Understanding Trigger Leads: Why the CFPB Should Act
September 3, 2024
In the ever-evolving landscape of mortgage lending, "trigger leads" have become a contentious issue.
These unsolicited marketing calls, often referred to as “junk calls” by the Community Home Lenders of America (CHLA), are drawing increasing scrutiny. Recently, CHLA urged the Consumer Financial Protection Bureau (CFPB) to address these practices, citing concerns about their impact on consumers. Here’s a closer look at what trigger leads are and why CHLA is calling for regulatory action.
What Are Trigger Leads?
Trigger leads are solicitations made by lenders or brokers when they receive information about a consumer’s mortgage application from credit bureaus. Essentially, when a borrower’s credit report is pulled for a mortgage application, it can trigger a flood of calls from other lenders who see this as an opportunity to pitch their services. While this practice is legal, it has raised several ethical and practical concerns.
Why Is CHLA Concerned?
CHLA’s recent letter to CFPB Director Rohit Chopra outlines three main concerns regarding trigger leads:
1. Lack of “Firm Offer of Credit”:
CHLA argues that many mortgage brokers engaging in trigger lead solicitations do not have the capability to close loans, thus failing to meet the legal requirement of a “firm offer of credit.” This discrepancy raises questions about the legitimacy of such offers.
2. Misleading Representations:
There are reports that some trigger lead calls misrepresent themselves as coming from the consumer’s current mortgage lender, even when they are not. This deceptive practice not only misleads consumers but also undermines trust in the lending process.
3. Unsupervised Loan Officers:
CHLA points out that some loan officers make trigger lead calls without their employer’s consent. This lack of oversight can result in inconsistent and potentially harmful practices that reflect poorly on the entire industry.
What Action Does CHLA Want?
CHLA is calling for the CFPB to take several steps to address these issues:
- Encourage Consumer Complaints: The CFPB should promote the reporting of abusive trigger lead practices by consumers. Clear guidance on what constitutes permissible and impermissible practices is essential.
- Identify and Act Against Violators: The CFPB should work to identify mortgage brokers or lenders frequently engaging in unethical practices and take appropriate action to stop these behaviors.
- Support Legislative Efforts: CHLA supports a bipartisan bill introduced in the U.S. House of Representatives earlier this year, which targets the abusive use of mortgage trigger leads. The bill aims to curb these practices and provide more protection to consumers.
The Path Forward
The CFPB’s proactive stance on issues like “junk fees” has set a precedent for addressing other consumer protection challenges. By applying similar scrutiny to trigger leads, the CFPB can help ensure a fairer, more transparent mortgage lending environment.
As the debate continues, it’s crucial for both consumers and industry professionals to stay informed about these developments. Regulatory action could reshape how mortgage leads are handled, ultimately benefiting borrowers and fostering a more ethical lending market.
For more updates on this issue and how it might impact you, stay tuned to DNVR Lending.
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