Loan application makes you a 'trigger lead'
By Brigitte Yuille • Bankrate.com

It's a surprise for many would-be home buyers: On Monday you sign a loan application with the mortgage broker of your choice and by Tuesday your phone is ringing off the hook with calls from other lenders offering you deals. Congratulations! You've become a "trigger lead."

When you, as a potential borrower, sign a loan application, the lender or broker pulls your credit report, often getting a report that includes information from all three major credit bureaus.

The lender's request for your credit report "triggers" an alert informing the credit bureaus that you are a "hot lead" looking to purchase a home or refinance your loan.

The credit bureaus sell these trigger leads to lenders and brokers, presenting these industry subscribers with a list of candidates who are looking for a loan and meet their ideal criteria for loan products.

Experian, for example, has a monitoring service that lenders and brokers can subscribe to called Prospect Triggers. Experian spokeswoman Susan Henson says the company can pull out all of the consumers that fit a lender's credit criteria from the consumer database.

"They could say they want consumers who have never claimed bankruptcy. They could say they want consumers that have two open credit cards and an auto loan," says Henson.

Henson says federal law limits the type of information provided to clients. Therefore, no specific information is delivered, only aggregated information such as the total number of bank cards a consumer has.

Credit bureaus also provide contact information, such as the applicant's name, address and telephone number, to their clients, says Stuart Pratt, president of the Consumer Data Industry Association, or CDIA, which lobbies for credit bureaus.

Questionable tactics
Trigger lead products have been around for more than a year and a half and are facing scrutiny in the home lending industry.

Many consumers complain it's a violation of their privacy. Some bankers and mortgage brokers also oppose the practice, claiming borrowers are blaming them for the flood of calls. In some states, lawmakers are calling for legislation to prohibit or regulate trigger leads.

Mathew Street, deputy general counsel at the American Bankers Association, says that since Jan. 1, 2007, Massachusetts, Minnesota, Connecticut, Maine, Rhode Island and Alabama have bills that "limit or prohibit the use of information about a specific loan by someone trying to compete with that loan or sell a product without acknowledging they are not affiliated with the bank that made the original loan."

New Mexico recently enacted a bill that bars solicitors from using certain loan information.

In Congress, House Financial Services Chairman Barney Frank reportedly plans to restrict the credit bureaus' ability to sell lists of prospective home buyers.