A Watershed Moment For Trigger Leads

Pending legislation collars controversial data sharing practice

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An increasing number of mortgage originators are receiving urgent calls from their borrowers who recently applied for a mortgage. Most originators have been there before.

After courting your borrowers for weeks – sometimes months – gaining their trust and confidence to secure their application, borrowers call in a panic demanding to know why they are suddenly getting dozens, or sometimes hundreds of unsolicited phone calls.

“Did your company sell my data?” they ask. “Make the calls STOP,” they demand. Originators begin asking themselves, future referrals at risk, “Why does this happen to all my best customers?”

Welcome to the world of “trigger leads.”

Pipeline Risk From Trigger Leads

A trigger lead is created when a lender pulls a borrower’s credit report through a “hard” inquiry. Unlike “soft” credit pulls used for prequalification, hard inquiries create a data sales opportunity for the three major credit bureaus: TransUnion, Equifax and Experian. As a formal indication that a borrower has applied for a mortgage, the inquiry is saleable as a lead to lenders and data brokers.

The credit inquiry triggers the sale of the lead, which triggers the incessant outreach to borrowers.

Some lenders purchase data with defined qualification criteria; they only want leads for borrowers who meet prescribed marketing and credit standards. Other lenders and/or servicers purchase trigger-lead data to monitor the mortgage application activity of their current client base as a method of protecting their servicing pipeline. Data brokers aggregate and sell batches of lead data.

Because there is no limit to the number of times a trigger lead can be sold, borrowers can be inundated with calls from competitors vying for their business. Inevitably, and understandably, this leads to consumer frustration and potential pipeline risk for lenders and servicers. Not only are the incessant calls, texts, and emails intrusive, tainting borrowers’ relationships with originators and lenders, but they can overwhelm or mislead borrowers inclined to second-guess their borrowing decisions.

Though trigger-lead data offers lenders a valid and valuable marketing strategy, when cold-calling borrowers, some lenders fall short of making the “firm offer of credit” to the consumer as outlined and required under the Fair Credit Reporting Act (FCRA). Many neglect to check the do-not-call registry, violating borrowers’ stated preferences. Complaints have been reported of callers misrepresenting their rates or even fraudulently posing as the original lender “just following up on their current application.”

Trigger leads are, in fact, legal. For many mortgage lenders they represent basic competition and comprise a significant portion of their lead generation strategy. Both the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB) endorse this competition as a means of potentially saving consumers money by increasing consumers’ access to more financing options.

Trigger-Lead Regulation Under Consideration

It should be noted, trigger-lead sales are neither new nor unique to the mortgage industry. The sale of consumer data generated from credit report inquiries is used as a lead generation and marketing tool for credit card card and auto loan issuers, as well as insurance carriers. Since interest rates began to rise, though, the impact of trigger leads on the mortgage industry has gained attention and controversy.

No matter your stance on whether trigger leads help or harm consumers, or increase lenders’ pipeline risks, regulators have begun to take critical actions that limit how trigger-lead data can be used.

In December 2023, the Federal Communications Commission (FCC) finalized a rule that closed the lead generator loophole. Under the new rule, lead generators must obtain the consumer’s consent for each entity that their data will be sold to. Previously, a consumer’s blanket consent allowed the lead generator to sell the trigger-lead data to as many buyers as they could. This change grants consumers more control over their data, but threatens those who rely heavily on trigger-lead data for loan leads.

The FCC will also have the ability to ‘red-flag’ certain phone numbers and require mobile carriers to block texts from flagged numbers. The new rule also clarifies that do-not-call protections apply to text messages, as well as phone calls. These changes, however, will not take effect until January 2025.

Preparing Consumers, Protecting Lenders

As trigger leads currently can’t be prevented, educating borrowers early and often is imperative to heading off their harmful consequences. Warning borrowers to expect phone calls, and ensuring they understand the solicitations are not originators’ or lenders’ fault, can help prevent pipeline risk.

Should borrowers choose to take or respond to an unsolicited call, advise them to do so with caution, applying appropriate due diligence to any offers provided or requests for documentation. Lenders or originators early in the prequalification process with a borrower can educate their borrower on the protections that do exist, such as opting out of prescreen marketing at OptOutPreScreen.com or by registering at DoNotCall.gov to avoid the deluge of trigger lead-generated phone calls. Such efforts may require repeated reminders, making it advisable to incorporate these practices early in a borrower’s prequalification process.

“Not only are the incessant calls, texts, and emails intrusive, tainting borrowers’ relationships with originators and lenders, but they can overwhelm or mislead borrowers inclined to second-guess their borrowing decisions.”

Lenders and originators who support trigger-lead reform can take action by co-sponsoring active trigger lead legislation. House Resolution 7297 in Congress and Senate Bill 3502 in the Senate, otherwise known as the Homebuyers Privacy Protection Act, proposes to eliminate trigger lead abuses while still allowing pre-screened reports within appropriate and limited circumstances.

Specifically, the bill would limit the sale of trigger leads to a third party to when:

The consumer has specifically authorized the solicitation,
The lead is sold to the consumer’s current mortgage servicer,
The lead is sold to the consumer’s current bank, credit union or savings institution,
The third-party lender originated the consumer’s current mortgage, including a mortgage broker, mortgage banker, or lender.