| Entities | Connecticut (4) Florida (5) Maine (6) Minnesota (2) New York (10) |
| Topics and Issues |
After lying dormant for many years, the mortgage trigger issue is having a modest resurgence, and must to the detriment of consumers who benefit from comparison shopping.
Recent Congressional activity
In May 2022, U.S. Rep. Ritchie Torres (D-NY) introduced H.R.7661, the Trigger Leads Abatement Act of 2022. As noted by the summary of the federal bill, it would “prohibit…credit reporting agencies from providing a credit report not initiated by a consumer if the report is being provided on the basis that the consumer has had a credit inquiry regarding a home mortgage loan. This practice, known as producing a trigger lead, provides notice to other mortgage lenders that the consumer is seeking a mortgage loan.”
The congressional legislation is supported by the National Association of Mortgage Brokers, which issued a statement of support for the measure.
In June 2023, U.S. Rep. John Rose (R-TN) introduced H.R. 4198, the Protecting Consumers from Abusive Mortgage Leads Act. A press release notes the support of the MBA and the Tennessee Bankers Association.
Around September 2023, the Broker Action Coalition launched a campaign in support of H.R. 4198, the Protecting Consumers from Abusive Mortgage Leads Act.
Recent state activity
In May 2022, Florida’s Chief Financial Officer, Jimmy Patronis (R) issued a press release “caution[ing] Floridians to be aware that credit bureaus can sell their data to lenders without their consent. Credit bureaus are selling ‘trigger leads,’ whereby lenders purchase lists of data on consumers who have credit characteristics that the lender desires to target. When consumers apply for loans and their credit is run, their information can quickly be sold by credit bureaus to lenders looking to make unsolicited offers. Recent reports say some lenders are making unsolicited phone calls to consumers and are being misleading [sic] about who they are, which exposes consumers to identity theft.” Patronis’ press release was followed by a letter to the nationwide credit bureaus.
In May, Patronis also sent a letter to the CFPB. In July, CDIA sent a letter to Patronis.
Mortgage triggers, in general
CDIA’s Mortgage Trigger Briefing Paper has more information about mortgage trigger leads, how they are regulated by federal law, how consumers can save money from these trigger leads, and how consumers can opt-out of receiving trigger lead ads.
The Federal Trade Commission has carefully evaluated these products and issued the following notice:
Clearly, some mortgage companies benefit from the practice. But the FTC says consumers can benefit, too: prescreened offers can highlight other available products and make it easier to compare costs while you carefully check out the terms and conditions of any offers you might consider
History
A few state legislatures have had an interest in how lenders use these mortgage triggers. Since 2007, four states have passed laws to address mortgage triggers. Three states, Connecticut, Kentucky, and Maine passed laws regulating the practice such that if a lender or mortgage broker uses information from a mortgage trigger, that person must adhere to certain professional standards and ensure that the offers made are in compliance with state and federal lending statutes. Ensuring consumers are protected and that they can still receive competing offers which may well save them money is a rational and reasoned approach. Two states, Minnesota and New Jersey enacted laws that banned the practice of making mortgage triggers available to lenders. Such efforts failed because federal courts stepped in in both cases to prevent the laws from taking effect on preemption grounds based on the operation of the federal Fair Credit Reporting Act. In private litigation unrelated to state legislation a third federal court in a third state likewise found that the federal FCRA preempted state laws.
Minnesota (2007)
In 2007, Minnesota passed the nation’s first ban on mortgage triggers, but that ban did not last long before it was overturned by a federal judge and the state opted not to appeal. The court, in looking specifically at the subject matter preemption of 15 U.S.C. § 1681t(b)(1)(A), found that “the preemptive reach of FCRA is both broad and explicit” and held that the “‘subject matter’ of mortgage-trigger lists is unquestionably regulated by [the FCRA]”. Thus, “neither Minnesota nor any other state may prohibit or regulate their sale.” Consumer Data Indus. Ass’n. v. Swanson, No. 07-CV-3376 (PJS/JJG), 2007 WL 2219389 (D. Minn., July 30, 2007), at 7-8. The state did not appeal this ruling and on Aug. 21, 2007, a final order was entered “find[ing] and declare[ing] that [the Minnesota ban on mortgage triggers] is preempted in its entirety by 15 U.S.C. § 1681t(b) of the FCRA and is not enforceable, directly or indirectly, by [the state].” Consumer Data Indus. Ass’n. v. Swanson, No. 07-CV-3376 (PJS/JJG), (D. Minn., Aug. 21, 2007), amended consent order, at 2.
