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Home arrow Financial News arrow Mortgage News arrow What Triggers Credit Bureau Actions?
What Triggers Credit Bureau Actions? Print E-mail
Friday, 08 September 2006

Have you wondered how every mortgage lender in the world is aware that you have been shopping for a good refinance opportunity?

The answer is credit "triggers," a highly profitable sideline for all of the big three credit collection bureaus, (and business financial analyst Dun & Bradstreet is also a player) although one of them seems to be exploiting their product with great intensity over the last few years.

Lenders (and others, more about this later) can subscribe to a trigger service with one or more credit bureaus. Depending on the parameters that the subscriber chooses, and there are over a dozen to chose from, it will be instantly notified if there are changes in the credit profile of current customers. These triggers may be employed by subscribers as risk alerts, collections assistance, and more recently as marketing opportunities.

A risk alert trigger would be one that indicates that a customer is taking on substantial additional debt or begins to exhibit a pattern of late payments or even of minimum payments on a number of accounts. This is the type of trigger that can result in reduced or even closed credit lines or a sudden increase in interest rates.

Triggers have been available to lenders for years although new technology is morphing them into a totally new type of product, one that can be customized by combining a number of parameters and is available to subscribers nearly instantly. Experian permits a lender to submit a list of names (probably from its current portfolio) to be monitored when for credit shopping or can ask that a list of names (not necessarily existing customers) that match a specified profile be generated on a regular basis. Marketing, risk, and retention triggers are now available on a daily, weekly, up to quarterly cycle.

It is in the marketing area that Experian at least has begun to strongly push its trigger products. While the marketing sector has been around for several years, the sales targets have changed and that could be disconcerting, particularly to the consumer shopping for a mortgage loan.

The credit bureaus have provided trigger service to mortgage servicers for some time; and in the throes of the refinancing frenzy this was a popular product. A servicer wanted to know if a customer was seeking additional credit in order to approach him and try to retain the mortgage business themselves through a refinance or to cross-sell other products such as mortgage insurance or credit cards. As the refinancing boom has waned, however, the credit bureaus are now offering the trigger services to all comers. In other words, they are selling mortgage trigger leads.

In other words, if your mortgage customer is shopping around to refinance, we will alert you so you can take action to retain that business. And we will also notify you if a total stranger who meets your parameters of location, credit score, etc. appears to be seeking financing.

Perhaps the borrower will get a better deal - in the words of the Lending Tree ad - "when banks compete you win." But there are a couple of troubling aspects. First of all, the lender who is initially seeking your business is paying for the credit report that triggers the trigger putting his very own mortgage lead on the open market to be sold as a credit trigger lead for profit to his competitors. Second, it is yet another in the endless examples of how an individual's privacy is ignored every day.

Edward D. Murphy, writing for the Portland Press Herald and Maine Sunday Telegram did an excellent report on this practice in mid-June. He maintains that all three of the big credit bureaus - TransUnion and Equifax in addition to Experian, are selling these kinds of trigger list leads. As stated above, we found only Experian actively marketing the product on line.

The law requires that anyone contacting a consumer from such a lead do so with a firm offer of credit and Experian's website specifies that requirement for lead purchasers. The Edward's article, however, quotes a consumer agency head in Maine as saying the calls to consumers are "more in the nature of fishing expeditions...'tell us what you're looking for and we'll see if we're doing better.'"

Edwina Baniqued

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