Bill would ban lenders' alerts to homebuyers

Within hours of applying for a mortgage at her chosen bank, Dorothy Parker of South Boston was bombarded with calls from competing lenders, plying their products and low, low interest rates.

"They've been calling from as far away as California and Florida," Parker said. "How do they know my personal business? They're relentless. They leave voice mails and then they follow up again."

It was as though her application had flipped a trigger -- a so-called mortgage trigger that automatically alerts lenders when a competitor checks someone's credit rating.

This increasingly prevalent phenomenon, promoted by credit agencies that sell the information to other lenders, would be outlawed in Massachusetts under legislation -- thought to be the toughest of its kind in the country -- currently under consideration on Beacon Hill.

Massachusetts bankers, who have championed the bill, say these mortgage triggers are hurting their business and their customers.

"On the surface it sounds like traditional competition," said Paul Comerford, vice president of loan operations at Mt. Washington Bank. "There's one big difference -- these people have already applied for a loan elsewhere. It gives the appearance that we are giving information to another institution. The customer thinks we've invaded their privacy , and it undercuts the level of trust between the bank and the consumer. It's a perceived breach. The customer could move on, thinking 'Why would I want to do business with you?' "

But the three major credit agencies that have been offering the service more aggressively in recent years defend it as a consumer-friendly practice that ensures homebuyers get the lowest rates.

"Let's say you walk into a mall and go to a jewelry store and see something you like," said Norm Magnuson, vice president of public affairs for the Consumer Data Industry Association, the group that represents the credit reporting agencies. "You like the price but say 'Wait a minute, there are other jewelry stores in the mall, I'd like to check them first.' I think consumers would be put off if the jewelry store said, 'No, you can't look elsewhere before you buy.' It would raise a question in the consumer's mind."

He said the practice has become increasingly common in the slumping real estate market, as lenders compete for a dwindling number of customers.

"I think a lot of the angst in the market is from those who have not been as competitive and are looking to keep the business they have. In a free market, sometimes that's difficult to do," Magnuson said.

The Massachusetts Mortgage Bankers Association has been complaining about credit triggers for more than a year, according to executive director Kevin Cuff.

"It's an awful practice," Cuff said. "The last thing in the world you want to do is pit any level of your membership against one another. That's what credit triggers ideally do. It's pernicious on many levels. It's deceptive to the consumer. It breaches a business contract for the primary lender , and ultimately the primary lender is regarded as being responsible."

A handful of states are considering legislation that would ban or regulate trigger services, Magnuson said, including Connecticut, Maine, and Wisconsin.

The credit agencies contend that the triggers are protected by the federal Fair Credit Reporting Act.

Consumers, they say, also can opt out, by visiting optoutprescreen.com, or by adding their phone number to the national Do Not Call registry.

"A ban on mortgage triggers has the same effect as telling consumers not to clip coupons, not to read newspaper advertisements, not to comparison shop at places like lendingtree.com," Eric Ellman, a vice president of the Consumer Data Industry Association, wrote to the chairmen of the state's Joint Committee on Consumer Protection and Professional Licensure, which is considering the bill.

Eric Bourassa, a consumer advocate for the Massachusetts Public Interest Research Group, believes the rules should be changed so that lenders are allowed to contact only consumers who sign up for the pre screened offers.

"Credit agencies should only send pre screened or pre approved offers to consumers that are interested in receiving them," he said.

Michael W. Morrissey, Democrat of Quincy, who chairs the committee, said he will push to ban mortgage trigger services.

"The intent is to stop the practice and, if necessary, let them take us to court," said Morrissey, adding that the committee is likely to approve the bill within the next two weeks.