"Congress pursues legislation to restrict lead generation from mortgage triggers on smartphones"
In a significant move to protect consumers from unwanted solicitations during the mortgage application process, Congress has passed the bipartisan Homebuyers Privacy Protection Act. The legislation aims to regulate the use and sale of mortgage-related "trigger leads" to prevent predatory practices and give consumers more control over their personal financial information.
The Act, which includes provisions such as the requirement for explicit consumer consent before solicitations can be made, restrictions on the sale of trigger leads by credit bureaus, and amendments to the Fair Credit Reporting Act, is a step towards ending the abuse of trigger leads.
Sen. Jack Reed, a Rhode Island Democrat, has co-sponsored the Senate version of the Act, joining efforts to put an end to this practice. The Act is designed to reduce the flood of unsolicited contacts that consumers often receive after a credit inquiry for a mortgage application, helping to lessen the stress and confusion associated with the homebuying process.
Bob Broeksmit, president and CEO of the Mortgage Bankers Association, has called the bill "an enormous step toward finally putting a stop to trigger lead abuses."
The regulation by the Act is as follows: Consent for solicitations is required unless an exception applies, such as if the solicitation comes from the consumer’s active mortgage originator, servicer, or a depository institution or credit union with which the consumer already has a relationship. Offers must be "bona fide," meaning the lender must be capable of making a real credit offer.
The legislation would also amend the Fair Credit Reporting Act to prevent consumer reporting agencies from furnishing consumer reports based on credit inquiries for mortgage applications, except under the conditions described above. The House version of the Act even directs the Comptroller General to study the impact and value of trigger leads delivered by text message, with findings due within 12 months of enactment.
The tactic of trigger leads involves credit bureaus selling a list of names and phone numbers of individuals who have had a credit check for a home loan to other lenders. This has led to excessive and intrusive marketing from lenders and brokers, a practice that the Homebuyers Privacy Protection Act aims to curb.
While some third-party callers have been found to use misleading tactics, such as fraudulently implying they are calling on behalf of the lender the consumer applied to, or quoting rates and fees that the consumer would not qualify for or are not actually on offer, it is important to note that trigger leads can be helpful in small doses. They allow borrowers to compare mortgage rates and potentially save thousands of dollars over the life of their mortgage.
The National Association of Mortgage Brokers and the Mortgage Bankers Association are among the trade groups supporting the Homebuyers Privacy Protection Act. As mortgage rates have increased from 3% in 2021 to 8% in 2023, the mortgage business has become more competitive, leading to homebuyers receiving more solicitations than in previous years.
One homebuyer, Bryan Dyke, filled out a mortgage application in mid-May and was inundated with solicitations from lenders. Many of the calls Dyke received did not seem to understand the purpose of his application. Despite not having a home loan to refinance, he received calls touting mortgage refinancing.
Peter Idziak, a Dallas-based attorney, has stated that some borrowers have received deliberately misleading calls from third-party lenders. The Homebuyers Privacy Protection Act allows marketers to contact consumers only to provide a firm offer of credit under certain circumstances, such as when the consumer has previously consented, the company making contact either originated or services the consumer’s current mortgage, or the marketer is a bank or credit union that already holds money for the consumer.
With the passing of the Homebuyers Privacy Protection Act, consumers can look forward to a more controlled and less stressful mortgage application process, free from unwanted solicitations and potential predatory practices.
- The legislation, known as the Homebuyers Privacy Protection Act, is designed to regulate the mortgage industry, especially concerning mortgage rates, by requiring explicit consumer consent for solicitations, restricting the sale of trigger leads by credit bureaus, and amending the Fair Credit Reporting Act.
- The Act is significant in the field of personal-finance, as it aims to curb the tactic of trigger leads, which has led to excessive and intrusive marketing from lenders and brokers in the banking-and-insurance sector.
- In the future, with the provisions of the Homebuyers Privacy Protection Act, consumers can expect a more controlled and less stressful mortgage application process, as they will have more control over their personal financial information and will receive fewer unsolicited contacts.
