Homebuyer Privacy

What’s the issue?

When a consumer applies for a mortgage, the lender orders a credit report from one of the three national credit bureaus for the purposes of evaluating the consumer’s application. When this occurs, the credit reporting agencies can sell that information to other lenders to make them aware that the consumer is looking for credit. These so-called “trigger leads” are then used by other lenders to attempt to sell a prescreened credit product to the consumer.

The Fair Credit Reporting Act (FCRA) allows for this type of activity. Initially, the law functioned to provide the consumer with options for shopping around. However, in recent years there has been a sharp increase in the volume of trigger leads, which often frustrates the consumer who may receive dozens, or in some cases, hundreds of unwanted solicitations.

While this activity is legal, consumers are increasingly wary of and frustrated with unsolicited calls for products they did not order. In many cases the consumer also mistakenly assumes that their financial institution “sold” the consumer’s credit report. This can end up damaging banks’ relationships with their customers and eroding trust in the financial system, even though it is the credit reporting agencies who have sold the credit report, not the individual bank.

What can be done about it?

Congress can modify The Fair Credit Reporting Act to rein in when credit reporting agencies may provide third party lenders with a consumer’s credit report information.

Senators Jack Reed (D-RI) and Bill Hagerty (R-TN) and Representatives John Rose (R-TN) and Ritchie Torres (D-NY) have introduced legislation that would help to limit use of these so-called “trigger leads” except in legitimate cases. This legislation, the Homebuyers Privacy Protection Act (S. 3502/H.R. 7297) would permit third parties to have access to a credit report only if the third party certifies that it has the consumer’s consent or has a current relationship with the consumer.

Congress should pass this legislation to enhance consumer protection and strengthen consumer trust in the financial system.