular comes to mind. Not long ago, I made a trip to Houston to visit my father. Upon arriving at his office around noon, he set me up in a room adjacent to his office so I could work on my laptop and follow up with clients. A couple of hours later, he came in to discuss refinancing his existing mortgage with me. I pulled a joint credit report on him and his wife (my stepmother) to see if they qualified. This was at roughly 2PM. By 4PM, he had received two phone calls on his PERSONAL CELL PHONE from telemarketers soliciting mortgage offers. Both times he had to tell them that he was "not interested" to the point that he had to become aggressive to get them off the phone.
We left his office around 5PM and met up with my stepmother for dinner. The first thing she mentioned was how she couldn't get any work done that afternoon because she kept getting calls from telemarketers soliciting mortgages on her cell phone. The last caller insisted that he "worked for her new lender and was about to send her the paperwork to finalize her application for the loan". Funny, I didn't recall a boiler room in the basement of my office?!?! This guy actually thought he could steal the loan by tricking her into signing paperwork with his company....I've seen many scams, but this was one for the record books!
Doesn't that sound crazy? I thought so too, but unfortunately it's not the first time one of my clients has reported a similar experience with a lender that got their name and number from a "Trigger Lead". I found it hard to believe myself until I witnessed it first hand with my father and step mother.
I'm not implying all lenders that purchase pre-screened trigger leads are using these tactics, but the majority of my clients that have received these calls tell stories of aggressive, high pressure sales pitches and the use of bait and switch tactics. Quite often, they are selling the types of mortgages that have a great sales pitch, such as pay option ARMs, but they neglect to disclose the high risk features of these loans, such as negative amortization and prepayment penalties.
Here are some tips for perspective borrowers who might be applying for credit soon and don't want to have this experience:
- OPT OUT if you don't want to receive these unsolicited offers. NOTE that can take up to TWO WEEKS to take effect if you choose the "Electronic Opt-Out-for-Five-Years" option. Mailing it will result in permanent deletion from the list, which might be a better option for those who can stand to wait more than two weeks. Notice the website implies that opting out will mean you will no longer be able to receive "Firm Offers of Credit". While reading this, keep in mind the credit bureaus make millions and millions of dollars by selling your personal information to telemarketers, so they don't want you to opt out. The term "Firm Offers of Credit" is misleading, in my opinion, because no mortgage company can make a truly "Firm Offer of Credit" without analyzing many aspects of a borrower's ability to repay a mortgage and looking at a full credit report. The companies that buy these leads are not buying a full credit report, they are just buying leads with basic contact information. So if they're claiming in the first breath they can "beat any deal", they are being somewhat dishonest since they don't know how to price the rate without obtaining additional information. Companies who buy these leads do not have access to that information yet: they must ask questions and also ask permission to run a full credit report.
- Shop around for a mortgage from people you know and trust. Banks are on nearly every street corner in Anytown, USA, and most people can ask their friends, family or realtor for names of lenders that have a history of providing good rates and service.
- Sign up on the DO-NOT-CALL-LIST as well. This should prevent ALL unsolicited phone calls, not just trigger leads. Once you buy a house, you become a prime target for telemarketers so it's better to do this before rather than after buying a house.
This will continue until the public demands that Congress outlaw this practice. In the meantime, consumers must make an effort to educate themselves and opt out if they choose. There are plenty of ways to shop for credit on YOUR terms without having to worry about junk mail and persistent phone calls from telemarketers.
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