New York (2008)
While New York did not attempt to ban mortgage triggers, the three nationwide credit bureaus and Credit Plus, were sued in federal court in New York by Premium Mortgage Corp, “a lending agency engaged in the business of lending money to homeowners and/or persons buying a home.” The plaintiff claimed that the consumer reporting agencies had “violated various New York State common law duties by selling certain consumer credit reports to numerous lending agencies.” The case was dismissed against the nationwide credit bureaus because mortgage trigger leads are preempted by the FCRA.
In this case, the Western District of New York wrote that
While plaintiff acknowledges that the FCRA pre-empts state statutory claims, plaintiff contends that the FCRA does not pre-empt state common law claims, and therefore, plaintiff’s common law claims may proceed.
I find, however, that 15 U.S.C. § 1681t(b)(1)(A) pre-empts both statutory and common law prohibitions or restrictions on the practice of prescreening. It is axiomatic that the term ‘state law’ includes state common law, as well as state statutory law and regulation. In the context of pre-emption doctrine, however, because of the strong presumption against preemeption, the Supreme Court has cautioned that the presumption ‘might give good reason to construe the phrase ‘state law’ in a pre-emption provision more narrowly than an identical phrase in another context. . . .’
In the instant case, however, there is no basis for limiting the preemptory effect of Section 1681t(b)(1)(A) solely to state statutory law. Rather, because Congress explicitly stated that in the FCRA that ‘[n]o requirement or prohibition may be imposed under the laws of any State with respect to. . . . the prescreening of consumer reports’, under Supreme Court precedent, the use of that language mandates a finding that the provision preempts both state statutory and common law.
. . .
Because the common law causes of action brought in this case seek to prohibit the defendants’ ability to engage in the prescreening of consumer reports, or make the defendants liable for engaging in the practice, the asserted common law causes of action are pre-empted by the FCRA.
Premium Mortgage Corp. v. Equifax, U.S.D.C. (W.D.N.Y. No. 6:07-cv-06349-MAT) (Sept. 30, 2008) (citations omitted).
New Jersey (2009)
Even after the Minnesota law was invalidated, New Jersey proceeded with its ban of mortgage trigger leads, which was similarly tossed out by the federal court.
Consumer Data Industry Assn. v. Milgram, U.S. Dist. Ct. (D. N.J.), No. 09-CV-01270.
Connecticut (2007) and Maine (2006)
While neither Connecticut nor Maine banned mortgage trigger leads, legislative staff in those two states both concluded mortgage trigger lead bans were preempted by the FCRA. “Connecticut is most likely preempted from passing any sweeping legislation affecting mortgage lead triggers.” Connecticut General Assembly, Office of Legislative Research, Report No. 2007-R-0072, “Mortgage Trigger Leads,” January 24, 2007, http://www.cga.ct.gov/2007/rpt/2007-R-0072.htm. The memo is also here.
“While the federal preemptive language…prevents a state from prohibiting or severely restricting legitimate use of such trigger leads…it is within a state’s prerogative to require that such information be utilized in a way that conforms with federal law and that is not misleading to consumers.” State of Maine, Office of Consumer Credit Regulation, “Legislative Proposals to Address Predatory Lending Practices in Maine,” December 8, 2006, pp. 2-4, 23, http://www.maine.gov/tools/whatsnew/attach.php?id=26818&an=1.
There is an alternative to mortgage trigger bans
Since state bans on mortgage triggers violate the FCRA, there is a path to further regulation of marketing using mortgage trigger leads. A number of states, primarily in New England, have passed laws essentially creating specific UDTP for users of trigger leads. See, eg., Conn. § 36a-498(g), Maine 10 § 1310.5, and Rhode Island § 19-4-17.1.