Pulling The Trigger On 'Trigger Leads'

Don't look now but one of the most regulation-loathing industries out there is lobbying to get itself more heavily policed: the banks.

So much for the free market.

It seems some mortgage lenders have taken up the practice of buying leads from credit reporting agencies so they can poach the business of home buyers who are having their credit checks run. Customers who have decided on a bank for a mortgage find themselves getting ambushed by pitches from other lenders and marketers, offering (however implausibly) to beat whatever rate the customer has been offered.

Testifying before the Banks Committee, Rockville Bank President William J. McGurk said the practice allowed invasive lenders and brokers to siphon off business that the original banker had spent weeks or months developing, and compared the experience to setting tomato plants in the spring and nurturing them all summer.

"Then in August, somebody comes by and steals my nice, ripe, red tomatoes," McGurk said.

Either that, or the customer blames the bank for leaking their application information, which doesn't help in building customer trust.

"When a customer submits an application, they expect privacy," McGurk said.

So now the bankers are trying to crack down on themselves for using "trigger leads," as they call them.

The Connecticut Bankers Association had its lobbyists - CBA Vice President Thomas Mongellow and Richard "Fritz" Conway, of Gaffney Bennett -- help draft a bill that would prohibit brokers or lenders (a.k.a. the association's own members) from using leads from credit reports.

It seems a bit like asking mom to please stop allowing you to shoplift, and then spending a lot of money to convince her.

But state Rep. Ryan Barry (D-Manchester), co-chair of the Banks Committee, was happy to comply. An attorney whose clients include mortgage applicants, Barry said the practice amounted to "a trampling of people's privacy rights."

Clients "complain to me that they had gone through a bank for a mortgage, then within a day or two they had gotten an onslaught of offers by mail or by phone from other lenders or brokers," he said.

Also firmly in support are the usual industry watchdogs, Banking Commissioner Howard F. Pitkin and Attorney General Richard Blumenthal, both of whom often find themselves on the other side of the banks when new regulatory ideas come up.

But not in this case. In addition to the Connecticut Bankers Association, other associations paying to keep their own members in line are the Connecticut Mortgage Bankers Association (another Gaffney Bennett client) and the Connecticut Society of Mortgage Brokers.

Conway said it could be that a lot of the trigger lead users were from out of state, but that he was sure that "some of the members that we have on board" were among the culprits, though they won't be raising their hands to identify themselves.

Source Of Contention

"There seem to be some who either used it at one time or know someone who used it," Conway said.

Same goes for mortgage brokers. Peter Spalthoff, executive director of the mortgage brokers group, said the use of trigger leads had become a source of contention between members, particularly because two credit bureaus, The Credit Bureau of Connecticut, in West Haven, and Strategic Information Resources, in Springfield, Mass., are members. The first is a sales agent for TransUnion, the second for Experian, two of three national firms that sell leads generated from credit checks. (The other is Equifax.)

"They are getting a lot of flak from the broker industry," Spalthoff said. He said he had received assurances from the two companies that they had no role in leaking or selling customer information, but that hadn't placated everyone.

"We've almost gone to our membership to dump them," Spalthoff said.

Not surprisingly, with all the regulators and all the banks behind it, the bill sailed through the Banks Committee last week. Rep. Barry said he hasn't heard opposition from anyone, much less any self-identified trigger lead users.

"Most of the firms I've talked to said they don't really use them," he said.

Jonathan O'Connell is a Hartford Business Journal Staff Writer.